I hope that you are enjoying your time on the discussion board and are finding it worthwhile.

We welcome feedback, suggestions and questions, so feel free to comment here or contact any of us individually!

Let’s start with some basic finance terminology.

Assets – assets are resources owned by a practice.  An asset which is convertible within a year is a current asset.  Others are considered long-term assets. 

Liabilities are things owed by the practice.  Accounts payable is an example of a liability and is money owed by the practice to its suppliers or vendors. 

Directs costs are materials, labor and expense that relate directly to a specific product or service.  (examples are rent, depreciation, medical supplies, etc).  Indirect expenses are things that are more general and cannot be pinned to something specific…they are expenses which might be incurred in a support area.  Examples might include housekeeping, medical records, and building maintenance.

Costs can be fixed, step fixed or variable.  A fixed cost remains constant regardless of the volume of work…examples include rent, property taxes, and salaries.  A step-fixed cost is fixed over a range of activity and then increases as the activity increases.  This would be the case when adding a physician or a clinical support staff member.  Variable costs are just as the name implies…they fluctuate with volume.  Examples would be supplies and commissions.