Generally speaking, you are a doctor because you enjoy science, medicine, helping people and even the artistic component in sculpting teeth and creating a beautiful smile. You did not become a doctor so that you could read profit and loss reports, understand statements of cash flow and oversee your internal controls to prevent embezzlement.
However, if you own your own practice, then you really need to force yourself to become familiar with reading some reports which will allow you to monitor the health of your practice.
The Profit and Loss Report (P&L) or Income Statement tells you how much income and expense you have had in a given period. It is a performance report that helps you understand the financial health of your business. I recommend reviewing this report on a monthly basis.
While reviewing your P&L, I recommend that you focus on three aspects. The first is to compare your P&L to your budget. Whether you have a formal budget or you just compare the amounts to our dental survey, you want to make sure that your income and expenses are on track.
The second thing you should do is run your P&L with a column that compares the previous period. You want to see how things are trending to get an idea of where the practice is heading.
Finally, you need to question anything that doesn’t look right. If an expense category looks too high, too low or just seems strange, dig deeper. QuickBooks allows you to easily see the detail of any expense category so make sure you investigate.
The P&L is just one report you should be reviewing on a regular basis, other reports are important as well, but the P&L can help you keep your finger on the pulse of you practice.