“Where is my money going?” It is the question Liliane Larsen hears most often from owners of private practices, and she has been keeping the books for medical, dental, and veterinary practices since 2006. It usually comes from a practice that is busy, well run, and, on paper, profitable. And yet the bank balance never seems to match the story the profit and loss is telling.
If that sounds familiar, nothing is necessarily wrong. Profit and cash simply answer different questions.
Profit is only half the story
As Liliane explains it to owners: “A business can be very profitable, but they have no cash.”
The profit and loss shows what the practice earned and what it spent on operating expenses during the month. What it does not show is a long list of things that take cash out of the bank without ever appearing as an expense:
- Equipment purchases. A new imaging system or dental chair is recorded as an asset, not an expense, when it is bought.
- Loan principal. The interest shows on the profit and loss. The principal portion of each payment does not.
- Owner draws and distributions. Money the owners take out is not an operating expense, but it leaves the bank all the same.
- Taxes. Estimated payments come out of cash on their own schedule.
Add those up, and a practice can report healthy net income and still feel short every month.
The three reports that answer the question
For private practice clients, we prepare three core reports each month, on an agreed schedule:
- Profit and loss. Is the practice profitable? What did it earn, what did it spend, and what was left?
- Balance sheet. Where does cash stand? What is in the bank, what does the practice owe on loans and leases, what has been invested in equipment, and how much have the owners taken out?
- Cash analysis. Where did the cash actually go this month, and what was the net change?
Read together, they turn “where is my money going?” into a list you can point at.
Looking ahead: can we cover what is coming?
The month-end reports explain the past. Many practice owners also want to know about the next few weeks. Can we cover payroll and the lab bill? Will there be enough in two months for that new piece of equipment?
When it is part of the engagement, we build a short-term cash forecast: what is in the bank now, set against what is going out over the coming weeks for payroll, supplies, lab costs, and upcoming bills. It is especially useful during a slower stretch, when the decision about a new purchase can wait a month or two.
Why the setup matters
None of this works if the books are not set up for a practice. We start with a chart of accounts suited to your type of practice, so supply and lab costs, equipment, financing, and owner compensation each land where they belong. Liliane compares the chart of accounts to a skeleton: once it is right, everything else stands up straight.
From there, every bank account, credit card, loan, and line of credit is reconciled each month. Payroll from your payroll provider is posted and reviewed. And at month-end, Liliane reviews the work and meets with you, along with your account manager, to go over the numbers.
A note for practices across the South Shore
Our medical practice clients are in Massachusetts, from Weymouth to Plymouth, and we welcome inquiries from further afield. Everything is done online, so there is nothing to drop off and no one to schedule into your waiting room. Our team is based in the United States.
“LBS, LLC has managed our books since we opened in 2006. In the past few years, our growth has exceeded all expectations, and Liliane has been instrumental in organizing our finances as we reach each new level. She is knowledgeable, reliable and most importantly 100% trustworthy”
Frequently asked questions
No. Your billing company or in-house team keeps that work. We check that the sales recorded match the deposits reaching your bank, and let you know if they do not.
No. Payroll stays with your payroll provider. We post it to the books and review it for anything that looks off.
Yes. We work with your CPA at year-end and whenever they need clarification during the year.
Start with a conversation
If your practice is profitable on paper but the bank balance tells a different story, request a free consultation. It is a short conversation about your practice, your books, and whether we are a good fit. Prefer to call? 781-924-1489.
This article is general education, not tax or financial advice.