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Financial Analysis and Pro-Forma Statements

At Practice Setup, our team of professionals assists each physician in developing a comprehensive Pro-forma Financial Analysis which provides the most critical tool for your company's future—a strategic financial plan.

What are Medical Practice Pro-Forma Financial Statements?

Since a start-up medical practice has no historical financial information, simplified Pro Forma’s are estimated statements that are typically projected for 3 years. They demonstrate the best case, worst case and most likely financial scenarios of a new practice, clinic, healthcare entity, etc. Computerized spreadsheets are ideal for this task. Other relevant financial information may be included, as needed.

Net Income (Profit and Loss) Statement

By allocating a practice’s profit or loss into operating groups, banks or investors can isolate profitable revenue centers and isolate unprofitable costs drivers. In certain managed care contracts, an analysis to identify unit or per dollar revenues, gross profits and/or gross margins, is vital. Other non-cash expenses (i.e., depreciation, amortization and deferred taxes) are then deducted from revenues to determine overall net income. All is included in the income statement.

Cash Flow Statement

The Statement of Cash Flow (SCF) projects estimated cash flows by month, quarter and year, along with the anticipated timing of cash receipts and disbursements. The office’s bills and obligations are paid out of cash flow, not net income. It is very important for accrual based accounting practices; especially in terms of Medicare, Medicaid, MCOs, PPOs and HMOs producing insurance payment time delays and other aged accounting methodologies. Cash flow reflects the internal generation of fund available to supply operating capital.

Balance Sheet

The Balance Sheet (BS) forecasts the financial condition, assets and liabilities, of an office at a singular point in time. It projects the ability to meet financial obligation and the capacity to absorb financial setbacks without becoming insolvent.

Statement of Retained Earnings

This is a fourth new financial statement, but it is not usually a pro-forma statement since little cash is generated from a new medical practice.

Conclusion

Our team accountant will typically create the above statements for a start-up medical practice, and continues with the mature business entity. If the physician would like to do the above statements with someone other than the team accountant at Practice Setup it is strongly urged that the physician’s accountant be one that is experienced in business matters, as well as medical specificity and healthcare acumen.