Council Post: A Beginner’s Guide To Reading Financial Statements For Private Practice Dietitians

By Libby Rothschild, CEO of Dietitian Boss; follow on LinkedIn.

According to the Compensation and Benefits Survey of the Dietetics Profession (registration or purchase required) from the Academy of Nutrition and Dietetics, only 8% of registered dietitians own a business and many struggle to stay in business and create a profitable operation. Only 50% of businesses survive after 5 years. The best bet to ensure survival includes learning how to read your numbers—also called your financial statement.

If you want to achieve profits, you should learn to identify your financial statements and associated key metrics. You can use this information to make better, more strategic business decisions and help the company earn more money over time. Making decisions about how and when to incorporate passive income products are all supported by reviewing your financial statements.

Understanding what a financial statement is and how to read it is a necessary skill that dietitian business owners should learn. It is vital for online programs, too, since knowing as much as possible about a company’s financial status can support scaling.

The Importance Of Financial Statements

A financial statement is a written record that shows business activities and the company’s overall financial performance.

There are different types of financial statements; however, most will include the same primary components, such as a balance sheet, an income statement, a statement of cash flows and supplementary notes.

Financial statements are important because they contain vital information about business activities and financial growth. These statements help private practice owners make better decisions and highlight areas where dietitians had the best return on investment for future growth.

How To Read A Financial Statement

If you are new to reviewing your financial statements, start with reading an income statement, also known as the profit and loss statement, or P&L. An income statement follows a linear path or vertical pattern. The top line will show your larger number (revenue) before expenses, and your bottom line will show the smaller number, which indicates what you earn after expenses (profit).

Critical Components

While all the data in a financial statement is essential, there are three key metrics that can help you make strategic decisions to support growth: net profit, sales and margins.

• Net Profit

One key benefit of financial statements is that they show a company’s net profit. That is the money a company has left over once they have paid out all their expenses. This information is essential in showing how much money a company has made. That is because losses and unsustainable profits are undesirable and indicate that you need to tweak your business strategy or readjust your quarterly goals.

Because many business owners do not have a good perception of their net profit, this is a good place to start when reading a financial statement.

• Sales

A product or service is only worthwhile if consumers are willing to purchase it. Looking at your sales and identifying patterns in your financial statements can support better goal setting. Every business owner should identify their sales and make decisions based on their actual numbers.

• Margins

Information about sales is only important as long as the business makes money. If you create a strategy based on how many products you are selling, you are likely missing a big piece of the puzzle: profitability. When reviewing your financial statements, you want to identify your profit margin at an individual product level and for the company overall.

Scaling

Reading and analyzing a company’s financial statement can help a business grow. It provides insight to make informed decisions about where to spend your time and energy.

For any form of business, including those that operate strictly online, scaling or growth is reliant on the precise and well-timed analysis of the company’s financial statement.

These days, online businesses can grow at a rapid pace. And that can place more prominence on collecting correct information regarding the company’s financial growth. Therefore, dietitian private practice owners should learn as much as they can about analyzing their financial statements and using that information to ensure prosperity in their business. The development of this knowledge is essential for growing a business.