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This series of financial articles are designed to introduce young ophthalmologists to the basics of the financial statements commonly prepared in connection with the operation of ophthalmology practices.
Understanding Financial Statements for the Ophthalmologist:
Financial statements are normally prepared in accordance with what are called generally accepted accounting principles. Although, this term sounds a bit fuzzy, it actually has a very specific meaning: It requires the use of the accrual method of accounting. Under the accrual method, revenue is considered earned and is recognized in statements for the period when the revenue transaction occurred, regardless of when the related cash is collected. So, for example, under the accrual method, a practice’s earnings are posted at the time services are provided. Similarly, expenses are incurred at the moment the liability is incurred, regardless of payment terms. For example, on any given day, a practice’s expenses include the hourly wages earned by staff members that day, even though the payroll funds may be paid out only twice a month, which might be a week or more away. Continue reading.
A successful financial policy clearly communicates procedures and responsibilities, provides a verifiable source of data, and automates the internal workflow to the fullest potential in order to increase cash flow and minimize loss. The key to this process is flexibility, as the medical world changes, the practice responds and changes and moves forward.
Developed by AAOE, The Profitable Practice Collection makes mastering key financial management concepts easier. With this seven-module collection, you will learn how to boost your bottom line; convert clinical services to practice income and use data to drive results.
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