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in any assessment of financial well-being of a cash basis prepared balance sheet. All financial statements prepared for physicians should be comparative with the prior period. So if the doctor is looking at Dec. 31, 2018, financial statements, those statements should have a column next the 2018 numbers with the Dec. 31, 2017, numbers. Comparing the current period with the prior period numbers is extremely helpful in understanding trends, checking unusual variances in collections and expenses, comparing to budgeted numbers and for benchmarking against industry standards. Budgeting is a very helpful tool to see if goals set at the beginning of the year are being met. Budgeted numbers typically reflect what the practice would like to achieve for the period in terms of patient revenue collections and limits on certain expense categories, such as salaries or practice overhead. Benchmarking by using common industry standards for various expense categories to see how the practice compares to other practices is also important in understanding how well or poorly a practice is doing. Medical Group Management Association, National Society of Certified Healthcare Business Consultants and Medical Economics are sources to consider for benchmarking data. The P/L statement should clearly spell out the sources of patient collections, the various type of expenses and be compara- tive with the prior period of time. This statement should a lso have budgeted numbers and benchmark data for the reasons discussed above. In addition, the P/L statement should provide the doctor with a clear understanding of the financial results for the doctor's hard work. This is done by isolating the compensation to the doctor. This compensation is from sal- ary, other types of compensation, or cash withdrawals given and fringe benefits, such as health insurance, retirement plan contributions for the doctor, payroll taxes paid on behalf of the doctor, vehicle allow- ances, etc. Isolating this compensation information allows the doctor to clearly see the " bottom line" of what is truly earned from the patient collections. If the P/L statement was prepared on the accrual basis, the estimated collectible portion of outstanding patient receivables would be included as income, and the unpaid expenses incurred up to the date of the P/L statement would be included as expenses. Finally, there is the statement of cash flows that unfortunately is rarely prepared for the doctor. This statement is designed to show the money coming into the prac- tice by category (revenue, loans, sale of equipment, capital invested by the owners) and the money going out of the practice by category (salaries, rent, supplies, payback of loans, purchase of equipment) for the same defined period of time as that of the income statement. So often physicians find themselves working harder and making less money. The statement of cash flow helps explain where the cash went. This statement is difficult to understand at first glance so the accountant must sit with the doctor to explain the format and accounting terms used. One of the main points to be made here is that physicians need to get more out of the financial statements prepared for them. Their accountants need to take a stronger role in making sure the physi- cians have the financial information they need to manage their practices. Jim Rice, CPA, is a shareholder at Sol Schwartz & Associates PC. He has 39 years of experience in public accounting. In addi- tion to providing business consultation, financial planning and various other accounting services, Rice specializes in income tax planning and consultation. He works with a high concentration of physician practices and high net worth individuals. Contact Rice at jprice@ ssacpa.com or 210-384-8000, ext. 112. Leslie Buoy is currently a Senior Tax Associate with Sol Schwartz & Associates PC. Buoy enjoys helping individuals, corporations, partnerships and trusts with tax compliance and planning issues. In addition, she helps clients with soft- ware training, bookkeeping consulting and various other accounting services. She has 18 years of experience in public accounting. You can contact Buoy via email at lmb@ssacpa.com or 210-384-8000, ext. 120. n that date. Liabilities a re repor ted at their payoff a mounts as of the sa me date. Note though, most liabi lities on the ba la nce sheet a re only for lines of credit or loa ns t a ken for t he pu rcha se of equ ipment , vehicles, etc. Reg u la r unpa id accounts payable, like rent, supplies a nd ta xes, a re not listed. If the practice is not pay ing t hese mont h ly-t y pe l iabi l ities ti mely, those liabilities ca n be a n indication of f ina ncia l problems that a re not noted on a cash basis ba la nce sheet. What is left after subtracting the liabili- ties from the assets is the practice's equity. The practice's equity indicates the general financial well-being. However, keep in mind that the balances in the patient receivables and accounts payable must be considered M D N E W S . C O M /// M D N E W S S A N A N T O N i O ■ 2 019 1 5