First Quarter Financials

Congratulations, medical practice owners…you made it through the first quarter.?

Just for fun I dug into the origins of April Fool’s Day, and the reason it became a day of pranks and practical jokes, and the results are inconclusive.

No joke.

Several hundred years ago the year actually began on March 25th with a holiday that ended on April 1st, notably France, who only switched to January 1st as recently as the mid-1500’s.?

I did not know that, but though a little interesting it is just trivia.

In the real world of entrepreneurial endeavor, the second quarter begins today.

There are two reasons why I find that significant, though they’re arguably subsets of one main reason.

Financial Metrics

Reason number one is that quarterly tracking of the financials of a private practice are critically important.

Unlike many other small businesses, medicine rarely suffers much from seasonality, except possibly for those that treat contagious winter influenzas and the like.

For the most part first quarter performance can provide valuable information about how the remaining three quarters of the year are going to go, and the math is even easy to do.

Just multiply by four.

The Infuriating Inevitability of Taxes

The other reason has to do with taxes.?

Or, I suppose I should have said “sub-reason.”

Because the income tax is a pay-as-you-go system, not an annual event. “What’s that,” you say?

If you are either in your first or maybe second year of medical practice, or aren’t making very much money yet, or just live under a rock maybe you don’t know this.

So let me be fairly clear.? And clearly fair.

If you are going to owe more than $1,000 in taxes you should be making quarterly tax payments, not just when you file in March or April. If you are going to owe more than $1,000 for a second year you HAVE to do it.?

The consequence for not doing it is called “underpayment penalty,” and it is easily avoidable.

Now comes the part where the sub-reason of metrics comes into play.

You make an estimated tax payment by following these simple steps in the first quarter:

1)???? Take out your first quarter profit and loss statement.? Plug the net income for January through March into a calculator.

2)???? Multiply that number by four.

3)???? Use some sort of at least semi-reliable tax calculator from a web search or other means, and figure out the tax on that amount.

4)???? Divide that by 4 (for one-fourth of the year), round it down to the next $100, and send it in to Uncle Sugar of America.

Of course there are variables involved here.? If you’re in a multi-income family, such as having a spouse that works, you have to add in his or her income and be sure to subtract any withholding from the total tax amount.

Hopefully you get the idea.

Estimated taxes are for me like cleaning up a kitchen after making a huge meal.

If you clean as you go it’s just neater, and you’re able to think and feel with better clarity.

Plus, extra added bonus, you also keep hundreds of underpayment penalty dollars out of the greedy snapping claws of the federal and various state governments.

Conclusion

The first quarter should be looked forward to with Christmas-like childish enthusiasm to a private practice owner, because it’s an ideal time to gauge the performance of the financials.

You also have the opportunity to develop the responsible and money-saving habit of quarterly tax payments, and just maybe look forward to next year’s tax filing without the dread of the unknown.

If you would like to discuss how having a non-equity financial partner guiding your practice's business future can increase your wealth, reduce your taxes, and provide the peace of mind that will allow you to put 110% of yourself into your patient care goals?

We would like to talk to you as well.

We are accepting two new business advisory clients in April.?

Use the link I’m providing below now to choose the time to talk most convenient for you.

Imagine having a financial coach and compliance expert by your side, so that you can focus your professional clinical time where it belongs: on patient care.

Does that sound good?

Then reach out to me, and let’s talk: Free Profit & Cash Flow Analysis