Business for Health Business Skills for Private Medical Practices

1. Business for Health Business Skills for Private Medical Practices Module 14: Understand the Importance of Financial Information

2. A Quick Start Welcome! While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator. Thank you!. Business Skills for Private Medical Practices

3. Agenda Welcome Your Current Record Keeping System Effective Record Keeping Systems Income Statements and Profitability Balance Sheets and Equity Questions to Ask Your Accountant Working With Financial Information Summary and Evaluation Close Business Skills for Private Medical Practices

4. Learning Objectives During this session, you will: • assess your current financial record keeping system; • discuss the components of an effective financial record keeping system; • identify the financial records your practice should keep; Business Skills for Private Medical Practices

5. Learning Objectives • analyze an income statement; • determine the value of a balance sheet; • plan questions to ask your bookkeeper/accountant on a regular basis; • propose how to handle issues involving financial information; • discuss the next step; and • state your key take-away from this session. Business Skills for Private Medical Practices

6. Introduction You will have 1 minute to introduce yourself: 1. Your name 2. Your position 3. Your business 4. How long you have been in business Business Skills for Private Medical Practices

7. Your Current Record Keeping System Business Skills for Private Medical Practices

8. What You Currently Do With Your Financial Records 1. Review the “financial documents” you have been given. 2. Label envelopes or file folders to reflect the current way your practice files or organizes these financial documents; i.e., sales, receipts, insurance, etc. Business Skills for Private Medical Practices

9. What You Currently Do With Your Financial Records 3. Place all of the relevant financial documents into the appropriate envelope or folder. 4. If there are certain pieces of information that your practice does not retain, place them into a “trash” envelope or folder. Business Skills for Private Medical Practices

10. Effective Record Keeping Systems Business Skills for Private Medical Practices

11. Business Transaction Daily Journal Ledger Accounts Financial Statements Financial Record Keeping Best Practices Business Transactions Daily Journal Ledger Accounts Financial Statements Business Skills for Private Medical Practices

12. Ledger Types • Sales • Accounts Receivable • Corporate Account • Insurance • Accounts Payable • Stock/Materials • Equipment • Wages • Cash Business Skills for Private Medical Practices

13. Example of a Sales Journal Business Skills for Private Medical Practices

14. A Cash Receipt Journal Business Skills for Private Medical Practices

15. A Purchases Journal Business Skills for Private Medical Practices

16. A Cash Payments Journal Business Skills for Private Medical Practices

17. An Accounts Receivable Ledger Business Skills for Private Medical Practices

18. A General Ledger: Left Side Business Skills for Private Medical Practices

19. A General Ledger: Right Side Business Skills for Private Medical Practices

20. Sales Journal-Sales Ledger-General Ledger Business Skills for Private Medical Practices

21. Ledgers of Value to Your Practice • What ledgers would be useful for your practice to keep? • How might this information change the way you manage your practice? • What financial statements do you or your bookkeeper/accountant generate, drawing information from the ledgers? Business Skills for Private Medical Practices

22. Income Statements and Profitability Business Skills for Private Medical Practices

23. The Income Statement An income statement shows all income and expense accounts over a period of time. • All income sources are listed and totaled on the top. • All expenses are listed and totaled on the bottom. • Total expenses are subtracted from total income to give the profit for that period. Business Skills for Private Medical Practices

24. Example of an Income Statement Business Skills for Private Medical Practices

25. Income Statement A Questions • Does it show a profit or a loss? • What categories on the Income Statement explain the profit or loss? • What else does the Income Statement reveal about the practice when you compare it to Income Statement A from the previous month? Business Skills for Private Medical Practices

26. Income Statement A Business Skills for Private Medical Practices

27. Income Statement B Questions • Does it show a profit or a loss? • What on the Income Statement explains the profit or loss? • What else does the Income Statement reveal about the practice? Business Skills for Private Medical Practices

28. Income Statement B Business Skills for Private Medical Practices

29. Case Study: Prof. Michael Olach Working independently, please: complete the Income Statement on page 17 so that you can identify the net income (after taxes) for Prof. Olach’s practice for the period ending 31st December 2013. Business Skills for Private Medical Practices

30. Income Statement for Prof. Olach Business Skills for Private Medical Practices

31. Balance Sheets and Equity Business Skills for Private Medical Practices

32. The Balance Sheet A balance sheet provides a snapshot of assets, liabilities and owner’s equity for a given period of time. • Assets: Items of economic value. • Liabilities: Obligations to settle debts. • Equity: Total assets minus total liabilities. Indicates the financial health or net worth of the business. Business Skills for Private Medical Practices

33. Example of a Balance Sheet Business Skills for Private Medical Practices

34. Got Any Equity? • What are the accounts that comprise the current assets of the business? Business Skills for Private Medical Practices

35. Got Any Equity? • What are the accounts that comprise the current assets of the business? Cash balance + Patient Charges + Inventory Balance + Drugs Bought -Drugs Sold- Payment to Suppliers- - Expenses Business Skills for Private Medical Practices

36. Got Any Equity? 2. How much are they worth in total? Business Skills for Private Medical Practices

37. Got Any Equity? 2. How much are they worth in total? 30,000 + 60,000 Cash balance + Patient Charges + 15,000 + 10,000 + Inventory Balance + Drugs Bought - 6,000 - 8,000 -Drugs Sold - Payment to Suppliers- - 7,500 = 93,500 -Expenses Business Skills for Private Medical Practices

38. Got Any Equity? 3. What are the fixed assets and how much are they worth? Business Skills for Private Medical Practices

39. Got Any Equity? 3. What are the fixed assets and how much are they worth? furniture (5,000) + equipment/vehicle (15,000) + building (10,000) + land (10,000) (40,000) Business Skills for Private Medical Practices

40. Got Any Equity? 4. What expenses are yet to be paid (accrued expenses)? Business Skills for Private Medical Practices

41. Got Any Equity? 4. What expenses are yet to be paid (accrued expenses)? what is owed for water and electricity Business Skills for Private Medical Practices

42. Got Any Equity? 5. What are the total accrued expenses? Business Skills for Private Medical Practices

43. Got Any Equity? 5. What are the total accrued expenses? 1500 + 1500 = 3000 Business Skills for Private Medical Practices

44. Got Any Equity? 6. What business liabilities are yet to be paid (accounts payable)? Business Skills for Private Medical Practices

45. Got Any Equity? 6. What business liabilities are yet to be paid (accounts payable)? balance due suppliers for drugs (2000) Business Skills for Private Medical Practices

46. Got Any Equity? 7. What are the total business liabilities? Business Skills for Private Medical Practices

47. Got Any Equity? 7. What are the total business liabilities? Balance due for drugs 2000 + water rate + 1,500 + electricity bill + 1,500 5,000 Business Skills for Private Medical Practices

48. Got Any Equity? 8. If equity = assets – liabilities, how much equity is there in the business? Business Skills for Private Medical Practices

49. Got Any Equity? 8. If equity = assets – liabilities, how much equity is there in the business? 133,500 – 5,000 = 128,500 assets – liabilities = equity Business Skills for Private Medical Practices

50. Got Any Equity? 9. If the owner invested 54,000, how much are the retained earnings? Business Skills for Private Medical Practices