The ultimate goal

Most dental principals would say they knew what their business goals were, but how many could say exactly how they intended to achieve them?

Management accounts, as a complement to a business plan, are among the business tools that point the way.

Management accounts should not be confused with financial statements, or annual accounts, which are prepared to establish a business’s profit or loss for the year and determine its monetary obligations to third parties, usually shareholders or the tax authorities.

Since they are produced annually, such statements can present a false impression of the business/practice’s actual current trading position – for example, a key fee earner may have left during the year, but his/her earnings are still reflected in the year end figures. The business will therefore appear to be trading more profitably that it really is, and such a “false positive” can lead to an over optimistic forecast and wrongly influence investment decisions.

Management accounts are typically produced quarterly, or even monthly, and do not have to be comprehensive, merely give a snapshot of the business’s cashflow and productivity at that moment; after the first set of accounts, comparisons can easily be made with the last quarter and progress, or the lack of it, duly noted and appropriate action taken.

The advantage for the principal is having an up to date basis on which to make decisions and a guide to possible shifting trends in the practice’s revenue streams – perhaps more patients are choosing whitening, for example, following a marketing campaign. Is it worth re-running that campaign? Without the figures immediately to hand, the opportunity could be lost. 

It’s vital to keep a close eye on cashflow when margins are squeezed so that the red line into losses is not crossed when no one is looking. 

At the same time, if the practice is straying from the path of the principal’s ultimate goals, regular management accounts will help refocus progress in the right direction. 

For more information please visit or call Lansdell & Rose on 020 7376 9333.


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