Just like the financial term page, this page will have words… I guess every page has words. Eh, this page will be specific towards dental practice terms. These words will be MY definition and how I understand them. These will be terms you will want to somewhat know (or at least recognize) when you are discussing your P&L statement with your office manager or CPA.
The Dental Business Words You Should Be Somewhat Familiar With
(Oh, also these words should all be buried in the financial term page…)
Accounts Payable (AP): Simply put, bills that are still due.
Accounts Receivable (AR): The money that still needs to be paid by a patient or insurance for a procedure that has been provided.
Amortization: (2 terms) 1. The depreciation of an intangible asset. 2. Paying off the principle of a loan.
Appraisal: Generally an expert comes and assesses the value of the practice.
Assets: A thing that has value. May range from stocks to that chair in the lounge.
Balance Sheet: Shows the assets, capital, and liabilities of a business during a particular point in time.
Cash flow: The amount of money that comes in and out of a business
Collections: is the total amount of cash that actually comes into a practice
CPA: Certified Public Accountant. Make sure you get a dental specific CPA for your dental practice they will know the tax write-offs and other financial things that will be difficult for you to pick up on.
Credit: Ability to obtain a good without purchasing it with a promise to pay the lender back later. This leads to debt.
Debit: How much is owed.
Depreciation: The decrease in value.
Due Diligence: Steps that should be taken before purchasing or selling a business or item. Such as contacting an attorney, getting an appraisal, presenting etc.
EBITDA: A company’s Earnings Before Interest, Taxes, Depreciation, and Amortization.
Equity: The value of the shares that an individual owns
Fixed Expenses: Bills that do not change in value month to month. Such as lease payments, Business loan payments, insurance, etc.
General Ledger: An account that is used to store balance sheets and income statements.
Goodwill: Assets in the business that are intangible. Such as Reputation, patient loyalty, etc. (When buying a dental practice you are mainly buying goodwill)
Leverage: Borrowed money to potentially increase the returns of an investment. A nice way to say I’m going into more debt to increase my cash flow.
Liabilities: In business the responsibility of payments of debt or other financial obligations.
Liquidity: Just think of this as cash.
Net Income (NI): The companies total earnings after removing taxes, depreciation, bills, etc.
Overhead: All the expenses that need to be paid in a business to keep it running. Such as payroll, liabilities, lease, etc.
Pay-roll: The amount a business pays their employee’s.
Production: The full fee for a service provided w/o adjustments (write-offs, friends/family discount, coupons, etc.)
Profit and Loss Statement (P&L): A statement that shows the expenses, costs, revenues… (basically cash flow) of a company of a specific period of time.
Tax Write-Offs: The claims made for a business expense to keep more money in your pocket and not in Uncle Sams.
Variable Expenses: Monthly bills that change monthly. Such as supplies, Marketing, and CE
Write-Offs: Money insurance doesn’t pay their part because they thought the procedure shouldn’t have been done.