Production, Collections, Profit- What’s the Difference?

By: Hailey Layton

It’s a Monday Morning and you are busy running around trying to build your practice, stay productive, & profitable all at the same time. You have an EMR system where you track your data, but you see so many different terms and aren’t really sure how they are different. 

We understand it can feel like data overload, and you don’t know what to focus on. Below, we will break down three of the most common metrics used, along with their differences, using an ‘inverted pyramid’ analogy. Picture an inverted pyramid with the largest layer on top. Starting at the top is Production, followed by Collections, and ending with Profit

  • Production – Top of the Inverted Pyramid

Production is the total amount of fees for all your services and products that were performed in a given period  BEFORE any discounts or adjustments are made. This is a very helpful metric to track for the total office and on a provider level to keep things in an apples to apples comparison amongst each provider on a monthly basis.

  • Collections – Middle of the Inverted Pyramid

Next layer is our Collections which is the actual amount that we collect from your clients each month after all discounts, adjustments, and prepayments are taken into account. The other difference between collections and production will be found in how much your clients still owe you for services already rendered and your end-of-month reconciliation process.

You might be wondering, “is it okay for our collections to be more than production?” Yes! Collections can be higher than production in a given month due to prepayments for packages and memberships. Therefore, we often expect to see more production and lower collections in future months as this evens out and services that have already been paid for are now being performed.

  • Profit – Bottom of the Inverted Pyramid

At the bottom of our pyramid is Net Profit (also referred to as Net Income). This is the amount of money you will see at the bottom of your Profit & Loss Statement (i.e. P&L). Whether your accountant uses cash or accrual basis for accounting for your books will determine how income is reported on your P&L statement. It will either include your total collections amount (for cash basis) or production net of fees (for accrual basis). After you know your income, you can subtract both your fixed & variable expenses, and this leaves you with your Net Profit. This is an extremely helpful metric to see the profitability of your practice. We recommend you review your Net Profit monthly as well as annually so you can see how your revenue and expense items vary throughout the year.

Here at Maven, we help our clients keep track of all these figures so they know exactly what money should be coming in & hitting the bank while making sure their discount & adjustment amounts make sense for their business.

If you are looking for someone to walk alongside you and simplify the financial metrics so you can focus on the operational side of your business, click this link to schedule an appointment with one of our financial experts.