Are Your Financials Misleading You?

Published August 18th, 2026

You receive a P&L every month. It shows revenue, expenses, and profit.

But what if the revenue is based on cash collected and the expenses are based on cash paid?

In a physician practice, that can create a very misleading picture.

Cash received this month may relate to care provided weeks or months ago. Expenses paid this month may relate to this month, future months, or may not be expenses at all.

If those timing differences are not handled properly, the P&L may tell you when cash moved — not how the practice actually performed.

A Simple Example

Assume your practice provides $500,000 of services in June.

Because insurance and patient collections take time, only $400,000 is collected during June. Some of that $400,000 may actually relate to care provided in April or May.

At the same time, the practice still has to pay June expenses:

• Payroll

• Rent

• Medical and office expenses

• Billing costs

• Other operating expenses

Those expenses have to be paid now, even though much of the revenue generated by those expenses may not be collected for several more weeks.

Now add a few more cash payments.

Maybe the practice pays a $60,000 annual insurance premium in June. Maybe it buys $50,000 of equipment. Maybe a loan payment includes principal.

If every cash receipt is recorded as revenue and every cash payment is recorded as expense, June's P&L is not really measuring June.

It is measuring when cash happened to move.

Why That Can Be Dangerous

A practice may appear profitable because collections from prior months are arriving today.

Meanwhile, current payroll and operating costs have already been paid, while the collections related to today's patient care are still sitting in accounts receivable.

At the same time, large cash payments may make one month look much worse than it really was.

So you can end up asking:

“If the P&L says we're profitable, why does cash keep going down?”

One possible answer is that the financial statements are not matching revenue and expenses to the periods they really belong to.

What Needs to Change?

The goal is not more complicated accounting.

The goal is financial statements that reasonably reflect what actually happened.

That means asking:

• Does revenue reflect the care provided during the period?

• Are expenses recorded in the period they relate to?

• Are prepaid expenses, equipment purchases, debt principal, and owner distributions treated properly?

• Are revenue, collections, and accounts receivable being reconciled?

• Does the P&L make sense when compared with what is happening operationally?

For many growing practices, that means moving beyond simply recording cash received as revenue and cash paid as expense.

The Bottom Line

Cash received this month does not necessarily equal revenue earned this month.

Cash paid this month does not necessarily equal expenses incurred this month.

If your accounting treats both that way, your P&L may be showing cash timing instead of true profitability.

Before making decisions about hiring, distributions, growth, or spending, ask one important question:

Can I trust what my financial statements are telling me?

Not Sure You Can Trust Your P&L?

ClinicAxis CFO can help you evaluate whether your revenue, expenses, and cash flow are being reported in a way you can rely on to make decisions.

Schedule a 30-minute conversation to review your practice.