The phone rings nonstop with clients wanting appointments right away. The team is tired, and you can’t find skilled people to hire. The doctors are frustrated, and it will take months to hire another doctor. So, who has time to look at one more financial report? What you really need is a report that gives you valuable information – not more data. So how would you like a tool that enables you to review your financials and make informed strategic decisions quickly and easily? Does such a report even exist? The critical component to keep in your toolbox is the trailing twelve-month (TTM) analysis.
A Reporting Method that Helps
The pandemic impacted all industries and is still creating adverse effects. If it weren’t the pandemic, some other economic or environmental situation would exert adverse impacts. Now, we don’t mean to minimize the impact of the pandemic, but let’s face it: there will always be something causing problems for the business. Relying on year-end financials will not provide an accurate narrative of the financial health of your practice during the year. Every practice manager knows how difficult it can be to formulate a strategic plan without accurate, complete data. It would help if you had a tool that allowed you to quickly assess and respond – be it from the frequent changes due to the pandemic to any new services you implement or any future adverse situation.
A trailing twelve-month (TTM) report reviews your practice's previous twelve-months’ financials. It’s not based on a calendar year, but it allows you to analyze an entire year’s worth of data at any given point in the year. The TTM smooths out seasonality because it looks at trends for an extended period. It also removes the effects of seasonality and other factors that might not be immediately obvious but could lead you to the wrong conclusion.
Why is TTM reporting better than Year-to-Date (YTD)? Because YTD numbers, although current, do not provide you with enough data to conduct a comparative analysis – especially if it is early in the year when you are only looking at a few months of data. Also, YTD numbers don’t reflect the seasonality of some practice activities or provide enough information to show any out-of-ordinary activities.
Why is TTM better than Quarterly or End-of-Year (EOY) reports? Quarterly and EOY require you to wait too long for data, and many decisions require a faster response.
Two examples of TTM reports are shown below. Figure 1 is a TTM Profit & Loss by Month Report for July 2020 - June 2021. This report helps identify issues related to seasonality. For example, if the practice experiences losses during the 4th quarter of 2020, looking at the June 2021 YTD report wouldn’t include the 4th quarter of 2020 and could mislead you into thinking the practice is more profitable than it really is. However, the seasonal decline is included by looking at a full twelve-month period, giving you a more accurate picture of the practice.
Figure 2 is a TTM Profit & Loss Yearly Comparison. This report compares the recent twelve-month period with the prior twelve months. In the example provided, we see that this practice has grown significantly in gross revenues and bottom-line profits. Moreover, the material ups and downs of the pandemic are smoothed out, giving a better apples-to-apples comparison.
Figure 1: Monthly for Twelve Months