Welcome Class 113 - First an announcement: There will be no class on Sep 7th. You are to use this week to finalize your business plan.
This week we looked at the "Big Three" - The balance sheet, income statement, and the cash flow statements. These reports are used for financial reporting different from the management reporting we discussed the previous week. We compared how the three interrelated and how they work together to provide a picture of the health of a business.
The balance sheet is a snapshot in time. Assets = Liabilities + Owner's Equity. The line items are listed in order of liquidity to cash.
The income statement reflects revenues less expenses to show whether the company has made a profit or loss.
The cash flow statement takes out depreciation and other non-cash items and provides information as to the viability of your cash. It incorporates three catagories; operating, finance and investing. Operating is the catagory to watch. You want to be able to operate profitably.
Both the income statement and cash flow statement shows activity over a period of time; a quarter or year.
My understanding is that very few students have any experience or understanding of financial statements. "Even teams", the topic this week is to discuss specfically what other resources you will access to help you have a better understanding of preparing and interpreting financial statements. List web links if you find ones that are helpful. Also, preceptors - ask your Doctor specifically what they monitor in their practice in regard to finances?
Have a great week. Alexis
We spent some time seeking out a variety of web sites that would provide us with useful tools to assist with the interpretation and preparation of financial statements. For an overall guide to preparing financial statements, we found a few websites to be beneficial. They are as follows http://www.investopedia.com/articles/04/031004.asp#axzz1X2ptWqEv
ReplyDeletehttp://www.toolkit.com/small_business_guide/sbg.aspx?nid=P06_1570
www.allbusiness.com. These websites provided us with the fundamental overview of the financial statements (i.e., the balance sheet, income and expense statement, and cash flow statements). We also felt it would be beneficial to get counsel from a successful field doctor and a professional accountant, so that they would have an opportunity to review simulated financial statements to ensure that they are as accurate as possible. We did some research on the web to find a decent place to start; www.allbusiness.com has step-by-step directions where to begin and the break down of each important part of the statements. For example, this website examined, in detail, the balance sheet and provided numerous and practical ratios that can be calculated, how to calculate each of them, and how the ratio can be beneficial for additional interpretations of a statement. These overall reports provide a deeper and broader understanding on how a business is currently performing and their possible future financial challenges.
Furthermore, this website also provided useful resources for small business finance.
As students we do have little experience in financial documents and statements. I think the most useful resources will be those for small businesses in the town you aim to practice in and probably the best would be a financial consultant. With that said not everyone has the revenue in the beginning (I certainly won't) to hire a financial consultant. I plan on utilizing the tools available through banking online to categorize and analyze office spending in addition to Future Health financial reports and statements.
ReplyDeleteGroup 2
ReplyDeleteUse the web to find sites to help us understand the finacial data since we all have little to no experience with this. Also I will be using my accountant who I will use in practice to help me learn and understand the financial data. Counseling to learn the ins and outs is the best way to learn more about the finacial world and statements.
Of course the internet is a good place to look but I couldn't find any sites that look good or inclusive. Another resource is business books. Business management text books can often have detailed step by step instructions on how to write/break down different financial statements. But a down side could be that they are general and could be too simple. An accountant or better yet someone who just graduated from school to be an accountant. They have a good understanding and are eager to help, plus if you become good friends and you think they know there stuff you get a useful accountant out of the experience. My preceptor doctor manages most of her office finances with a quickbooks like program.
I also looked around online for different websites a lot of them were interesting but I was unsure of there actual validity. I will be utilizing the experience of my preceptor for his information onto of the information I can gain from asking my parents about things they monitor in their practice. Granted they are Optometrists so some things will obviously be different, but they still have years of experience I may benefit from. I will also be using an accountant to learn and expand my knowledge for this area. Discussing with my office precept what he monitors, he does an end of day sheet every day to note all patient charges of the day. He also notes any nutritional services he provides as well as all of the PT products he provides in his office from exercise balls to Biofreeze. One thing I do take away from how he monitors his finances is that he does not leave everything on his computer system even though everything is moving towards electronic documentation. He always has at least 1 hard copy to go over so that if something does happen to the power or the computer source there is no guess work thrown into the equation. I think this is a very good idea.
ReplyDeleteLike many others have stated, when we graduate many of us don't really have the knowledge or resources when it comes to the financial aspect of our business. My parents own a body shop and I am sure they had no clue what they were doing before they hired their accountant. Sure we might not have a lot of money coming right out of school but unless you have a degree in that field I think it is necessary to have an expert behind you to optimize your earnings. My parents pay average 350 a month and that includes payroll taxes and monthly financial statements. It sounds like a lot and I'm sure there are cheaper accounts but my dads shop has a lot of employees and im sure a lot more cash flow then if I were to just start practice. Along with the accountant my parents use quicken which is basically a checkbook but it can monitor whats coming in and out and it is a really simple program to use and learn. Since I have been away from Palmer and working with a field doc I have been asking him a lot of question. He has been in the field for years he knows what works and what does not. Of course, his way might not work for everyone but the more you ask other docs the more ideas you will have for yourself. so before you graduate or start practice ask around the docs who have been in practice for years should know what they are doing.
ReplyDeleteFor me my best information will be coming from the Dr. whose practice I am going to purchase. I will also look at other field Docs whom I am friends with and see their method. I believe the banks can also help get you going but using someone who has "been around the block" will and is my first choice.
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ReplyDeleteMost of us as students don't have experience with the financial aspect of running a successful practice. In fact I believe that many students choose to associate following graduation in hopes of gaining the knowledge that is necessary to run a strong practice. It is important to do your homework by using resources such as the internet. This will provide us with useful tools to assist with interpreting and preparing financial statements. There are also many books available such as Financial Statements written by Thomas Ittelson. This book offers a step-by-step guide to understanding and creating financial reports. I also believe that it would be important and beneficial to consult with an accountant.
I found the following websites to be helpful:
http://www.accountingcoach.com/online-accounting-course/05Xpg01.html#balance-sheet-introduction
http://www.ehow.com/how_2081262_create-financial-report.html
www.yourbusinesspal.com
Group 10
ReplyDeleteI feel this is something that most of our class doesn't really have any knowledge or experience with. Going straight out of college and starting your own practice with minimal experience with the financial aspect of running a business is hard we would think. Some people are able to pull it off but a lot of people have to associate in order to learn the elementary of how a business work and how financial statements work. We think that everybody that has a business should have an accountant to make sure things are ran smoothly and kept track of. Other doctors, family, friends, local bank and others will be important in gaining more knowledge of how to run the business. We also think that everyone has an own responsibility to educate themselves or gain from people that has done it before and know how things work.
We also think its worth to note that our whole group will be going back to Norway to practice and we will all do a year long mandatory internship before we get our final license. So for us it will be of huge benefit too work under another doctor and learn how he/she runs their business.
Here is on link we used:
http://finansiell-planlegging-online.blogspot.com/2010/07/bank-for-sma-bedrifter.html
Group 8
ReplyDeleteI am glad that we are covering Financial Statements even though I as a computer programmer have written parts of accounting packages and taught computerized accounting at a college it has been 10 years of not doing any accounting and all business owners should have at least a basic understanding so that even if they hire an accountant they will be able to know how to read the financial statements. It is so strange to see where the numbers go if you have never looked at accounting statements before.
In 1996 I had a boss that although he usually kept all his financial information private was telling his employees that he (the company) was losing money. I am not positive that he knew how to read his own statements but I am pretty sure that he must have noticed that he only made $1.25 million after taxes that year in stead of his usual $7 million each of the previous 3 years. I knew because he had me print the statements for him because he and I where the only ones to have the computer permissions to do so.
Do not fire the only person that knows the password to your accounting software. I have had to rescue someone that did and it was not easy.
Group 22
ReplyDeleteI think that what has been said above really hit the nail on the head. I have seen in the practice where I am doing my preceptorship that it is very important to keep close track of finances. I talked with the doctor who runs the office and he said that when he first started out in practice that he was able to keep track of his own finances. He kept very elaborate books and kept track of all of his assets and liabilites as well as income and expenses. He said that this worked for a while but when his practice grew he needed professional help. He said that he had less time to do keep track of his books and more patients to see. He hired a professional accountant and he has had one ever since. He said that he was able to save himself lots of time and money by using a professional.
I looked at various different web sites and one of the biggest things I saw was that unless someone has training they would be well advised to seek professional help such as an accountant or a certified financial planner. It seems like with the help of a professional you can save yourself lots of time and money that could be put to use elsewhere.
Posting for Eric Slead
ReplyDeleteAs students, it is difficult to really see the end in sight and because of that many students do not take the financial aspect seriously and leave school not knowing much of anything about running a practice. Because of this issue, many people end up seeking an associateship for a couple of years to be able to learn on the job how to run a practice and how to manage finances. One of the main things my precept doctor does is a daily balance of cash recieved to services renderred. This lets him know exactly what he has received for services compared to how much service was provided and this also keeps him conscience of income at all times. He is also really good about keeping up on insurance collections and making sure that money does not stay uncollected for more than 90 days.