Even in the busiest of times, it is imperative to keep on top of your practice’s accounts receivable and payable. But even with the most diligent of practices, there may be times when something seems off, and your account doesn’t reflect all of the work put into your practice. If this occurs, it is time to review a cash flow statement with your financial advisor.
What is a Cash Flow Statement?
This is a report that shows the money your dental practice used and generated in a specific timeframe. The report reflects how changes in balance sheet accounts and income affect cash. Due to the fact that cash inflows and outflows are vital to your practice – it’s critical to review.
Cash Flow Statement Specifics
The report has three parts:
- Operating activities. This section includes money received as a part of everyday operations, such as patient collections and bank account or loan interest. These collections are netted against the payments like payroll, supplies and office expenses and other general day-to-day business expenses. The result is either a net cash increase or decrease from operating activities.
- Investing activities. This is the purchase and or sale of your assets like the purchase of new equipment and leasehold improvements on your building.
- Financing activities. This part of the report includes the cash received on a loan or the repayment of principal on a loan. It also encompasses cash that was paid to you as a dividend, distribution or withdrawal, depending on your type of entity.
The cash flow statement doesn’t show the profit earned for the timeframe as it does not include non-cash items such as depreciation. The report will show you exactly how much actual money your dental practice has generated and where it was spent.
Cash Flow Help
When you review your cash flow statement with your financial advisor, you will be able to better understand why your bank account is growing or shrinking as well as manage the inflows and outflows of cash. Contact PMA Practice Transitions to determine if your dental practice could use a cash flow review. We can help you evaluate it and get you pointed in the right direction.