Company profit and incomes

A revenue generated by the company in a period are subtracted the expenses incurred during the same period and the benefit is obtained.

The benefit can be considered in two ways:
  • As absolute value ( "This month I won X ...")
  • As relative value ( "My benefit is a% of my income")

The benefit as a figure, tells us what we make in a particular amount, on which pay taxes. Variations in this figure at the end of each quarter will only tell us if we win more or less money. Instead, the percentage of revenue gives us more information.
Comparing this percentage to over the months, we will know if we are more efficient in our management of the clinic, regardless of turnover.

An example will help explain ....



In this case the quarter that more benefits are obtained is the 4th, but change is not only having a percentage of profits on lower revenues, but also, this percentage is below the annual average. This should make us jump the alarms it is also the quarter in which more has been billed.
Clearly, the Quarter 1 has been the most efficient of all, because if it is true that the profit figure was less in absolute value (€ 7,500), is the month that more has been the benefit compared to the volume of revenues (17.4%).

What happened in Quarter 4? What has gone wrong?
The answer can only come from an analysis of the figures a little more careful. While for now we consider income globally, not so with the cost, which can be grouped into various categories. Each cluster depends on the cost structure of each clinic, but overall could be defined an income statement as follows:



Purchases
Grouped purchases of material we use directly in our work at the dental clinic: consumables, implants, prostheses, etc. Is recorded when the bill is purchased, not when paid.

Margin
The first difference between our revenues and purchase invoices is the margin. It indicates what percentage we charge our purchase. In this case, the price revolves around the 50% margin. In Quarter 4, we can think of:
  • Or have bought a lot of stuff we have not yet used (in this case it's a temporary problem)
  • Or like i've bought have had to make cheaper treatments by market pressure prices downward (in this case must be made to improve the margin, is raising prices is buying cheaper).

Expenses
The margin should allow us to absorb the costs of the cynical. Which they should be allowed to run to the clinic, as the costs of general staff or supplies. And some not so essential but we assume to have more presence in the market, such as those for marketing campaigns. The depreciation to wear and tear of the equipment purchased and facilities of the clinic.

The final benefit
It is left to us after having faced all expenses. On this amount the taxes will be paid. As can be seen, the starting point (income) and end (benefits) are the same, but the importance is in the information provided to us. A good accounting and good financial analysis provide insight into the evolution of the business and take corrective action.
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