Four financial reports every practice needs

By Gary Hughes - THC Associate Writer

Most GP Partners and Practice Managers know whether there is money in the bank. Far fewer can confidently answer questions like:

• Are we becoming more profitable?

• Where is our income changing?

• What are we actually spending our money on?

• Can we afford to recruit another member of staff?

• Can we afford to decorate or invest in new equipment?

Without good financial reporting, those questions are often answered with an assumption rather than evidence. That creates uncertainty, delays decisions and increases risk.

Over many years of managing practices and now working with practices across the country, I've found that effective financial reporting doesn't need to be complicated. In fact, the opposite is true. The simpler and more accessible the reporting, the more likely it is to be understood, discussed and used to make better decisions.

Most practices don't need dozens of reports. They need four.

Why financial reporting matters

Financial reporting is not about producing accounts for your accountant. Nor is it about demonstrating how good you are with spreadsheets. It is much simpler and more meaningful than that.

• Good financial reporting should help you to answer three questions.

• How are we doing?

• What has changed?

What should we do next?

If your reports can't answer those questions, they're probably just providing information rather than supporting decision-making. There is a difference between the two that really matters.

A report full of figures and charts may appear impressive, but if it doesn't help people understand the business and decide what to do next, it has little value.

1. Profit and Loss headline report

The first report should answer one simple question.

• How are we doing?

This doesn’t need pages of detailed accounts. Instead, provide a headline summary showing:

• Total income

• Total expenditure

• Overall profit or loss

  
  

Compare each figure with the same period last year and include a year-to-date comparison. Those comparisons are usually far more valuable than comparing everything against a budget, particularly in general practice where budgets are often based on previous years anyway. If there has been a major change, such as merging with another practice or moving premises, then budgets may become more useful for those specific areas.

Make it visual too. A simple chart showing income, expenditure and profit immediately makes the report easier to understand for those less familiar with finance.

2. Detailed Profit and Loss by category

Once you know how the practice is performing overall, the next question is:

• Why?

This second report breaks income and expenditure into categories that allow you to see:

• Where your income is coming from

• Where your money is being spent

• Which areas are changing

• Which areas need attention

This is where financial reporting becomes genuinely useful. Perhaps locum costs have increased significantly. Maybe premises costs have risen. Perhaps private income has grown. Or recruitment costs have doubled because you've struggled to fill vacancies.

They are the conversations you’ll be able to have, and which often lead directly to better decisions. You’ll also find it easier to identify coding errors, unexpected spending or opportunities to improve.

Again, make it visual. Simple charts often communicate trends far more effectively than another table of numbers.

3. Financial percentages

Large financial figures don't come naturally to everyone. Not everyone enjoys finance, and not everyone understands management accounts.

One simple way to improve understanding is to convert key figures into percentages. Instead of saying:

• "We spent £1.2 million on staff."

  
  

Say:

• “62% of our expenditure, or 62 pence of every £1 we spend, is on staffing."

Most people immediately understand that.

• Financial percentages also help answer questions like:

• How much of every pound of income do we spend?

• What proportion goes on staffing?

• How much becomes profit?

• How does this compare with last year?

Percentages also make comparisons much easier, whether you're looking at previous years or comparing with another practice. They improve engagement because they remove much of the intimidation people feel when faced with financial reports showing large amounts of money.

4. Cash reserves report

One of the most common questions in any practice is:

• Can we afford it?

Whether it's employing another receptionist, replacing consulting room furniture or investing in technology, somebody eventually asks that question.

A cash reserves report provides the answer.

The report starts with the money currently held in your bank accounts. From that, deduct:

• Working capital needed for routine expenditure

• Money committed to known future costs

• Any exceptional reserves you have decided to hold

What's left are your available cash reserves.

This report removes uncertainty, so you can see whether the practice has sufficient cash, and the ‘can we afford it’ question can be confidently answered.

I've found this to be one of the most useful reports for helping practices reach decisions more quickly.

Don't forget the commentary

The numbers alone are not enough. Every monthly report should be accompanied by a short commentary. This is often the most valuable part of the reporting pack and is usually written by the Practice Manager or Finance Partner.

It should explain:

• What has changed?

• Why has it changed?

• What does it mean?

• What decisions or actions are needed?

  
  

Keep it concise. Two sides of A4 is usually more than enough. The purpose is not to demonstrate financial expertise; it's to help busy Partners and Managers quickly understand what’s happening and what should happen next.

Keep it simple and consistent.

The biggest mistake I see is making financial reporting more complicated than it needs to be. The reports should be produced every month, in a consistent format and structure. They should be discussed each month as a standing item of your regular business meeting, and they should focus on supporting decisions rather than simply presenting figures.

Once you’ve created the templates you need, the process becomes straightforward and repeatable. Most accounting software will produce much of what you’ll use, with only a small amount of additional work required for the percentage and cash reserve reports.

Consistency is what makes the reporting valuable. People become familiar with the format, and they will engage quickly and more confidently.

Financial reporting supports better leadership

Financial reporting isn't an accounting exercise; it's a leadership tool.

It gives Partners and managers the confidence to make informed decisions based on evidence rather than assumptions. Practices that manage their finances well are rarely doing anything exceptional. They're simply looking at the right information, every month, in a way that everyone can understand.

Every practice can do that too. With four clear reports, a short commentary, and a consistent monthly routine.

The simplest systems are sometimes the ones that make the biggest difference.

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About Gary Hughes, MBA, PGCMDE

Gary Hughes has spent nearly 20 years in primary care, leading, supporting and strengthening general practice as a Practice Manager, consultant, educator and facilitator. Through Leadership in Practice, he helps practices become stronger, more effective businesses.

Gary developed the Business Strength Model, a practical framework that enables practices to assess the strength of their business across seven key areas. He also designs and delivers workshops and education programmes, speaks at industry events, and hosts the Leadership in Practice podcast.

If you would like to understand the strength of your business and identify opportunities for improvement, contact Gary at gary@leadershipinpractice.co.uk to arrange a free Business Foundations Health Check.

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