Your Pediatric Clinic Had a Great Year. Why Don’t the Numbers Feel That Way?
By ProfitWise - a Visa Business Plans company
A pediatrician once looked at her year-end financial statements and had a very reasonable reaction.
“My accountant says we had a good year. I don’t understand why it doesn’t feel like we did.”
The clinic was busy. Patient volume was strong, and the financial statements showed a healthy practice. Still, she felt expenses had become harder to control and that the clinic should have been doing better, given how many patients they were seeing.
Her accountant wasn’t wrong.
The financial statements were accurate. They had been prepared with the information needed for accounting and tax purposes.
The pediatrician was simply asking a different question.
She didn’t just want to know how much the clinic earned during the year. She wanted to understand what was happening inside the practice and why.
That’s an important distinction.
For example, imagine that payroll increased significantly from the previous year. Seeing the increase on a financial statement tells you what happened, but it doesn’t necessarily tell you whether there’s a problem.
Maybe the clinic hired another medical assistant because patient volume increased. Perhaps overtime has been creeping up because the last appointments of the day regularly run late. Or the practice may be paying more in administrative payroll because insurance verification, referrals, prior authorizations and billing are requiring more staff time.
Those situations may all appear under payroll, but they tell very different stories about the practice.
The same can happen with revenue.
A pediatric clinic may be seeing more patients than it did a year ago, yet the financial improvement the owner expected isn’t showing up. That’s when we want to understand what’s happening beyond the total revenue number. The mix of insurance plans may have changed. Reimbursement for certain visits may be different. Patient balances may be taking longer to collect. The clinic may also be providing more services without seeing a comparable increase in what it ultimately collects.
None of that means the CPA did anything wrong.
A CPA and a practice owner are often looking at the same financial information for different reasons. Your CPA may be focused on making sure the tax return is prepared correctly and the practice complies with its tax obligations.
As the owner, you need that information, but you also need to use the numbers to run the clinic.
That’s where the conversation changes.
At ProfitWise, we work with business owners to take the accounting information and look at it from a management perspective. In a pediatric practice, that can mean understanding how payroll is moving in relation to patient volume, whether collections are keeping pace with the work being performed, or whether certain expenses have gradually increased enough to deserve attention.
Sometimes the numbers confirm that the practice is doing very well.
Other times, they explain why a year that looked great on the tax return didn’t feel nearly as good while you were living through it.
Your CPA can tell you what happened financially last year.
Understanding why it happened can help you decide what to do differently this year.
