back-to-top
X

CONTACT US







hamburger-menu-icon

Articles

Volume 12: The Importance of Separate Financial Statements

Download the PDF version now!

Too often I come across a dentist with two or more locations and there is only one set of financial statements for all the practices. This will give rise to many problems when the dentist wishes to sell only one of the practices. The purchaser and his or her accountant place a high value on their ability to see separate financial statements for the practice which they are interested in purchasing.

If a purchaser is purchasing one of the practices owned by the vendor and there is only one financial statement for all locations, ( it is none of the purchaser’s business what the other practices are doing,) the vendor would be hesitant to show any financial statements and this leaves the purchaser somewhat skeptical. It certainly does not make it easier to sell the practice.

It is not an expensive request to have the accountant prepare a separate financial statement for each location as well as an overall set of financial statements for income tax purposes. Separate financial statements also permits you to review each location as to its productivity.

We recently represented a nice practice for sale which was a satellite practice without separate financial statements and a number of the banks did not want to fund the sale because there were no separate financial statements. The doctor only had one joint financial statement and we had to create a reasonable financial statement given the billings, rent and staff costs. This is a last resort.

Separate financial statements require the bookkeeper to keep a separate ledger for each practice as much as possible. I realize that supplies can be transported between practices but this is easy to account for. There is a strong belief that financial statements are true and accurate when they are prepared by an accountant but the reality is that they are no better than the information supplied by the dentist. The accountant’s statement indicates that there was no audit done although often times the accountant’s statement indicates that a review engagement was completed which indicates that the statements were reviewed by the accountant with the dentist in an attempt to identify any potential errors.

Any unusual transactions were discussed to ensure that reasonable steps were taken to avoid any misrepresentation. A review engagement gives the reader a greater level of assurance that the statements are correct but there is no guarantee.

Well presented financial statements with reasonable groupings to reflect the activities of the practice can be a valuable tool in the sale of the practice.

The Professional Advisory

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead

celebrating-30-years
test
SUBSCRIBE TO OUR NEW LISTINGS SERVICE