Finance & Unit Economics Glossary

Read the three core statements together

A profit and loss statement, often called an income statement, reports revenue and expenses across a period. A balance sheet reports assets, liabilities, and equity at a point in time. A cash-flow statement explains cash movement through operating, investing, and financing activities across a period.

The SEC financial-statements guide explains these distinctions for investors. Private practices still need a qualified accountant to set policies. The SBA finance guide provides small-business orientation on bookkeeping, statements, and cash planning.

Accounts payable records amounts owed to vendors or others under the accounting policy. Working capital commonly compares current assets with current liabilities. The components, restrictions, aging, and timing matter more than the headline number.

Keep revenue stages separate

Gross revenue should name the gross amount recognized under the practice's accounting policy. It is often confused with gross charges or submitted claims. Net revenue reflects defined contractual adjustments, expected collections, or other offsets under that policy.

Revenue per delivered hour divides recognized revenue for a service cohort by delivered service hours in the same cohort and period. Do not mix billed units, scheduled hours, paid hours, or cash receipts into the denominator without labeling the measure differently.

The IRS business-transaction record guide explains journals, ledgers, and complete, accurate records. Management reporting should reconcile to approved source systems.

Understand costs and margins

A fixed cost stays broadly stable within a relevant activity range and period. A variable cost changes with activity. Direct labor cost is labor directly assigned to a defined service or cost object under the stated policy.

Contribution margin is net revenue minus defined variable costs. Gross margin is gross profit divided by net revenue under the selected accounting definition. These labels are not interchangeable.

The break-even point is the activity level at which defined revenue equals defined costs. In a mixed ABA practice, payer rates, service mix, staff configuration, cancellations, authorization, travel, supervision, and collection timing can shift the result.

Earnings before interest, taxes, depreciation, and amortization, or EBITDA, is a non-GAAP measure. SEC non-GAAP guidance applies in public-company contexts and warns about unclear or inconsistent measures. A private practice should still define and reconcile EBITDA or adjusted EBITDA, while counsel determines any securities-law duties.

Measure revenue-cycle performance by state

Days sales outstanding estimates how long receivables take to collect under a defined formula and period. Net collection rate compares collections with the collectible amount after defined contractual adjustments. Cost to collect compares defined revenue-cycle expense with a stated collection or revenue denominator.

A denial rate needs an adjudicated denial artifact, unit, cohort, and maturity window. Keep claim or line rejections, denials, partial payments, appeals, recoupments, and immature claims separate.

Build a revenue bridge from delivered service to final cash. Reconcile delivered and documented units, billing release, first transmission, clearinghouse and payer acknowledgments, adjudication, remittance, client responsibility, payment, refund, and recoupment. Segment by payer, service, site, and service month only when each segment has enough mature volume to interpret. Report counts beside rates so a small cohort does not create a dramatic percentage with little operating importance.

CMS's remittance page describes Medicare remittance resources. Its ERA and EFT page explains that the remittance reports claim-payment adjustments while EFT moves money. Match the deposit, remittance, claim, service evidence, and ledger.

Protect liquidity

Cash runway estimates how long available liquidity can cover projected net cash outflow under a defined scenario. Use a monthly receipts-and-payments forecast and calculate the peak cumulative shortfall. Include each outflow once.

Runway should reflect collections lag, payroll timing, taxes, deposits, debt, refunds, recoupments, capital spending, and contingencies. A profitable P&L can coexist with a cash shortage because revenue recognition and cash receipt occur at different times.

Compare plan with actual results at the same definition level. A budget built from authorized hours cannot be evaluated against delivered hours without a utilization bridge. Separate rate, volume, service mix, staffing configuration, wage, cancellation, denial, collection, and timing effects. Assign each material variance to an owner and a dated follow-up. Forecast revisions should preserve the former version so leaders can distinguish new information from unexplained drift.

A unit-economics example

A fictional service cohort records $96,000 of net revenue and $57,600 of defined variable cost across 1,200 delivered hours. Revenue per delivered hour is $80. Contribution margin is $38,400, or 40% of net revenue. If monthly fixed costs allocated to the model are $32,000, the cohort contributes $6,400 before other defined items.

Those figures do not establish cash flow, clinical quality, payer profitability, or a future margin. Reconcile the cohort, period, accounting basis, hours, adjustments, and cost policy before comparing sites. Pair the result with access, safety, client outcomes, workforce, and capacity measures.

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