Comparison With Previous Period

One feature of your typical set of financial statements is that they give comparative figures for the previous accounting period (usually a year, but in larger organisations accounts will be prepared more regularly so the comparative may be the previous month, or quarter.) The benefit of comparative figures is that the previous period acts as a benchmark against which to measure this period.

You will remember when I talked about projections, the same thing applied, but in that case, the comparison was between the actual and the budget figures.

The meaning that we take from the figures presented will depend on our expectations. If we wanted to earn more this year, but the figures are telling us that we earned less, then that gives us important information for planning purposes. The figures can then be broken down, analysed, and can inform decisions about next year’s activities.

A comparison also helps to identify where expenses may have increased or decreased significantly.

Profit or Loss / Excess or Deficit of Income Over Expenditure

The gross level of fees or income earned in an accounting period is a very useful measure, and when examined in conjunction with other figures, tells us a lot about our business. Significant calculations include:

Gross fees / Client Hours worked = Income per client hour worked Let’s say for arguments sake you have a sliding fee scale between €50 and €70. This calculation tells you your average fee per hour. If it’s too close to the €50 mark, you might want to reassess your fee scale policy. You might decide, for example, to limit the number of places you assign to the lower rate. If the calculation returns a figure below the €50, then that implies that you have not been paid for all the client hours you worked, and you might want to reconsider your payment terms.

Gross fees / Number of clients = Average income per client You might be surprised by this one! A client paying a modest fee per week, pays a very substantial amount if they attend weekly for a number of months. When compared to similar calculations in previous periods, this calculation may indicate a shift in the time clients are attending for. A larger average income could indicate more long term work, whereas a lower average income figure could indicate more short term work.

Net Profit or Loss / Net excess or deficit of income over expenditure is the figure that is left after paying out all the expenses of your practice, but before tax. It loosely compares to gross salary in paid employment. It is also the amount available for you to take out of the business, after you have make provision for tax. In a year where income has reduced and expenses increased, the amount available to draw from the business is diminished. Preparing figures regularly, rather than once a year to satisfy the tax authorities, can help you to take appropriate action to solve an emerging problem before it becomes too big.

Again this figure (Net profit), when examined in conjunction with others can tell us a lot about the business side of our practices. It’s interesting, for example to look at it in the context of the cost of our original training (for those recently qualified) or for additional training (for those qualified for a while). Does this figure give you an adequate return on the investment you made?

It is also useful to compare it to a typical salaried position for a counsellor (adjusting if necessary for the number of hours worked.) Not that the money would be the only factor in determining whether to be self-employed or take a salaried position, but if what you earn is significantly less than you could earn working the same number of hours for someone else, you might consider having a look at your finances.

If the results you’re seeing in your practice are not what you want, contact me here for a free 20 minute consultation or to make an appointment.