Accounting vs. Financial Analysis

Accounting vs. Financial Analysis

Like many other small business owners, do you often feel frustrated when reading your financial reports?

What is the difference between dental accounting and dental practice financial analysis? One revisits your past, the other points to your present and future…

Dental Practice Accounting

Accounting is the process of balancing and reconciling your past, showing the numerical results – good or bad – generated by the historical activities you performed.

Dental Practice Financial Analysis

Financial analysis includes the experienced-based process of interpreting and translating these past numbers into current future suggestions, actions or activities to reach your desired outcome.

For most small businesses, the person who performs the accounts payable (A/P, a.k.a. check writing) role may not be specifically trained or experienced – let alone expert – in processing, aggregating, filtering, prioritizing, projecting and simplifying the future actions needed to meet and exceed your expectations.

Once the accounts payable person sends out the checks, the bookkeeper then makes sure all the financial information is present and “accounted” for in order to “balance the books”. As a side note: this is often the same person the business owner “hopes” will give observations and recommendations to the owner. “What have we been doing that is working well, so we can keep doing it to build the practice?” and conversely, “What have we been doing that has not been working well, so we can try to change it?”

The Role of the Dental Practice CFO

In a high-performing and profiting organization, financial data is elevated to a controller to effectively confirm data accuracy, double check the accounting processes to minimize embezzlement gaps, then enhance fiscal data, reports and optics to provide the desired business management and fiscal analysis reports which supply the next level of information to the Chief Financial Officer (CFO) of the organization.

The final step for the CFO is to gather, translate, interpolate, project, and succinctly summarize observations from the data into a prioritized action plan for the Chief Executive Officer (CEO) and/or owner. This CFO role is focused on profit and performance of the organization and prioritizing the sequential actions required to strengthen the stability of the practice.

Successful businesses and practices know they must have each one of these positions filled. The roles may not need a lot of time, but they need expertise at each level, in order to align the best optics and outcomes for the CEO.