1. The Dental Practice: Business Foundations
Financial Statements
Dr. Dave Willis
Dental Simulations

2. Measuring Financial Success: Types of Financial Statements
Balance Sheet
(Statement of Financial Position)
Income Statement
(Profit and Loss Statement)
Budget
Cash Flow Statement

3. Types of Financial Statements Balance Sheet
Point in time “snapshot”
Lists
what you own
what you owe
the balance or your financial position
You can have a negative “Net Worth”
Should grow (more positive) over time
Successive statements identify trends

4. Types of Financial Statements Balance Sheet Formula
Assets
Liabilities
Net Worth

5. John and Dr. Mary Doe As of December 31, 201X ASSETS
ASSETS
Cash/Cash Equivalents
Checking Account 3,050
Credit Union Savings 4,000
Money Market Account 7,500
Life Insurance Cash Value 8,000 22,550
Personal Use Assets
House 135,000
Automobiles 28,000
Personal Property 52, ,000
Business Use Assets
Dental Practice 200, ,000
Investments
Stock Portfolio 7,800
Mutual Funds 6,500
SEP / IRA’s 18,980 33, ,830   
LIABILITIES
Short Term Liabilities
Credit Card Balance
Long Term Liabilities
Auto Notes Balance 4,920
Home Mortgage Balance 87,900
Dental Practice 150,300
Student Loans 100, , ,070
NET WORTH ,760

6. Types of Financial Statements Income (Profit and Loss) Statement
Shows money flows over time
Month, quarter, year or other
Indicates taxable income and expense items
Indicates a profit or loss

7. Types of Financial Statements Income Statement Formula
- Expenses
Profit (Loss)

8. Example Profit and Loss (Income) Statement (Schedule C format)
For the Year Ending December 31, 201X
Income
Gross Collections 268,723
Returns and Allowances 875
Net Collections 267,848
Expenses
Advertising 854
Auto Expenses 1,928
Commissions 0
Depreciation 23,047
Employee Benefit Program 3,640
Insurance 1,650
Interest Expense 12,487
Legal and Professional 1,790
Office Expense 3,817
Pension / Profit Sharing Plan 3,048
Rent or Lease 12,000
Repairs and Maintenance 270
Taxes and Licenses 9,108
Meals, Travel and Entertainment 139
Utilities 8,955
Wages 60,950
Other Expenses
Temporary Services 340
Bank Charges 120
Office Cleaning 3,055
Dental Supplies 17,010
Dental Lab 29,754
Dues and Publications 1,050
Continuing Education 1,808
Postage ,779
Profit (Loss) ,069

9. Example Profit and Loss (Income) Statement (Organized format)
For the Year Ending December 31, 200X
 Income
Gross Collections 268,723
Returns and Allowances 875
Net Collections 267,848
 Expenses
Staff Costs
Employee Benefit Program 3,640
Pension / Profit Sharing Plan 3,048
Wages 60,950
Temporary Services ,978
  Office Space Costs
Depreciation 23,047
Rent or Lease 12,000
Repairs and Maintenance 270
Utilities 8,955
Office Cleaning 3,055 47,327
  Office Expenses
Insurance 1,650
Office Expense 2,817
Postage 690 5,157
  Marketing Expenses
Advertising
  Bank Expenses
Interest Expense 12,487
Bank Charges ,607
  Variable (Production) Expenses
Dental Supplies 17,010
Dental Lab 29,754
Office Supplies 1,000 47,764
  Professional Expenses
Legal and Accounting 1,790
Taxes and Licenses 9,108 10,898
  Owner’s Expenses
Auto Expenses 1,928
Meals, Travel and Entertainment 139
Dues and Publications 1,050
Continuing Education 1,808 4, ,779
Profit (Loss) 67,069

10. Types of Financial Statements Cash Flow Statement
Cash receipts and disbursements over a time
Similar to Income Statement
All Inflows equal all Outflows
Shows spending patterns, savings and investments

11. Types of Financial Statements Cash Flow Statement Formula
Cash Inflows
Equal
Cash Outflows

13. Types of Financial Statements Budget
Estimate of future spending
Based on historical patterns
Helps to define income and spending goals

14. Types of Financial Statements Budget Formula
Projected – Actual = Difference

16. Types of Financial Statements Pro Forma Statements
Projected (Future) performance
Balance Sheet
Income Statement
Cash Flow Statement
Budget vs Pro Formas

17. Uses of Financial Statements
Decision making in personal and professional situations.
Income distribution and expense allocation to doctors and other providers.
As required by law, such as income tax returns.
To meet the needs and desires of creditors.
Planning and control of the practice or personal / family matters.

18. Cash Flow Cash In Cash Out Cash In must meet or exceed Cash Out
Operations
Borrowing
Savings
Cash Out
Pay Bills
Pay Loans
Pay Taxes
Personal Living Expenses
Cash In must meet or exceed Cash Out
Non-payment
Bounced checks

19. Working Capital “Extra Cash” Uses Collections Lag Immediate Payments
Start-Ups
Growth

20. The Dental Practice: Business Foundations

21. The Dental Practice: Business Foundations
Financial Statements
Dr. Dave Willis
Dental Simulations