Start with revenue, not the bottom line
Your top line shows revenue on the accounting basis used in your financial statements. Cash-basis revenue generally follows receipts; accrual-basis revenue can differ from collections because of timing. Compare revenue by provider or location on a consistent basis, since a practice-wide average can hide important differences.
Look at direct costs before overhead
Direct costs — clinical staff, supplies, provider compensation — tell you what it actually costs to deliver care. Overhead (rent, admin, insurance) is real, but allocating it evenly across providers or locations can distort the picture if your practice isn't evenly sized.
Illustrative example only, not client data or a benchmark.
Review operating margin
Operating margin = operating income ÷ revenue × 100. Operating income reflects revenue less operating expenses, before interest and income taxes; it is different from net income. Document your accounting basis, operating-cost classifications and treatment of owner or provider compensation. Compare like periods and practices with comparable scope rather than relying on a single universal target.
Compare month over month, not just to budget
A P&L in isolation tells you where you stand today. A trend over 6-12 months tells you where you're heading.
If your monthly P&L doesn't break out revenue and direct costs by provider or location, that's usually the first gap worth closing — it's the difference between "the practice is profitable" and knowing why.
A worked read-through
Illustrative monthly figures: revenue of $200,000, direct operating costs of $116,000 and overhead of $48,000 leave operating income of $36,000. Operating margin is $36,000 ÷ $200,000 × 100 = 18%. The example assumes the listed direct costs and overhead comprise all operating expenses for this simplified report. It excludes interest and income taxes from operating income and is not a target or client result.
Profit does not explain every cash movement
A profitable month can coincide with a lower bank balance. On an accrual basis, receipts may arrive after revenue is recognized. Equipment purchases, loan-principal payments and distributions can also change cash without being the same period’s operating expenses. Review the balance sheet and cash movements alongside the P&L rather than treating the operating margin as cash available to spend.
Use a short review agenda
- Confirm the period, accounting basis and whether the close is complete.
- Identify which revenue and expense lines changed most in dollars.
- Separate timing or classification changes from operational changes.
- Compare provider or location figures only with consistent definitions and allocations.
- End with the unresolved question, the person responsible and the information needed.
Primary reference: SEC financial-statement guide distinguishes the income statement from cash-flow reporting. This is a general educational reference, not a medical-practice benchmark or support for the illustrative amounts.