Finance for veterinarians Flashcards
do most veterinarians live above or below their means? general saving habits?
- Most veterinarians live below their means
- You often have “enough”
- Veterinarians are big savers
if financial management needed?
- Financial Management is a Necessary Evil
- Either you do it or hire someone to do it
- Youmusttakeresponsibilityforyourpracticeand personal finances
financial investments
- Individual Retirement Account
- Asset Portfolio (stocks / bonds / indexed funds / land)
- Own vs Rent
- Leasing vs Buying
personal investments
- Where you live
- How you live
- Lifestyle now = lifestyle at retirement
- Owning a practice vs associate
- Spouse
Life Stages of a Veterinarian
- Student
- NewGrad
- Associate
- Practice Owner
- Semi Retired
- Retired
personal financial considerations
- Budgeting
- Debt Management
- Asset Accumulation
> Car
> House - Savings
> Rainy day
> Retirement - Retirement
practice financial considerations
- Budgeting
- Debt Management
- Asset Accumulation
> Equipment
> Facility - Savings
> Rainyday-February
> Retirement - Practice Sale
5 Financial goals…
- know where you stand
- know where you are going
- have time to do your real job
- have a life
- sleep at night
how do you figure out where you stand financially? what metrics do we use?
Profit and Loss/Income Statement
* Revenue
* Expenses
> Itemized
* Net Income
income statement shows what?
- revenue
- expenses (itemized)
- net income ( revenue - expenses)
Income Statement Veterinary Chart of Accounts
- variable expenses
– Drugs and Supplies
> Cost of Goods Sold
– Laboratory
– Non-DVM Wages
– Associate Wages
– Specialists
– Bank Charges
> VISA MasterCard
> Debit
Income Statement Veterinary Chart of Accounts
- fixed expenses
– Rent
– Office Supplies
– Repair & Maintenance
– Utilities
– Advertising
– Legal and Accounting
– Professional Dues
– Insurance
– Continuing Education
– Equipment Rental
– Bad Debt
– Grooming Expenses
– Automotive
– Depreciation
what is depreciation?
- Depreciation measures the gradual wear and tear of an asset
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Example: - Pair of shoes cost $200
- Value of shoes in year
2,3,4? - Estimated life is 5 years
- Value goes down $40 per year
- Depreciation expense is $40
what is amortization?
Amortization measures the cost of an intangible asset
* 20 year patent on a drug that makes you fly – “FlyOff”
* “FlyOff” Patents is valued at 20 million dollars
* Annual amortization would be 1 million per year for 20 years
amortization vs depreciation
Amortization is the practice of spreading an intangible asset’s cost over that asset’s useful life. Depreciation is the expensing a fixed asset as it is used to reflect its anticipated deterioration.
The Purpose of Financial Statements
- Shows you if you’re making money
- Comparing periods
- November 2022 to November 2021
- 2022 to 2021
- Not unlike comparing blood work over time
3 types of financial statements
income statement, balance sheet, and statement of cash flows
does more revenue = more income?
no…
income statement use? when is it used?
- Used to measure revenue, expenses and net income
- Used monthly
- annually
- and special occasions – bank financing
practice valuation simple calculation
- EBITDA x Cap Rate / Revenue
EBITDA:
Earnings Before Interest, Taxes,
Depreciation and Amortization
Capitalization Rate / Multiplier
- what is this for vet clinic?
- Industry Standard is 3.5 to 5
- Corporations offering more
Accounts Not Included in EBITDA
- Bank Charges – loan portion
- Bad Debt
- Depreciation
Practice Value Estimate
- EBITDA
- Total Revenue $1,000,000
- Less Non-DVM Expenses $500,000
- Less Associate Wages $100,000
- Less owner wages
> (60 hr or 25% of rev) $200,000
= $200,000
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Capitalization Rate – 4
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Practice Value Estimate?
$800,000
balance sheet shows what?
- vs income statement?
- Shows Financial Health/ Wealth at a Point In Time
- Assets–Liabilities = Owners Equity
– Income Statement shows financial health over a period of time
Your Personal Balance Sheet
- Assets $300,000 house
- Liabilities $250,000 mortgage
- Equity?
$50,000
income statement vs balance sheet
- Income Statements
> Measure income over a period of time - BalanceSheet
> Measures financial health/wealth at a point in time
