We find that a doctor’s Profit and Loss Statement (or P&L Statement) hardly ever reflects the true expenses required to produce the top line revenue stated. Why? Depending on how the practice is structured, there are a number of discretionary expenses that a doctor and his/her accountant may choose to run through the practice. Some common items hidden within a P&L Statement are the doctor’s payroll taxes, the doctor’s health/life (and sometimes disability) insurance, the doctor’s retirement contributions, automobile expenses, and certain travel and entertainment expenses, just to name a few.
To understand the true overhead of an orthodontic practice, it is often necessary to deduct these expenses from your P&L Statement, and then recalculate your overhead rate. After doing so, the question most doctors ask us is how they compare to industry norms. While there is no correct answer to what a practice’s overhead should be, we have produced a document that will help doctors compare his/her overhead to the average benchmarks seen in the orthodontic practices we value. Click here to access this sample P&L Statement document. Once you download this reference sheet, take out your P&L Statement from the last complete year and begin to make entries. Enter your actual expenses in the unadjusted column on the left (entering each into the best available category), and then remove discretionary business expenses in the adjustments column to determine the final adjusted figures, which will provide your true expenses to operate the practice. In an hour or less, you’ll have the best view of your practice.