What basic financial statements should I be using for my home care agency and where can I get templates?
The main financial statements that Home Care business owners should be familiar with are:
- Profit & Loss account (P&L)
- Balance Sheet
- Bank reconciliation
Note: Click here to download a spreadsheet with template P&L and Balance Sheets built for a home care agency.
Within the P&L you should pay close attention to your:
- Gross Profit (GP) = Billable Sales-Caregiver wages
- Gross profit margin = GP/Sales
- Net Profit (NP) = GP-Administrative Expenses (what is left for the owner)
- Net Profit margin = NP/Sales
Knowing what is going on in your P&L would allow you to know how well your business is doing and what actions you would need to take in order to improve your situation if needs be.
In the Balance Sheet you want to ensure that your bank accounts in your accounting software are saying what your actual bank statements are showing or there is an explanation if they do not match. You want to also pay attention to any loans, outstanding invoices that have not been collected (Accounts Receivables).
A reconciled bank account ensures that all the funds that are going in and out of your business are accounted for. This is where the owner can find out if payments are being duplicated or if fraud is taking place.
These are the main management reports that you should go over by yourself or with your accountant on a monthly basis.
I offer all my clients a free 4 module video course, Introduction to Bookkeeping and Accounting for Small Business owners where I further explain these reports and basic accounting concepts/principles that home care business owners need to know in order to operate their agency successfully.
Contact Mark at his website or schedule time on his calendar.