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Using Your Financial Statements: Chiropractor Edition

May 08, 202310 min read

“Should I set up a booth at that community event next month? Let me check my business bank account balance real quick and see if I can pay the booth fee.” - most DCs

Has that been you?

I’m going to assume–I know, I know assuming is never a good idea–but I’m going to assume after talking to many business owners that you probably make most business decisions by checking your bank balance.

How often do you look at your financial statements?

I asked that to a group of savvy business owners one time and I was somewhat surprised that only a couple people raised their hands! And out of the business owners that do check their financial statements, they usually only check the Income Statement (aka Profit & Loss, or P&L for short).

I get it though…the financial statements can be really confusing! For the purpose of this conversation, I’m going to compare the “Big 3” financial statements (Balance Sheet, Income Statement, and Statement of Cash Flows) to three scans/tests that you are probably familiar with for identifying the health of a spine.

Let’s start with the Balance Sheet...

I am going to compare the Balance Sheet to an X-ray. The chiropractors that I have been to do not jump right into an adjustment based on the symptoms I have explained to him. No, he recorded all the symptoms I explained, but he also took an x-ray to see the positioning of each vertebra and how healthy the spine was overall.

Sidenote: I find it so cool to watch y’all measure and analyze an x-ray!!

Do you know how much your practice is worth? Do you know how much debt you have compared to equity in the company? Do you know how much total debt is due within the next 12 months? These are questions you can’t get answers to by checking your bank account balance or even your P&L. In other words, if checking your bank account balance is like your clients listing their symptoms, then the Balance Sheet is like an x-ray. The Balance Sheet will show you your bank account balance AND will give you specifics about the financial position of your practice.

“Okay, I understand that I should be looking at my Balance Sheet, but what am I actually looking for? What does it all mean?”

The Balance Sheet shows three main sections: Assets, Liabilities, and Equity.


Assets are anything of value that your business OWNS. This section should include your cash, checking, and savings accounts; chiropractic equipment and other expensive office equipment; any security or rent deposits that you will get back eventually; inventory on hand of supplements and other products for resale; and accounts receivable. These are (or should be) listed from most easily turned into cash (i.e. cash, checking, accounts receivable) to most difficult to turn back into cash (i.e. chiropractic equipment and office equipment). A quick glance over the assets section tells you how much value your practice owns.


Liabilities are anything that your business OWES. This section should include your accounts payable (any bills that haven’t been paid yet); credit cards or lines of credit; loans for equipment and/or business loans; unearned revenues (those plans that are purchasing adjustments in bulk…they need to be here until the adjustment has been claimed); withholdings from your employee’s paychecks to be paid out to the government at some point; and sales tax charged on supplements and the other products. These are (or should be) listed from most quickly paid back (accounts payable and credit cards) to the farthest out due dates (business loans and financing on equipment). A quick glance over the liabilities section tells you how much your practice owes, whether in cash or labor (those plans that are paying for adjustments in bulk).


Equity is anything that is LEFT OVER after subtracting liabilities from the assets. This section should include anything you as the owner have contributed; anything you have taken out of the business (depending on your entity type); year-to-date net income; and retained earnings (cumulative net income). If your entity type is LLC, you should not be alarmed to see a negative number in your distributions/draws account since that just means you personally have received money from your practice. You do not want to see a negative number in either your net income or retained earnings though! A quick glance at this section tells you if you personally have paid in more than you have taken home and what your current and cumulative net profit is.

Just like an x-ray, the Balance Sheet can tell you so many things about the health of your business. It is better to look at the spine as a whole instead of looking at just symptoms, but it definitely does not show you everything and does not give you the complete picture from which you can determine the best care and most efficient wellness journey.

Next, let’s talk about the Income Statement (aka P&L, or Profit & Loss)...

I’m going to compare the Income Statement to a Thermal Scan. It can give you more insight into what is working properly and what has challenges or abnormalities.

Do you know how much you made last month? Do you know what your profit margin is on chiropractic care versus supplement sales? Can you afford to do xyz? Did you have a really good month in revenue, but your Balance Sheet is still showing a small net income?

“Okay, fine! I get that I need to do a thermal scan of my business, but I’ve looked at my P&L a couple times; what exactly am I looking for?”

The Income Statement (that’s the official name although a lot of people call it Profit & Loss or P&L for short) shows your total revenue, direct costs, and operating expenses for a select period of time.


Revenue is all the monies brought in from the goods and services you sell. I’m not even sure I should spend much more time on it than that since most people know what revenue is. The thing I do want to add though is that you should not be seeing sales tax in this number. Revenue should only be the actual sales price of your supplements and adjustments. Sales tax is tracked as a liability to your practice and not as part of your revenue and expenses.

Direct Costs

Direct costs are any expenses that pertain directly to your goods and services. I like to think of it as anything that directly goes into creating the revenue numbers. These costs include the original cost of the supplements (when you purchased them to sell), your salary as the chiropractor (without YOU there would be no adjustment income), and repairs and maintenance to your chiro equipment.

Operating Expenses

Operating expenses are all the other expenses incurred for your practice that do not directly pertain to your goods and services. These are expenses such as receptionist and CA wages, supplies for the office, rolls of paper for your adjusting tables, etc.

Just as you would analyze thermal scans by comparing them over time, you will want to compare your Income Statements each month to the prior couple months. This way you can see trends throughout the year and across multiple years. Another way you want to analyze the Income Statement is called the Vertical Analysis. Basically you take every balance on the Income Statement as a percentage of the total revenue. This analysis shows you how much of your revenue is going to wages, office supplies, advertising, etc.

Many business owners only look at their Income Statement because they solely want to see their “bottom line” and how much revenue they earned. But you and I know how important it is to see the whole picture not just react to symptoms.

The Balance Sheet and Income Statement together give you a much clearer picture of the health of your business than just one of the reports alone and a waaaaay better understanding than checking only your bank balance.

Finally, let’s chat about the Statement of Cash Flows…

I like to compare this underrated little guy to the sEMG scan. Totally necessary before you make an adjustment? Maybe, maybe not…

But does it give you more details into how healthy that individual is? Absolutely!

It can also give you a really good idea of the quality of life that person experiences each day. The Statement of Cash Flows tells you in more detail if your business is healthy and just how the money is being brought in and used up each day.

My P&L shows a profit but my bank account is lower than I’d like; where did my money go? How much money is going towards paying off debt? Where is my cash coming from and going?

“Alright alright! I understand that I need to do a muscle scan of my business, but I don’t even know where to start with this whatcha-ma-callit.”

The Statement of Cash Flows shows all cash in and/or out for operating activities, investing, and financing.

Operating Activities

Operating activities are all cash received as revenue (and by cash in this case I mean anything that was deposited to your bank account) and all cash paid out to suppliers/vendors and employees. This section of the Statement of Cash Flows basically captures in a couple lines all the cash movement described on the Income Statement.

Investing Activities

Investing activities are all cash received from or spent on assets and other investment items. This section would show if you bought any equipment for your office or sold equipment from your office. Investing activities do not show up on your Income Statement so it’s always good to check this section and see why that bank balance is different from your net income.

Financing Activities

Financing activities are all cash received from or paid to loans, credit cards, lines of credit, owner equity, etc. This section shows you if any extra cash was put into the business via loans or your personal money. It will also show you how much cash you have spent paying down loans, credit card balances, and any owner draws. Since these transactions also do not show up on your Income Statement, this section tells you even more about why your bank balance is different from your net income.

When reviewing your Statement of Cash Flows keep in mind that negative numbers mean cash left the business or was not received. And positive numbers mean that cash was received or did not leave the business.

Let me give you a quick example since the negatives and positives on this statement throw most people off…even accountants!

When purchases are made with the credit card, those show on the Statement of Cash Flows as a positive number since no real cash left the business. Then when the credit card balance is paid off/down, that transfer shows as a negative number since cash IS leaving the business.

The Statement of Cash Flows basically summarizes the Balance Sheet and Income Statement by capturing all cash movements detailed on them. Just as the sEMG gives you an image of the individual’s quality of movement, your Statement of Cash Flows gives you an image of the quality of your business transactions.

By regularly reviewing your Statement of Cash Flows you will never again have to ask “Where did my money go?”

The statements can be overwhelming and a bit confusing when you are first trying to use them to monitor the health of your business, but once you understand what each scan/test is showing you and how it SHOULD look, you will be able to see the quality of your business finances by a couple clicks of your mouse or trackpad!

Of course the accuracy of your scans is based upon the accuracy of your equipment; similarly, the accuracy of your statements is based upon the accuracy of your bookkeeping software. But that is another topic for a different day!

If you have any questions about your bookkeeping software or where and how to pull your financial statements to check on the health of your business, do not hesitate to reach out to us at

We are here to support you and use our unique abilities to further the difference you make in the community.

financial statementsbalance sheetP&Lbookkeeping for chiropractors
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Heidi Ryder, CDB

Heidi is a wife, mother, and entrepreneur seeking to glorify God in all that she does. As the bookkeeper for chiropractors, she believes in using her talent (numbers nerd!) to help chiros find freedom in their practices.

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