This Finance section covers banking, accounting and financial assessment, which is essential to the success of your business.


You treat patients, consult with colleagues and read clinical journals. It’s all in a day’s work at your thriving chiropractic practice. Or maybe you’re still getting ready to launch. Either way — whether you’re in start up mode or you already have an established chiropractic practice you’re seeking to grow — healthy finances are essential to the success of your business.

This is something chiropractors who own their practice share with all business owners, no matter what the industry. Your passion for helping people manage their pain to lead the best life they can may be why you became a chiropractor. These business fundamentals will help you to start and grow your own practice:

  1. Creating a business plan
  2. Securing financing
  3. Maintaining a healthy practice

Your Business Plan

Talent, credentials and passion alone aren’t enough to establish a viable business. You need a plan. 

Your business plan will provide a roadmap for how you’ll bring your vision to life. It will also outline the crucial evidence you need to prove why the business will be successful. The plan will include:

  • Market research
  • Location
  • Operational details, such as equipment and supplies
  • How you will market to potential patients 
  • Cash flow projections and how you plan to finance the business

There are several options for how to create your plan. You can hire a company that specializes in market research and business plan writing. Some law firms offer business plan writing services. There are also numerous resources online with detailed business plan explanations and templates. In addition, business incubators are available where you can receive guidance through the process of creating a plan.

The do it yourself approach will likely be a lot less expensive than hiring someone to do it for you. It also has the advantage that you will gain a more thorough understanding of what it will take to get your business off the ground. Either way, at some point you may need to have a lawyer review your business plan before you present it to a financial institution.

Once your business is underway, things will not go exactly according to the plan no matter how thorough it is. This is normal. Nevertheless, the process of developing a plan will bring clarity and focus to getting started and the document itself will be a valuable reference point as things unfold. It will also be crucial at the financing stage. 

Many people who decide to become their own boss are so eager to get started they’ll skip creating a business plan altogether and just start serving customers or, in your case, patients. This is not advisable. Statistics show most businesses started without a plan will fail within their first three years of operation.

As Benjamin Franklin famously said, “If you fail to plan, you’re planning to fail.” 

Securing Finance

Unless you have a patron or substantial personal assets, chances are you’ll need financing. Now that you have a clear vision of what it will take to make your business viable, you’re in a good position to arrange a meeting with a financial institution to try to secure a loan.

Each financial institution offers different products, fees and services. Before applying for a loan:

  1. Research financial institutions near your location to compare and contrast what they have to offer small business owners.
  2. Identify your top three preferred lenders.
  3. Arrange a meeting in advance with a loan officer at the financial institution where you’d most like to build a business relationship.
  4. Bring your business plan to the meeting and find out what other information they might require  to consider a loan application from you.

Presenting Your Loan Request

Your loan request is really a financing proposal. It should contain financial and non-financial data, indicating the amount of money you wish to borrow and the details of your loan payment plan. You’ll also need to complete a standard loan application.

Tips on presenting your proposal:

  • During your pre-scheduled appointment, introduce your purpose for the meeting.
  • Present your business plan and supporting documents in an organized fashion.
  • Remain calm when asked questions.
  • During your preparations for the meeting, try to anticipate what questions you might be asked so you already know the answers in advance.
  • If for some reason you’re asked a question you don’t have the answer to, don’t panic. Calmly state you will look into the matter and get back to them with the information. Follow up on this promptly.
  • Prior to going into the meeting, it’s prudent to familiarize yourself with your collateral options (i.e. if your parents or spouse will guarantee your loan, etc.).


Bankers need to know that your financing proposal represents a safe and profitable investment. If your business plan clearly demonstrates the ability to generate sufficient profits to repay a loan, the banker will feel more comfortable in offering you one.

Usually equipment and leasehold improvement loans are secured by a general security agreement. Your operating line is secured by what are called Assignment of Book debts. This term refers to money generated by patients and insurance companies. 

In some cases, the bank will consider personal property, such as a home or stocks/bond, and you may require third-party guarantors . These would be guarantees from parents, your spouse, etc.

Cash Flow

Banks are in the business of providing low-risk debt financing. To be successful with your financing application, you need to show the bank that — besides being an honest and hardworking individual — you have a realistic business plan and can demonstrate the ability to repay the loan you are asking for, if approved. In essence, you need to convince the bank, with more than words, that your proposal is a sound investment. To do this, you’ll need to produce a cash flow forecast.

Of all the supporting documentation in a business plan, the cash flow projections document is probably the most difficult one to prepare.

These projections show: 

  • Anticipated cash flow during the period covered by your business plan. (i.e., they show when billings will actually come into the practice)  
  • Daily operating costs, affordable inventory items and when you can purchase these items
  • Projected operating costs and profits with realistic estimates of how many patients will visit and pay for their treatments each day

Loan Repayment Proposal

You and your financial institution will negotiate the terms and conditions of your loan. These arrangements will depend on the following criteria:

  • Their assessment of you
  • Your personal debt load
  • Your personal credit history
  • Your practice
  • The amount of the loan
  • The reason you wish to borrow the money
  • Payment terms
  • Current interest rates
  • Economic conditions

Your repayment proposal should be based on your cash flow projections and the nature of the loan. In general, leasehold improvements can be financed for up to one year less the length of the lease. For example, if you have signed a lease for five years, the bank will expect repayment in four years. In the case of equipment loans, repayment can take anywhere from four to seven years, depending upon the nature of the equipment and the amount.

Loan processing

After you’ve completed meeting with the financial institution and made an application, ask when you can expect to receive an answer. Usually, a bank can give you an opinion within a couple of days. If you have all of the required documentation, it’s not unreasonable to have approval within three to five business days. 

Prior to formally approving the loan, expect to have a couple of conversations with the financial institution. After your initial meeting, there may be additional questions that come up. The banker will then scrutinize your character, your business plan, your cash flow projections, your ability to repay a loan and any collateral you’re able to offer.

Once you have been approved, the appropriate paperwork must be completed and signed by you, the banker and any other involved parties. Expect this process to take a couple of days before the account is formally opened and money is made available to you.

If at First You Don’t Succeed

Don’t be discouraged if you’re unable to secure a loan with your preferred lender. A financial institution will not automatically approve your loan request simply because you’re a doctor. Ask why they are declining your application. This will provide you with valuable information. Then turn your attention to the next lender on your list. Eventually you should be able to get financing.

Maintaining a Healthy Practice

The health and well-being of your patients must be paramount in any practice. Also essential to the success of your practice is the relationship you develop with your associates and employees, financial institution and suppliers. Communicating on an ongoing basis is vital.

Remember the majority of chiropractic practice failures are due to poor management. Maintaining a realistic cash flow forecast is an excellent business tracking tool because it will alert you to unforeseen problems.  When complete, it’s also useful for financing requests.

Always be frank with your banker when discussing cash flow. However, choose your words wisely and be careful not to confuse your personal frustration over patient numbers with your ability to generate sufficient cash flow to repay debt. It’s easy to get down on yourself if your personal goal is to see 150 patients per week and you’re not meeting this target. However, you may not require that number to meet your basic financial obligations to the bank. In this situation, avoid telling your bank that business is not as good as you expected. If you do so, you’ll likely invite some unnecessary and unwanted concern.

On the other hand, if you run into a cash flow problem and cannot meet a payment or pay an invoice, take the initiative: call and make appropriate arrangements with the banker.

The key to running a healthy practice is being able to make tough decisions on a timely basis. Failure to make decisions promptly and take appropriate action could threaten the viability of your business.

Final Thoughts

Going into business is one of the most challenging and rewarding experiences you’ll ever undertake and it has lifelong implications. Ups and downs are part of the process. When you remember your vision and keep your patients’ health and well being at the forefront you’ll stay inspired and motivated as you start and grow your business.

Buying a Practice

When you’re studying to become a chiropractor the question of whether you want to be an entrepreneur or business owner some day may not be top of mind. Learning to become a great chiropractor is your primary focus. This is understandable, but at some point you may have to decide whether to own your own practice. This is a business decision — and a big one. 

You’ll need ample time to work through such a major decision.

There are many complex legal issues to consider, which include:

  1. Buying an existing practice vs. starting your own practice
  2. Lease agreements
  3. Financing documents
  4. Business name registration
  5. Practice appraisals

Before diving into hefty legal matters, it’s helpful to begin by exploring whether you’re even ready to take the step of business ownership. This Practice Assessment will help you evaluate your readiness.

Buying vs. Starting Your Own Practice

You have two main options when it comes to owning a practice:

  1. Purchase an existing chiropractic practice 
  2. Start from scratch and build a brand new practice. 

Each option has advantages and disadvantages.

Purchasing an existing practice

There are many legal issues to consider if you are planning to purchase an established practice, which include:

  • Legal consequences of hiring existing staff members
  • Ability to get your deposit returned, if the transaction is not completed for any particular reason
  • Obtaining the landlord’s consent to transfer the existing lease or entering into a new lease
  • Ensuring that existing associates at the seller’s practice are bound by non-competition and non-solicitation agreements so they don’t solicit patients from the practice after you have purchased it

The big advantage of buying an existing practice is that you are, in essence, purchasing a proven product. You are buying an established patient base which, hopefully, understands the value of your service and has become accustomed to receiving treatments.

However, there are many aspects of the business you need to be informed of before you finalize a purchase agreement. For instance:

  • What are the terms of the lease you are assuming?
  • Is it still considered fair market value?
  • What kind of patients does the practice treat?
  • Are these the type of patients you would normally be trying to attract?
  • Do the facilities or the equipment require upgrading?
  • Is the purchase price based on an evaluation?

If you are an associate in one practice and plan to purchase a practice other than the one where you are currently working, part of the legal advice you’ll need relates to your current arrangement. A lawyer will have to analyze any existing associate agreement between you and the owner of the practice where you work now. They need to determine whether there are any restrictions on opening a practice in your new proposed location. The lawyer can also advise you on to what extent, if any, you can solicit the patients you served at your former location.

Purchasing an unfamiliar practice

You might end up wanting to purchase a practice where you’ve already worked as an associate. On the other hand, you may find an unfamiliar chiropractic practice with an asking price that seems reasonable. You’ve observed the practice for a couple of days and, if everything seems appropriate, you’re ready to sign the deal and become the new owner. 

However, it’s advisable to exercise caution in this scenario as well. A couple of days of observations do not necessarily guarantee a good purchase. 

Consider the following:

  • Fees charged by the practitioner. Are they below industry standard?
  • How is the practice equipped? Have treatment rooms or equipment been upgraded at all?
  • The lease being assumed. Is it reasonable? Do you have exclusivity? Is the rent appropriate for the area?
  • Does the staff have the level of expertise and professionalism you want?

Once you’ve taken these issues into account, are you still prepared to pay the price the vendor is asking?

Find out start up costs, even if you aren’t planning to start from scratch

Another part of the equation in deciding whether to go existing practice or start up is to compare the price of the two scenarios.

Ideally, work out the cost of setting up a practice from scratch and then compare it to the purchase price of the existing practice. While purchasing an established practice may give you instant cash flow, in some cases you can set up a new practice in the same area for half the price. 

Starting a new practice is thrilling, but it’s also somewhat of an emotional roller coaster. It can be an even more daunting prospect than going with an established practice.

In the end, if you’re not prepared to accept the risks associated with a start up practice, you may decide that spending the extra money on an established practice is worth it. What matters is you’ve considered all the aspects of the purchase.

After the decision to purchase an existing practice

Once you agree on some of the preliminary terms, the next step would be to have the lawyer write a comprehensive agreement of purchase and sale. This document will set out, in legal terms, all of the exact terms and conditions of the particular situation.

The agreement of purchase and sale would generally be conditional on such things as:

  • Ability to get financing for the purchase price
  • Ability to get the landlord to consent to your moving into the premises
  • The removal of all liens against any of the property or assets of the selling practitioner
  • The agreement of existing important staff to continue their employment with you

There are numerous legal searches called “due diligence” searches that a lawyer would conduct. These include searches to determine whether there are any taxes owed by the vendor, court judgments against the vendor, or liens on any of the assets being purchased. If any of such factors exist, they must be addressed prior to the purchase to ensure you, as the buyer, are free and clear of any such problems.

A properly conducted purchase transaction realistically takes approximately six to eight weeks to complete considering the fact that:

  • Numerous legal searches have to be ordered
  • Negotiations of the fine details with the vendor and landlord may take time
  • Numerous documents and agreements need to be prepared

Starting from scratch

This can be the most exhilarating and terrifying time of your life. When you make the choice to start your own practice, you become the master of your own destiny. And, it has distinct advantages.

  • By starting up you own practice, you do not run the risk of purchasing an existing patient list and then having some of these patients leave. 
  • You are also not inheriting problem cases from the previous practitioner. Instead, you in effect, choose the patients who come through your door because they respond to your marketing efforts. 
  • You are also in a position to select your own equipment, instead of settling for someone else’s.

Setting up a practice is not for everyone. A lot of time and thought is required when selecting the location and you must be prepared to accept the fact that you will be building your own patient base from scratch. On average, it takes most individuals approximately four months to organize themselves and actually open the doors for business.

Managing your practice

Once you’re in business you must be prepared to delegate. For many new practitioners this is an extremely difficult thing to do. On one hand, if you’re a new practitioner you may attempt to save money by doing everything yourself. However, you must learn how to evaluate and understand the value of your time. For instance, if you have the ability to generate $100-300/hour, why would you spend your time playing receptionist or bookkeeper?

The key to being a successful practitioner is to recognize your strengths and weaknesses. Do what you do best and allow someone else to assist you with things that are outside of your skill set.

Lease Agreements

A lease is the legal agreement between you (as tenant) and the landlord of the premises where your practice is located. It is a significant document whether it’s for the purchase of an existing practice or a start up. Leases are complicated documents that place onerous obligations on tenants.

Too often tenants fail to spend the time or money necessary to have their lawyer negotiate or explain the terms of their lease. As a result, tenants often do not understand the legal implications and the obligations they have undertaken by signing a lease. In these cases, the tenant can have serious difficulty when unexpected problems arise during their tenancy.

There is no such thing as a “standard” lease. Many leases, however, are slanted in favour of the landlord, delineating onerous obligations and limited rights for the tenant.

A lawyer should review your lease prior to signing it and perhaps negotiate changes for such things as:

  • A rent free period 
  • Reducing your obligations
  • Obtaining a right of first refusal on additional space in case you want to expand
  • Renewal terms 
  • Preventing the landlord from renting other space in the building to your competitors.

There are numerous issues that you need to consider in the lease, including:

  • Length of the term and right to terminate
  • Renewal of term
  • Exclusivity
  • Yours and the landlord’s obligations under the lease
  • Definition of rent and additional rent
  • Whether fixtures remain the property of the tenant
  • What happens in the event of a disaster
  • Relocation of your premises
  • Right to transfer your lease if you wish to sell your practice or move
  • Non-disturbance

Financing Documents

Whether you’re planning to buy an established practice or start a new practice, you will most likely need to obtain a significant loan and line of credit to finance the purchase and operation of the practice. A lawyer can explain your obligations under the financial institution’s standard loan agreements and other related agreements.

The financial institution will most likely ask you to sign a security agreement that grants it a lien over all or some of your property and assets, such as your equipment, furniture and accounts receivables.

If you default on payment of the loan, the financial institution has numerous significant legal rights and remedies that you should be aware of when entering into the loan. The financial institution may also ask your spouse or family member to sign a personal guarantee that states they will pay the debt if you default on paying. This individual will have to obtain independent legal advice from a separate law firm than the one you have retained.

Registering a Business Name

If you carry on business under a name other than your own personal name, you must register the business name with the Ministry of Government and Consumer Services.

In addition, under certain circumstances and depending upon your profession, you may have to register the name with your governing body.

There are certain requirements and restrictions regarding the use of business names other than your own individual name. Speak with a lawyer who can advise you on the law relating to the use of and registration of business names.

Additional information about business registrations is available in this Business Accounting 101 for New Chiropractors Guide.

General Legal Advice – Dos and Don’ts

The following is general advice to help you legally protect your business:

  1. Seek legal advice, as required, at the earliest stages of your venture. (Do not bring the lease to your lawyer a few days before you intend to move into the premises. A lawyer needs time to review the document and to prepare and negotiate agreements on your behalf).
  2. Do not seek legal advice from your friend, neighbour or classmate, unless they are a lawyer. All legal advice depends upon the particular circumstances of a situation. The legal advice that another lawyer may have given to your friend or colleague may not be applicable to your particular situation.
  3. Do not sign any agreement unless you have read it and clearly understand your obligations and rights under the agreement.
  4. Do not assume the agreement is “standard” and cannot be amended. A lawyer should analyze the agreement, explain its implications and advise you of what should be added or deleted from the agreement, so as to protect your legal interests.
  5. Do not attempt to negotiate with a landlord without consulting a lawyer, unless you are trained or skilled in negotiations. Negotiating on your own behalf without proper training could harm your legal interests. It is wise to spend a little money at the outset to try to negotiate changes to a lease, such as a free rent period. It may actually save you a lot of money in the long run. 
  6. Call a lawyer before you enter into serious negotiations with anyone.
  7. Put all verbal agreements in writing to avoid any misunderstanding about your obligations and rights.
  8. It is wise to take a preventative approach to protecting your legal interests.
  9. Seek out a lawyer who will be a part of your professional team of advisers, so you can run your practice with peace of mind.

Practice Appraisals

You will need to have any practice you are planning to purchase appraised for the following reasons:

  • Valuation is required by banks (to borrow the money to buy the practice)
  • Valuation helps a practitioner know what price is reasonable to pay
  • Gives a quick check up to your practice so that you can see how healthy it is
  • Investment and tax planning – after all, your practice is a huge investment and should be considered part of your portfolio
  • Determine a price for selling (starting point)
  • Legal Issues – such as divorce

Every situation is unique, but the seller almost always thinks the practice is worth two to three times the actual value. Consider this:

  • How easy is it to step into the selling practitioner’s shoes?
  • What can be done to compensate for fit differences?
  • Retention (50 to 95 per cent)
  • Who are the patients loyal to? The doctor, clinic or location?
  • Files (active vs. dormant)
  • Non-competition agreements
  • Quality of financial information

Information required:

  • Financial statements and tax returns
  • Site visit and observation
  • Area visit/demographics
  • Evaluation of competitors
  • Legal review of agreements
  • Existing business plans
  • Year-to-date results
  • Complete listing of equipment, inventory and other assets
  • Copy of lease agreement (if premises rented)
  • Copy of any agreements with sub-contractors, associates, staff
  • Detailed information about owner, key personnel and staff
  • Hours of operation

Basic valuation steps:

  • Normalize earnings
  • Cash flow positive? Yes/No
    • Yes: discounted or capitalized cash flow
    • No: Asset-based valuation
  • Determine discount/capitalization rate
  • Estimate/opinion of value

Points to remember:

  • Financial statements should be as clean as possible
  • The better the information, the better the price (generally)
  • Valuation is only the starting point

You became a chiropractor to help people. You may also have to become a business person to fulfill your vision.


As a chiropractor you naturally have concern for the health and well-being of your patients. What may be less obvious is the fact it’s just as important for you to maintain a healthy practice. An accountant is a critical member of the team you need to have in place to ensure your financial affairs and records are in order.

The term “accountant” is unregulated in the province of Ontario.  This means that anyone can call themselves an accountant, even with little or no formal training and experience.  To ensure your accountant is fully trained for the financial tasks and projects ahead, engage a professionally designated accountant.

Business Accounting 101 for New Chiropractors

SRJ Chartered Professional Accountants are one of our Affinity Partners and accounting for chiropractors is one of its specialities. They created this Business Accounting 101 for New Chiropractors guide, specific to the chiropractic industry. Following the steps in this guide to properly establish your business and avoid costly errors.

Selecting an Accountant

The accountant you choose may become your most valuable resource.  Begin by selecting an accountant with a professional designation, such as a chartered professional accountant (CPA), chartered accountant (CA), certified management accountant (CMA), or certified general accountant (CGA).

Professionally designated accountants (CPAs, CAs, CMAs, CGAs) will:

  • Have formal education and training required to fulfill advanced business and financial functions.
  • Adhere to a code of ethical principles
  • Keep skills current through mandatory continuing professional development.
  • Carry liability insurance and are subject to regular practice inspections

Before engaging the services of an accountant you should confirm that:

  • Their services meet your needs.  (You may require planning and preparation of financial statements or tax returns, representation to the bank or Revenue Canada.  Before you select an accountant establish which services you require.)
  • You can reach them conveniently.
  • They explain accounting in a language you can understand.  If your knowledge is limited, select someone who will be able to explain basic accounting concepts and terminology.

What to ask a prospective accountant:

  • Do you have prior work experience with chiropractic offices?
  • Can you provide references of clients who are chiropractors?
  • What is your standard billing procedure and can you provide me with an estimate?
  • Who will do the routine work, yourself or other staff?
  • Are you open to seeking advice from outside experts on specialized practice affairs?

Ultimately, you should select an accountant with whom you can speak freely – someone whose comments and suggestions indicate an understanding of the profession. Most importantly, select someone who both listens to and hears what you say.


The practice’s “books of account” is set up on a computer software package that can be integrated with any other special software packages used for practice management (billings, accounts receivable).

Data entry for your practice’s “books of account” may be done in several ways:

  • Existing office staff
  • Hiring a freelance bookkeeper
  • With your accountant’s office staff

It is often efficient and cost-effective to work with a bookkeeper because:

  • Unusual transactions can be identified by a bookkeeper and reported to the accountant, particularly when preparing records for year-end work.
  • Freelancers are flexible about how, when and where they work, enabling a tailored relationship.
  • Banking transactions performed by office staff can be verified.

All documents for the practice must be kept for at least a seven-year period. After year-end has passed, your accountant will request a list of records and documents from the bookkeeper to complete the engagement.

These records and documents may include:

  • Various reports generated from accounting software
  • Monthly accounts receivable reports (manual or computerized)
  • Original invoices paid during the year
  • Insurance policies
  • Leases
  • Banking agreements

Fees and Billing

For standard fees, consult the OCA Recommended Fee Schedule.

Social Assistance and Ontario Works

Some patients on social assistance may have chiropractic coverage. The Ontario Works (OW) program is cost shared 80/20 by the province and municipalities and is administered by the municipalities.

This means that:

  • Requests for benefits must go to the appropriate OW caseworker or administrator in the municipality where benefits are accessed.
  • The flexibility to grant discretionary benefits may vary from region to region because of local budgetary constraints.

Some OW offices report having covered the cost of chiropractic services in the past while others report they will be unable to do so because of budgetary constraints. Nonetheless, because budgetary circumstances can change, we recommend you assist all appropriate patients in applying for these discretionary benefits.

Request for Discretionary Benefits: Your patients can use this template to request discretionary benefits. The application is from the patient, not the chiropractor. Keep a copy for your records. Procedures vary by jurisdiction, but patients should direct the request first to their caseworkers.

We recommend the following:

  • Where possible, your patient should request the discretionary benefit before services are provided. If services are performed before approval, they may still be covered, but the OW administrator may conclude that the patient is prepared and able to pay on their own.
  • Provide a clear diagnosis, related where possible to a specific incident or injury. Requests for maintenance care or preventative care are less likely to be approved.
  • Propose a clearly defined course of treatment (frequency and duration).
  • Provide specific details of the expected benefit to the patient, especially as it relates to improved ability to function at work or in activities of daily living.
  • Include a date when you will provide a progress report and honour that date.
  • Use validated outcome measures (i.e. Roland-Morris, Oswestry, NDI).


HST does not apply to chiropractic services. If a chiropractor does more than $30,000 of HST applicable business, they must register as a HST entity, charge HST on all applicable goods and services and remit this, minus the off-sets. Applicable services include most items a chiropractor would sell and non-clinical services, such as legal and other reports and rent collected from associates.

To learn more, check:

Coverage for Indigenous People

Canadian citizens who are a First Nations person (registered under the Indian Act) or an Inuk (recognized by an Inuit claim organization) can attain coverage for chiropractic services through Health Canada’s Non-Insured Health Benefits (NIHB) Program (under its benefits specific to Ontario).

Financial Statements

When you own a chiropractic practice it’s important to stay on top of its finances to ensure your business is not only viable, but also grows and thrives. This means you’ll need to review financial statements for your business on a regular basis. 

Financial statements are a set of formal financial reports prepared from the accounting records of the practice. The format of financial statements is somewhat standardized to help you understand the information presented and to make this information useful.

Parts of Financial Statements

The basic parts of financial statements are:

  • Accountant’s report
  • Balance sheet
  • Income Statement
  • Statement of Changes in Financial Position
  • Notes to Financial Statements

In addition, it’s important to learn how financial statements can help your practice.

Accountant’s Report

The accountant’s report must precede any financial data. The report informs users of the financial statements about the degree of assurance given by the accountant.

There are three different types of reports that can be issued:

  1. Auditor’s Report

    • Highest level of assurance needed for public companies, many not-for-profit organizations and large corporations
    • Professional practices are not required to be audited by any government body or legislation
  1. Review Engagement Report

    • Lower level of assurance than an audit, financial statements are prepared from client records but are subject to some analysis and enquiry
    • Usually required by lenders and prospective investors
  1. Notice to Reader Report

    • No assurance given
    • Financial statements have been compiled from information supplied by the client, with minimal analysis
    • Usually prepared for income tax filing purposes only and generally may be accepted by bankers or other lenders

Fees commensurate with the degree of work performed and your accountant will generally recommend the most cost-effective engagement.

Balance Sheet

A balance sheet is a statement, at a particular point in time, of the financial position of your practice. It includes figures for the current fiscal year and comparatives for the previous fiscal year.

The basic formula for a balance sheet is: Assets = Liabilities + Practice Equity

Assets are items of value owned by the practice:

  • Cash in the bank
  • Investments such as bonds, term deposits, mutual funds
  • Accounts receivable from patients
  • Equipment and fixtures

Liabilities are amounts owed or obligations payable by the practice:

  • Bank loan or line of credit
  • Account payable to suppliers
  • Credit card balances
  • Capital losses
  • Mortgages

Practice Equity is the practitioner’s financial interest in its assets. When a practice is first established, the amount of your own funds contributed to set-up and installing fixtures in the office is considered the equity or net worth. 

When the practice develops and becomes profitable, you begin the process of building practice equity. As you draw cash out of the practice, the practice equity will decline.

The change in equity over a period of time is:

Equity balance, beginning of period

+ Net practice income for the period

+ Funds advanced by the practitioner in the period

– Funds withdrawn by the practitioner in the period

= Equity balance, end of period

Understanding the Income Statement

A statement of income and expenses  – also known as the “income statement” – summarizes the revenues earned and expenditures made for a stated period of time. The statement of income and expenses generally covers a full fiscal year and shows comparative figures for the previous fiscal year.

The basic formula for this statement is: Income – Expenses = Net Income for the period

Income is the amount earned by the practice in the year. Examples include:

  • Professional fees billed – For accounting purposes, fees are recorded as income when they are billed, irrespective of when they are collected.  Amounts not yet collected at the year end are shown in the balance sheet as “account receivable.”
  • Investment income – This category includes interest dividends and capital gains earned on investments.

Expenses are amounts expended in the ongoing activities of the practice and are generally consumed within the year:

  • Staff wages and benefits
  • Associate and other fees
  • Laboratory fees
  • Supplies used in providing your services
  • Repairs and maintenance
  • Office expenses such as telephone, stationery, postage and printing
  • Advertising, promotion and entertainment expenses
  • Insurance premiums – office premises, business interruption (life and disability premiums are generally not included in the practice financial statements)
  • Bank charges, interest on bank loans and line of credit
  • Lease payments (operating leases)
  • Depreciation of equipment and fixtures

Statement of Changes in Financial Position

This statement shows the change in the cash position of the practice over the year.

Notes to the Financial Statements

Notes to financial statements are standardized disclosure requirements and are meant to provide additional useful information to users of the statements. These notes are placed at the back of the statements to avoid obscuring the actual figures reported. 

Financial statements, when used in conjunction with other financial reports (such as cash flow projections), will help you make informed decisions about your practice.

The value of any financial report for decision-making is directly related to the following factors:

  • Accuracy
  • Timeliness
  • Organization

The data used to compile financial statements is taken from the “books of account” for the practice. The data must be accurate, current and easy-to-read.

How can financial statements help your practice?

Your accountant can help you understand the financial statements for your practice.  If you want to keep a close watch on the financial operations of your practice, have your bookkeeper prepare these reports on a regular monthly basis. (This is easy if you are using an accounting software package.)  

Forward this information to your accountant and discuss it together.

Examples of how you may use your financial statements in practice decision-making include:

  • Collection of accounts receivable – Compare the level of accounts receivable to fees billed. If accounts receivable is growing at a faster rate than fees, you may want to review and improve your collection efforts.
  • Levels of expenses – Compare the level of supplies, various fees and staff wages as fees billed.
    • How do these compare to industry averages? (Ask your accountant for more information)
    • Review purchasing and pricing procedures
    • Review how supplies are being used in the office
  • Level of repairs and maintenance expenses – Review office procedures for regular maintenance of equipment and facilities.
  • Income tax payable – Your practice’s financial statement does not show any income taxes.  Rather, the net income shown in the statements will be reported in your personal income tax return.  While this figure alone will not determine total tax liability, changes from one year to the next can help you estimate this amount.

For more information about accounting and your practice, check our Business Accounting 101 for New Chiropractors guide.

Financial Assessments

Key Numbers to Help You Understand the Financial Dynamics of Your Practice

Dealing with financial statements and numbers can be daunting.

It can be helpful to focus on these key numbers when assessing the financial dynamics of your practice:

  • Financial Statements ($ Numbers)
    • Balance Sheet
    • Income Statement
    • Statement of Cash Flows
  • Statistics (Non $ Numbers)
    • New Patients
    • Subsequent Visits/Retention
    • Referrals

Key Questions for Financial Assessment

  • Did you establish financial goals for yourself (e.g. number of new patients, number of patient visits, gross billings)? If so, have you achieved them? If not, how close were you?
  • How much does an average patient visit cost you?
  • What percentage of your patients follow through with their recommended treatment schedule?
  • What capacity is your clinic running at?
  • Have you prepared a budget for your clinic? Are you on track?
  • Can you pay your bills on time or do you rely on credit?
  • Are you profitable? After all expenses are paid, are you left with 50%?

New Patient Tracking Assessment

Patient tracking is essential to understanding how you are receiving new patients, why patients are leaving and how you can promote your practice effectively.

Since you cannot measure everything all the time, choose some key signs to monitor and use as an early warning system.

These may include:

  • New patients
    • Tracking trends in patient growth
    • What kinds of referrals do you receive? Are your referrals growing to the level you’d like?
  • Patient visits
    • Are patients following your treatment recommendations?
    • How much does each patient visit cost you?
  • Retention
    • Why and when are people leaving your clinic?
    • How do patient visits compare to your treatment recommendations?
    • What is your patient retention after key points such as the initial visit or the initial treatment period?
    • Are patient complaints being addressed?
  • Cancelled/missed appointments
    • Why are people not showing up?
    • Are you fitting into their schedule or are they fitting into yours?
  • Discounts
    • How much are you giving away? How much can you afford to give away?
  • Utilization
    • How busy are you?
    • Should you be planning for growth?
  • PMP reports
    • Are you using your software as a planning tool?
    • What are you doing with your reports?
  • Patient complaints
  • Staff turnover

When to Expand

It’s important to monitor how busy you actually are, rather than focusing on how busy you feel. If you have 30 hours available per week for appointments, how many of those hours are actually booked? Once you reach 80 per cent utilization, it’s time to think about expanding capacity.

Your strategies to expand your capacity may include:

  • Adding more practitioners
  • Delegating more tasks to your staff
  • Reviewing your facilities and procedures
  • Adjusting your appointment schedule
  • Increasing your fees
  • Dedicating specific times for intake of new patients


Key Terms to Help You Manage Your Chiropractic Clinic’s Finances

Cash Equity Contribution – Money invested in your practice that represents an ownership interest

Cash receipts – Cash you receive from patients after you’ve provided a treatment or sold a product

Collateral or security – Assets pledged to support a loan (i.e. money, house, equipment)

Cost of goods/services sold – Direct costs incurred in delivering your product or service (i.e. pillows, supplements, orthotic supplies etc.)

Current assets – Cash, accounts receivable, inventory and other assets that are due within one year

Current liabilities – Payables, bank loans and other debts payable within one year

Depreciation – The amount by which the cost of an asset is written off, over its estimated useful life

Disbursements – Money paid out to run your practice – the opposite of revenue

General and administrative expenses – The common expenses of doing business (i.e. chiropractic supplies, paper, marketing, rent, insurance etc.)

Goodwill – An intangible asset reflecting the excess paid for your practice over its net asset value (i.e. the value of your patient files, location etc.)

Gross profit margin – The difference between revenue and the cost of goods or services sold

Interest expense – The cost of servicing your debt with lenders such as leasing companies and banks

Operating loan – A type of bank loan that should be used for day-to-day operating expenses.  (This is also known as a line of credit.)

Operating profit – Profit before your draw, dividends and income tax.

Payables – Also known as accounts payable – money owed by the practice to suppliers.

Receivables – Also known as accounts receivables,  is money owed to the practice by patients and third-party payers

Retained earnings – Accumulated profits retained in your practice and not paid out as dividends.  This is more applicable to practices that are incorporated.

Shareholder’s equity – The net assets belonging to the owner of the practice.  It is the difference between the practice’s total assets and total liabilities.

Term loan – A type of bank loan that is for a specified amount and period of time, often used to finance the purchase of practice, equipment and leasehold improvements.