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Figuring future income for financial statements

Student DC March 19, 2019

financial statements

If you are preparing financial statements for your business plan, a bank will want to see up to three years’ projections on your practice income.

It is difficult to make these kinds of projections when you are not sure what your income will be. Here is one way to come up with some numbers, using a “best case” scenario:

Imagine a week in your office when you are seeing the maximum number of patients. How many hours a week would you be working? How many patients would you expect to see in an hour, including new patients and current patients? Make up a weekly schedule sheet and fill in the information on the number of days, hours per day, and patients per hour. Call this a typical week. Then put numbers to this week: How much would you bill for these patients for the work you are doing? Get as specific as possible.

Then, multiply this week by the number of weeks each year you expect to be working, not including vacations and holidays, to come up with an expected annual income.

Finally, multiply this number by a percentage you expect realistically to see in year one, year two, and year three.

For example, let’s say your calculations give you an annual income of $160,000 in Year One. Since it’s your first year, maybe you will only be working at 60 percent. Maybe in Year Two you’ll be up to 70 percent, and by Year Three you can be at 90 percent. You probably would never be at 100 percent, because everyone needs time off or is ill, or patients cancel, or a thousand other reasons.

The benefit of this calculation is that it gives you a way to explain to a banker how you came up with these numbers.

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Filed Under: Financial Preparation, Student DC

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