I got asked an interesting question in the past week that inspired today’s post.
Background: A gentleman is about to spin off of a medium size medical practice, as he has not been invited to become a partner. He has finished the business plan, about to apply for money, and currently shopping small medical office space outside of his non-compete’s geographic restrictions.
His question to me: What should I focus on first? Any tips as I get going?
My answer: Get profitable as soon as possible.
Honestly, I apologized for my answer as soon as I said it, but at the same time, we all know it is the right answer. He needs to invest enough in his practice to not lose clients. He needs to warmly welcome them, competently and thoroughly service them, and be able to bill them, schedule them, and have the next one waiting in a patient room. Is this the time for a waterfall in the waiting room? No. Not if his client base doesn’t require or expect it. Is it the time for equipment and computers to move business forward? Yes!
The importance of profitability is obvious on an intuitive level, but harder for many entrepreneurs to get their hands around. At what point do you stop investing in the future and just sell and service? For me, and my clients, it is before the point of net income loss. In any period, you can run a P&L. For me, I run it monthly. For a more seasonal business, it should be run quarterly, and on the outside, annually. In my opinion, it’s critical to figure out how to run a business profitably in ANY 12 month cycle. This means that you are profitable if you run a P&L dated 1/1-12/31 in the same year, or if you run it 7/1 – 6/31 of a given set of years.
This makes it critical for all business owners to be able to use, read and manage their profit & loss statements. This single tool validates your gut check, and helps you steer toward your goals going forward.
The ability to read your P&L also means your bookkeeping system needs to be accurate, clean, and geared toward the reporting you need. This isn’t hard, but it does require input from the business owner, a competent bookkeeper to reconcile and train as needed, and regular (usually daily or weekly) accurate data input.
The accounting & bookkeeping system is the proper path to your P&L. You should be receiving a P&L from accounting AT LEAST monthly. You should not have to export it to Excel and then correct it. If you DO this… Please know that it’s common. However, it’s not the goal.
Does this inspire an idea? Do you have questions? Bookkeeping is the spine of your back office operations. It needs to run properly in order to run your business properly. If your bookkeeper is bad at their job, chances are you are pulling your hair out trying to run the business. We can help. Fisher Business Management can train your admin, bookkeeper, and back office personnel. We can also operate as your back office. You decide the terms, the goals, and even the reporting you want to receive. As a team, we figure out how to best deliver profitability to the business.
Barb is the CEO of Fisher Bookkeeping, an outsourced bookkeeping consultancy that provides small businesses with a full-service financial department. Her favorite aspect of work is to break down the accounting to meaningful bits, so entrepreneurs can make a powerful difference in their own business. She's also a power lifter (squat: 215, DL: 270).
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