Besides everyday office day-to-day expenses, another factor responsible for excess costs in your office is financial fraud from employees. Many times, staff embezzle funds right under the nose of the practice owner without the latter knowing. These kinds of employees usually cover-up by reporting wrong figures, and it’d take a dentist with some accounting knowledge to spot such fraud. That’s why you should ask a dental accountant in Kansas City to prepare a financial statement for your business regularly.
What is a Financial Statement?
A financial statement is a written record that shows the various business activities and the enterprise’s financial state. It includes a balance sheet that provides an overview of assets, liabilities, and other necessary details. You’ll also find an income statement that focuses on revenue and expenses during a particular period and a cash flow statement that measures how the business generates cash to fund its operations and costs.
Significance of an Accurate Statement to Your Practice
The importance of a financial statement to your dental practice isn’t something we can overemphasize. Examined below are some of its significance:
1. It Helps to Detect Fraud and Discrepancies
An error-free financial statement is a necessary tool in analyzing your practice’s economic well-being and stability. It also helps in tax planning and making informed financial decisions about the business. Another thing it does is that it helps to detect fraud.
With the help of a dental accountant in Kansas City, you can easily detect embezzlement and discrepancies in your practice’s financial sector. If there’s been fraudulent financial reportage on the part of the staff, the financial statement will help you uncover them, and you’ll take corrective actions.
2. Enables You to Make an Excellent Future Cash Flow Budgeting
An excellent financial statement doesn’t only help you identify discrepancies; it also helps you with future cash flow budgeting. In a situation where you’ve got an inconsistent stream of income spanning months, it’s always advisable to get your month-by-month revenue and expenses report, review them, and make adjustments to the items where necessary.
Factor in planned expenses, revenues, additional workdays, inflation, payroll, and others. In the end, you’d have a budget you can use for preparing cash flow. Doing this will enable you to identify revenue-generating moves to consider making.
3. It Helps You Prepare a Breakeven Analysis
A breakeven analysis enables you to determine what you need to generate in revenue to sort through necessary expenses and what adjustments the practice needs. Here’s how to go about this; divide your expenditures into fixed costs (rent, utilities, insurance, etc.) and variable costs (staff payroll, lab, dental supplies, etc.). Then, subtract the percentage of your variable costs from the revenue percentage, and divide your fixed costs by this percentage, and you’d have your breakeven point.
Every financial statement your dental accountant in Kansas City prepares for you contains vital information that can help you make informed financial decisions. Understanding your financial statements is highly essential as it gives you an insight into how you can run your practice more efficiently.