Finance https://www.askascent.com/forums/posts.aspx?topic=1124256 Sat, 6 Jun 2026 16:33:53 GMT Thu, 9 Jul 2015 14:32:14 GMT Copyright © 2015 ASCENT | Administrator Support Community for ENT Finance https://www.askascent.com/forums/posts.aspx?topic=1124256 https://www.askascent.com/forums/posts.aspx?topic=1124256 Happy Tuesday!

This week we will work on Finance.  Please be sure to let me know if you have any questions on any of the topics covered so far OR if you have any ideas/suggests, etc. for topics to go more in depth with this week.

 

Let’s take a look at some finance terminology.

 

Direct Cost - a cost that can be traced to or caused by a particular service, product, segment or activity of the practice.

Example: There are direct costs of performing a particular procedure, making a product, or managing a department or an office. Direct costs in a practice include salaries of the

physician and other medical personnel involved in delivering care, supplies used and in some cases outside referral costs.

 

Indirect Cost - a cost that cannot be traced to a particular cost object – a service, product, segment or activity. They are costs necessary to support the practice but can not be directly traceable to a single cost object.

Examples include salaries of employees in the business office, malpractice insurance,

maintenance expenses, occupancy costs i.e. rent or building expenses. Also referred to as overhead.

 

Depreciation is a non-cash expense that reduces the value of a tangible asset (such as real property, vehicles, or equipment) over time as a result of wear and tear, age, or

obsolescence. Most tangible assets depreciate and eventually must be replaced.

Depreciation is an accounting mechanism for recognizing the declining value of such assets over time that lowers a company’s gross profit, thereby reducing its taxable income.

 

Accounts receivable in a medical practice primarily consist of the charges owed to the

practice by insurance companies, patients or third-party payers. Most private practices

are on the cash basis of reporting for income tax purposes, which means income is

recorded when cash is received, and expenses are recorded when cash is paid out.

 

]]> Tue, 30 Jun 2015 12:29:53 GMT https://www.askascent.com/forums/posts.aspx?topic=1124257 https://www.askascent.com/forums/posts.aspx?topic=1124257
The straight-line method provides for equal periodic charges to expense over the life of the asset. This method is widely used. It provides a reasonable allocation of costs to periodic revenue when usage is relatively uniform from period to period.

The declining-balance method provides a steadily declining periodic depreciation over the estimated life of the assets. This method is most appropriate when the decline in productivity is proportionately greater in the early years of an asset’s use than in the later years.
]]> Tue, 30 Jun 2015 12:30:49 GMT https://www.askascent.com/forums/posts.aspx?topic=1124611 https://www.askascent.com/forums/posts.aspx?topic=1124611
How are you doing with the discussion board format? Is this helpful for you? Anything you'd like to see more of? Any questions? Please feel free to let us know!

To continue on our finance topics, let’s talk about the possible corporate structures of medical practices.

Sole Proprietor: This is the simplest business structure under which to operate. This makes it easy as you do not have to prepare or file legal documents; however, as a sole proprietor there is always the risk of liability exposure. If you are sued, all of your personal assets could be at risk.

Corporation: A business corporation is a legal, stand-alone entity. The primary benefit of establishing a corporation is that you, as the owner, are separated from the business itself. This means that if the business is sued, any claims made are generally limited to the corporation’s assets. It is important to remember that this does not apply to malpractice. If a patient is harmed by a doctor, it is not legally possible to claim that the “corporation” is at fault in order to absolve the provider of blame.

There are multiple ways in which one can structure a corporation, such as:

C Corporation (C corp): C corps are stand-alone entities which file their own tax returns and pay federal taxes directly at the income rate. As a provider of professional health services, however, the IRS will classify your corporation as a “personal service corporation” subject to a flat tax rate of 35%.

Opting to be an S corporation may give you a tax break.

S Corporation: An S corp provides all the protections of a C corp but while it must file tax returns for the entity, it does not pay taxes directly. Money passes through the shareholders and is reported and taxed at their individual, personal tax rates.

LLCs and LLPs are essentially simplified versions of an S corp.

Limited Liability Corporation (LLC) and Limited Liability Partnership (LLP):: LLCs and LLPs offer the same liability protection as S corps. The owners are typically not liable for debts of the LLC/P, though still liable for personal wrongdoing or malpractice. Tax treatment is comparable to S corps as well. Record keeping is very simple for LLCs and LLPs.

It is important to keep in mind that in all of these business structures, if the legal requirements are not met, the veil of liability may be pierced, meaning that the creditor can attack personal assets.

In summary, the 3 major components to consider when structuring your business are:
1. Liability exposure
2. Tax exposure
3. The complexity and stringency of legal reporting requirements
]]> Wed, 1 Jul 2015 14:35:50 GMT https://www.askascent.com/forums/posts.aspx?topic=1124929 https://www.askascent.com/forums/posts.aspx?topic=1124929
Let's continue our discussion on the topic of Finance by making sure we understand what GAAP means and who governs these principals.

Generally Accepted Accounting Principles (GAAP) are the rules and standards utilized by accountants when preparing financial statements. The federal government grants the Securities and Exchange Commission (SEC) the power to set accounting principles.

For the most part, the rules outlined by the GAAP for determining the profits of a business coincide with methods used to calculate taxable income. The rules also specify what needs to be disclosed. They are the recognized standards used in preparing financial statements. They are meant to be used consistently and uniformly in all businesses. The overall intent of the GAAP is the establishment of uniform methods and vocabulary and full disclosure in financial reports.

]]> Thu, 2 Jul 2015 13:06:24 GMT https://www.askascent.com/forums/posts.aspx?topic=1125424 https://www.askascent.com/forums/posts.aspx?topic=1125424 Sun, 5 Jul 2015 19:27:55 GMT https://www.askascent.com/forums/posts.aspx?topic=1126286 https://www.askascent.com/forums/posts.aspx?topic=1126286
Let's talk about the types of reporting. There are two main types, accrual and cash.
Accrual Method means that revenues are recorded when they are earned, not when they are paid for.
The Cash Method of Accounting records revenues when they are received.

There are several ways we can look at how our business is doing financially.
Let's start with the BALANCE SHEET.
A balance sheet is a financial statement that reports the amount of:
#1: Assets—things that a company owns—equipment, etc
#2: Liabilities—obligations of a company such as a loan, etc
#3: Stockholder’s (or owner’s) equity---exactly the difference between asset amount and liability amount. Sometimes known as “book value” of the corporation

Do you use this in your medical practice?

We will review more tomorrow.....
]]> Wed, 8 Jul 2015 01:38:06 GMT https://www.askascent.com/forums/posts.aspx?topic=1126643 https://www.askascent.com/forums/posts.aspx?topic=1126643
The CASH FLOW STATEMENT is one of the main financial statements (along with the income statement and balance sheet). The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities, and certain supplemental information for the period specified in the heading of the statement.
The cash flow statement is also known as the statement of cash flows.




]]> Wed, 8 Jul 2015 21:20:20 GMT https://www.askascent.com/forums/posts.aspx?topic=1126877 https://www.askascent.com/forums/posts.aspx?topic=1126877
I would like to review income statements, retained earnings, and the purpose of internal and external reports. Hold tight…here we go!!!

Income Statements
A practice’s income statement, also referred to as the Profit and Loss (P&L) statement, tells a story about the practice’s sources of revenue and the income remaining after the cost of business and operating expenses are deducted. It differs from the balance sheet in that it is for a specific period of time.
The income statement looks as follows:
Dr. Smith Practice
Income Statement For the Period Ended 2015
Consulting Revenue $ 2,800
Salary Expenses (1,500)
Net Income 1,300


The income statement shows changes in equity from all sources other than transactions with owners. In our example, the increase in assets (specifically, account receivable) from consulting services was $2,800; the liabilities increased by $1,500 (salaries payable). Because net assets are defined as total assets minus total liabilities, net assets increased by $1,300 ($2,800 - $1,500).

There is one important point to be remembered…..previously we defined expenses as economic sacrifices from a decrease in assets. Now, look at the income statement and you will see that expenses can also be recorded with an increase in liabilities.

The next area we will review is Retained Earnings

The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders' equity on the balance sheet.
The formula calculates retained earnings by adding net income to (or subtracting any net losses from) beginning retained earnings and subtracting any dividends paid to shareholders:

Retained Earnings (RE) = Beginning RE + Net Income - Dividends


This area is regarding Internal and External Reports.

Administrators need to understand how to organize financial information about the practice in order to respond appropriately to both internal and external requests for information.

External requests may come from a bank for a line of credit. The primary focus of external requests is usually net income, the results of the practice’s operations as indicated by excess of revenues over expenses. Although banks are interested in the balance sheet of the practice, they often rely on the personal financial statement of the physician(s) for the security they need to lend money to the practice. Practices often have external financial statements audited or reviewed by an independent accounting practice.

Internal requests may come from insiders such as the practice’s physicians. Insiders generally want to know not only about net income, but also distributable income, which is the amount of net income available for distribution to partners in the firm of bonuses.

Internal reports typically include not only historical information, but key operating statistics, comparisons of actual operational activity to budgets, and forecasts. They tend to be prepared more frequently, usually on a monthly basis, in contrast to external reports, which may be prepared only annually or perhaps quarterly.


I hope this wasn't overkill today. Please let me know if you have any questions OR you would like for me to cover something specific.....
Talk to you tomorrow!
Danielle]]> Thu, 9 Jul 2015 15:32:14 GMT