Finance Flashcards
The process of identifying, measuring, and communicating economic information, often in the form of professionally prescribed and standardized reports, to permit informed judgments and decisions by users of the information, such as practice owners and managers.
Accounting
Bills and vendor liabilities due for payment by the practice as part of the normal course of practice activity; money the practice owes to regular business creditors and practice vendors, and generally accruing from the previous month of supply and service purchases. These accounts may be aged over longer periods depending on vendor contracts and practice ability to meet its debts as they come due.
Accounts payable
Debts owed to the veterinary practice, usually from client sales on credit.
Accounts receivable
An expense incurred during an accounting period for which payment is postponed to a later period, or revenue earned during an accounting period for which cash is received in a later period.
Accrual
The accounting method based on recognition of a transaction’s occurrence. The method recognizes revenue as income in the period in which it is earned because a transaction occurred (provision of service), regardless of when the client pays. Recognizes expenditures in the period in which the liability for paying them is incurred, regardless of when payment is made.
Accrual basis accounting
To increase gradually, to accumulate, to have due after a period of time.
Accrue
A report that segregates amounts owed to vendors into increments of 30-day periods, based on the number of days from the inception of the practice debt to the date of the report.
Aging accounts payable report
A report that segregates amounts owed from clients into increments of 30-day periods, based on the number of days from the inception of the client debt to the date of the report.
Aging accounts receivable report
Things of value owned by a business enterprise, such as cash, accounts receivable, and equipment.
Assets
An examination or verification of financial records or accounts by a qualified professional.
Audit
A record of financial transactions from which an accountant can reconstruct the sequence of events.
Audit trail
An electronic network for processing financial transactions, such as direct deposit payroll and vendor payments.
Automated Clearing House (ACH)
Also referred to as the statement of financial condition, summarizes the assets, liabilities, and owner’s equity at a particular date.
Balance sheet
A charge added to a bill sent to a client to compensate the veterinary practice for the costs of billing when the usual practice policy requires payment at time of services. Full, advance disclosure of billing charges is generally legally required.
Billing charge
The systematic recording of a practice’s financial transactions, including sales, purchases, deposits, and payments.
Bookkeeping
In regard to bookkeeping and internal control processes, the act of indelibly marking or otherwise defacing documentation so that is invalidated for reuse. For example, marking a vendor invoice with a “paid” rubber stamp shows that the invoice should not be paid again.
Cancel
Electronic equipment used to read the magnetic strips on credit and debit cards and transmit the transaction information to the financial institution for credit authorization and approval.
Card swipe terminal
A company that provides a dedicated health-care credit card to be used specifically for veterinary services; recommended by AAHA.
CareCredit®
An accounting method that measures income when cash is received and expenses when cash is spent.
Cash basis accounting
A list of the names of the financial accounts a practice uses to record, organize, sort, and report transactions, usually including numeric coding. The list organizes accounts in order of their permanence and appearance in the financial statements: asset accounts, liability accounts, equity accounts, operating revenue accounts, operating expense accounts, nonoperating revenues and gains, and nonoperating expenses and losses.
Chart of accounts
A company that helps manage the risk of accepting client payment by check by validating checks presented to the practice and/or using extensive data analytic predictions to statistically assess the level of risk associated with checks, and sometimes including check guarantee protection
Check verification service
The average amount of money charged to a client for a single invoice. Compared to the average patient dollar transaction, which refers to the average amount charged per invoice attributable to single patient, average client dollar transactions are often higher because several animals may be invoiced through a single client bill.
Client transaction charge (or average client transaction charge)
A standardized, CPA-prepared financial report that presents transactional information provided by management in a prescribed format. A compilation is the representation of management, not of the CPA, and is the most common type of financial statement presentation prepared by CPAs for veterinary businesses. Accounting profession guidelines and rules dictate protocols and presentation requirements for CPA-prepared compilations.
Compilation
The direct patient costs associated with producing veterinary service and related revenues.
Cost of professional services (COPS)
A cost accounting method in which cost of a product or service is determined by allocating to it the variable (direct) costs attributed to it.
Direct costing
A bookkeeping record that chronologically records expenditures made.
Disbursement journal
Rights or claims to the properties or assets of the veterinary practice.
Equity
Systems and protocols for ensuring the management and protection of monetary and investment aspects of the veterinary practice. These controls are framed by the protocols, policies, and activities that ensure that the practice’s accounting system is strong and intact.
Financial control
A type of business report that presents financial information about the economic impact on the entity of completed transactions and other events.
Financial statement
Tangible assets of a durable nature, which are expected to help generate revenue over a period of a year or longer.
Fixed asset
An expense that tends to remain constant in monetary amount, regardless of variations in the volume of activity.
Fixed cost (or fixed expense)
A fixed fee for services rendered, as opposed to charging by the hour or based on a percentage of the service.
Flat fee
The complete and permanent chronological record of all of a practice’s transactions, organized by financial accounts, that summarizes other supporting journals, such as those listing details of sales, cash receipts, and cash disbursements.
General ledger
For a specific item, the difference between revenue realized by and the cost of selling a product (like dog food or a drug).
Gross profit
The veterinary practice’s total operating income, before any deductions for discounts, account write-offs, or operating expenses, and without adding other sources of cash, such as consumer sales tax collections and nonoperating income.
Gross revenue
An adjective describing a fund or cash reserve that is maintained at a constant level for lengthy periods of time.
Imprest
A gain or recurrent benefit, usually measured in money, that derives from capital or labor.
Income
A bookkeeping record that chronologically records transactions related to sales and other sources of revenues, such as rent and interest.
Income journal
A type of financial report that presents the total income earned and expenditures made for a specific period of time. When income for the period exceeds expenses, a profit occurs. When expenses exceed income for the period measured, a loss occurs. The period of time can span one day, one month, one calendar or fiscal quarter, a full year, or another time frame that gives management the information it wishes to examine.
Income statement
Law passed by the U.S. Congress and subsequent regulations created under that law and through which the Internal Revenue Service functions with regard to taxation of individuals and businesses.
Internal Revenue Code (IRC)
“Commercial trade, business, movement of goods or money, or transportation from one state to another, regulated by the federal government according to powers spelled out in Article I of the Constitution,”
Interstate commerce
Present obligations resulting from past transactions that require the practice to pay money, provide goods, or perform services in the future.
Liabilities
A branch of economics that examines aggregate market perspectives (regional, national, and global) of production, distribution, and consumption of goods and services, and upon which models and forecasts are developed to assist in policy and business strategy formation and evaluation.
Macroeconomics
The current mandatory depreciation method required by U.S. federal regulation for most tangible depreciable property (equipment, furniture, signs, computer hardware, buildings, and improvements) placed in service after December 31, 1986.
Modified Accelerated Cost Recovery System (MACRS)
A bookkeeping system that utilizes overlapping carbonless papers to record the same transaction to several records simultaneously.
one-write system
Revenues or income resulting from veterinary activities and veterinary-related sales, such as pharmacy sales.
Operating income
Practice expenses are grouped into general categories, such as postage, office supplies, advertising, and laboratory supplies.
Out-of-line expenditure
A bookkeeping record that chronologically records transactions related to payment of employees, employee taxes, employer payroll taxes, and various amounts withheld from employee pay, such as employee copayment of health insurance premiums, garnishments, and voluntary retirement contributions.
Payroll journal
Imprest cash fund maintained for minor expenditures.
Petty cash
Revenues that are or will be collected because all events have occurred that establish the practice’s legal right of receipt from the client.
Realized revenues
Information accompanying payment that informs the vendor which invoices are being paid, including the customer account number, invoice number(s), and so on.
Remittance information
The income from goods sold and services rendered during a given period of time, equal to the inflow of cash and receivables from sales made during that period.
Revenue
An accounting concept wherein a revenue transaction is marked at the moment the revenue is earned, regardless of when cash is ultimately received for services or products provided.
Revenue recognition principle
The initial money investment necessary to start up a practice that allows it to cover initial operating expenses as well as equipment, technology, and organizational cost.
Seed capital
Financial statement detailing inflows and outflows of cash between two points in time.
Statement of cash flow
Physical assets, such as buildings, inventory, and equipment.
Tangible property
An adding machine used by cashiers, bookkeepers, and accountants to quickly tally long lists of numbers, and providing an option for printing to a narrow roll of paper to create a printed tape used as a proofing mechanism for bank deposit totals, among other number lists.
Ten key
Amount owed to a vendor.
Trade account payable
Amount owed from a client.
Trade account receivable
An expense that directly and proportionately fluctuates in amount in relation to the volume of activity.
Variable cost (or variable expense)
An amount charged to a client that is later removed from the financial records and deemed unrecoverable because of nonpayment.
Write-off
What is the Accounting Equation?
Assets = Liabilities + Equity
What is Accounts Receivable turnover (A/R Turnover) equation?
Annual Revenue / Accounts Receivable
What is the Annual revenue per Veterinarian
Annual gross revenue / # FTE Veterinarians
What is the Average age of A/R equation?
365 days / A/R turnover
What is the Average age of Inventory equation?
365 days/year / A/R Turnover
What is the Average Transaction value (ATV) Equation?
Total Revenue / total # transactions
What is the Cash Flow (Current Ratio) equation?
Current Assets / Current Liabilities
What is the Economic Order Quantity (EOQ) equation?
Square root of ((2 x A x F) / (H x UC)) Where: * A = Annual demand in units * F = Fixed Ordering costs/order * H = holding costs exp. on annual basis as % of unit cost * UC = Cost to purchase from vendor
What is the Efficiency ratio?
of patient visits / # of staff hours
What is the employee retention ratio?
( # of positions retained / # of positions in the organization )
x 100
What is the Employee Turnover ratio?
of employees who have left the organization
/
# of employee who are in the organization
x 100
What is the Equity Ratio?
Total Liabilities / Total Owner’s Equity
What is the gross profit equation?
Revenue - cost of goods sold = gross profit
What is the Inventory Turnover rate?
Annual purchase of supplies
/
Average inventory value
How do you calculate Net income (before taxes)?
Gross profit - operating expenses = net income (before taxes)
How do you calculate Net income (or loss) after taxes?
Net income - taxes = net income (or loss)
How do you calculate Profit Margin?
Net income (before taxes) / Revenue
What is the Profitability Ratio?
Operating Income / Revenue
How do you calculate Return On Investment (ROI)?
( Expected annual return / investment ) x 100
How do you calculate Working Capital?
Cash on Hand + A/R - Current Liabilities
Maximizing inventory turnover is a key strategy in creating an efficient and profitable inventory system. Name 4 ways to increase your inventory turnover.
- Product consolidation2. Order quantities that make sense3. Measure and increase compliance4. Doctor and staff product education
The art of measuring, communicating, and interpreting financial activity.
Accounting
The amounts the practice owes to suppliers that are payable in the future.
Accounts Payable (AP)
Money that is owed to the practice by a client for products or services provided on credit.
Accounts Receivable (AR)
A system that recognizes revenue as earned and expenses as incurred.
Accrual Accounting.
Accounting method that recognizes income when it is earned, and expenses when they are incurred regardless of when cash is received or disbursed.
Accrual basis.
Relating to income that remains after the deduction of taxes due.
After-Tax
A particular period of time, as distinguished from other periods.
Aging.
Periodic expense attributed to the decline in usefulness of intangible assets over its estimated useful life.
Amortization
Any Asset that lacks physical substance and is usually very hard to valuate.
Asset - Intangible
A trust which can be used to maintain control over the trust assets for a designated period of time, which may survive death.
Asset Control
Things of Value owned by a business enterprise, such as cash, accounts receivable, and equipment.
Assets.
Any Asset reasonably expected to be sold, consumed, or exhausted through the normal operations of the business within the current fiscal year.
Assets - Current
Any Asset that cannot easily be converted to cash
Asset - Fixed
Give examples of a Current Asset
Short Term Assets such as general inventory, cash, and accounts receivable.
Give Examples of a Fixed Asset
Long term Assets such as land, buildings, and equipment.
Give examples of an intangible asset.
Not physical in nature such as goodwill and copyrights.
A record of financial transactions from which an accountant can reconstruct the sequence of events.
Audit Trails
Total Revenue of a time period divided by the total number of transactions in that period.
Average transaction charge.
Also referred to as the “statement of financial conditions” and summarizes the assets, liabilities, and owner’s equity at a particular date.
Balance Sheet
Summary of financial transactions which have occurred over a given period on a bank account.
Bank Statement
Measurable quantities for a given period of time that are considered industry standards.
Benchmark
The process by which a business compares itself to others.
Benchmarking
A charge added to the bill sent to a client when the usual practice policy requires payment at the time of service.
Billing Fees.
Money or an equivalent given in addition to an employee’s usual compensation.
Bonus.
