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Accounting Today
Accounting Today
Southeast’s fastest growing hubs as well as Bengaluru, India
Think of Finance and Operations as the left and right paddles of a canoe. If they row in sync, the organization glides forward smoothly, but if they paddle in opposite directions, progress stalls and energy is wasted. These two teams sit at the heart of every organization’s ability to grow, adapt, and thrive. Yet in many cases, they still operate in silos, each with its own systems, priorities, and definitions of success.
In practice, Finance and Operations should function as strategic allies. When these roles collaborate effectively, they form a resilient growth engine that fuels smarter decision-making and agile execution across the enterprise.
Traditional Finance systems were built for compliance and reporting, while Operations teams rely on playbooks, experience, and fragmented data. This disconnect frequently results in misaligned goals, delayed reporting, and missed opportunities.
In healthcare, the consequences of this divide are especially pronounced. Many middle-market providers, such as infusion centers, dental practices, and behavioral health clinics, focus on revenue at the office level without fully accounting for the actual cost of doing business. This can result in overstaffing, over-purchasing, and compressed margins that persist unnoticed. Leadership may celebrate top-line growth while profitability quietly erodes.
When Finance and Operations paddle in different directions with one chasing compliance and the other reacting based on instinct, the organization misses opportunities to identify mistakes early and “fail fast.”
The solution starts with cross-functional visibility. Regular reviews of profit and loss (P&L) statements, department-specific key performance indicators (KPIs), and actively monitored budgets help establish a common language of success. When Finance and Operations apply consistent metrics and definitions, they can set shared goals, celebrate wins, and course-correct quickly.
This transparency allows every department to work from the same playbook, driving accountability and enabling smarter, data-driven growth.
To achieve strategic alignment, it requires involving all key stakeholders in the planning process, including Finance, internal and external support teams, Operations managers, and even Human Resources and Marketing. When financial and operational data is accurate and accessible, leadership can set realistic goals, track progress monthly, and make informed investment decisions.
Organizational success is fundamentally shaped by culture. High-performing companies cultivate transparency, accountability, and adaptability, usually anchored by a unified dashboard that becomes the North Star guiding every tactical conversation. This shared view empowers teams to fail fast by detecting issues early, iterating rapidly, and making timely adjustments before problems compound.
When strategic plans are tightly integrated with real-time performance data and supported by broad organizational buy-in, companies gain the flexibility to respond to dynamic market conditions without compromising coherence.
In contrast, even well-intentioned approaches can falter when departments lack guidance on how to recalibrate budgets, reallocate resources, or adjust priorities. For agility to take root, planning frameworks must be both data-driven and culturally embedded.
Once cultural alignment is in place, modern technology systems help bridge the gap between Finance and Operations. Many organizations today use integrated platforms like Power BI and NetSuite to allow leaders across departments to ingest and analyze large datasets, identify margin drivers, and generate reliable forecasts.
By leveraging diverse data sources, including financial reports, practice management metrics, and supply chain information, teams can enhance forecast precision, optimize resource allocation, mitigate operational risks, and elevate overall performance.
However, technology alone isn’t enough. Sustainable impact requires strategic interpretation and cross-functional alignment. Finance and Operations must co-define objectives, such as increasing profitability, improving operational efficiency, or scaling sustainably, and view progress through a shared lens.
In this collaborative model, Finance sets the course by allocating resources based on performance insights and projections, while Operations executes with agility and precision to propel the organization forward.
When both teams rely on a common dashboard and interpret data through a cohesive strategy, they enable smarter decision-making across all stakeholders, resulting in stronger financial health, accelerated momentum, and a more resilient operating model.
Middle market healthcare leaders may face a perplexing paradox: as their practices expand in volume and revenue, margins continue to shrink. The causes are often buried deep in the fragmented data, hidden behind legacy pricing models, inaccurate product-level cost tracking, or siloed reporting systems. Without the right technology and analytical capabilities, leadership may struggle to isolate the drivers of profitability.
Finance and Operations frequently look at different metrics and dashboards, drawing conclusions from incomplete or misaligned information. This disconnect can lead to counterproductive outcomes that have negative impacts on certain areas. For example, incentive compensation that doesn’t account for profitability and leads to operating losses.
To prevent blind spots, organizations must connect financial KPIs (e.g., contribution margin, working capital) with operational KPIs (e.g., patient volume, supply utilization, hours worked) and embed them into decision-making. A unified performance framework supports defensible, data-informed actions by enabling leadership to track key metrics in real time and recalibrate swiftly.
For mid-market healthcare companies poised for growth, a coordinated approach and cross-functional visibility are the cornerstones of sustainable, profitable expansion.
When Finance and Operations work in concert, teams create a culture of transparency, agility, and strategic focus, transforming data into decisions, and decisions into sustainable growth.
At Elliott Davis, we deliver flexible support models tailored to your needs, including:
Our team brings firsthand experience building, scaling, and exiting retail healthcare organizations, having led them through rapid growth and successful transactions with sponsors. We work alongside senior financial and accounting leaders to:
From inception to transaction and beyond, Elliott Davis supports healthcare organizations every step of the way.
Contact us today to start the conversation.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
Note: Originally published in January 2024, updated to reflect recent legislative changes.
When a company is structured as a partnership, including a limited liability company (LLC) taxed as one (hereafter referred to as a partnership), it is not subject to tax. Instead, taxable income passes through to the owners (hereafter referred to as partners), who are responsible for paying the tax. To help them meet those obligations, the partnership may distribute cash, known as tax distributions.
Tax distributions are generally advances on future partnership payouts, allowing partners to cover tax liabilities without using personal funds. When drafting the LLC Agreement or Limited Partnership Agreement (LPA), it is extremely important to define the provisions related to tax distributions, as they manage the timing and dollar amount of these payments. This article addresses key practices and definitions to consider during the negotiation of such provisions.
When negotiating the tax distribution provisions, the first place to start is defining “income.” Common items to consider during these negotiations include:
When determining the taxable income of the company, only the current year’s income should typically be emphasized. Any built-in gain or loss from a partnership revaluation or contribution of a partner should normally be disregarded (e.g., 704(c) layers). Taxable income allocated to a partner for built-in gain or loss would be unrelated to the current taxable income, as it reflects prior appreciation or depreciation. It is commonly excluded from tax distribution calculations.
Like built-in gain or loss, a partner’s step-up adjustment from a partner-to-partner transaction is unrelated to the company’s current taxable income. As a partner-level item, it is commonly excluded from tax distribution calculations.
Under the One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, a company’s interest expense deduction may be limited to approximately 30% of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Any interest expense exceeding that threshold is suspended and passed through to the partners. However, this suspended interest is not deductible in the current year. It becomes deductible upon the company passing through excess taxable income to the partner, or adjusts the partner’s basis in the sale of the partner’s interest in the partnership.
For purposes of calculating taxable income for tax distributions, suspended interest expense represents a future deduction available to partners. Since this amount can be significant, it’s important to address its inclusion or exclusion during negotiations when defining taxable income for distribution purposes.
Tax distributions are intended to help partners cover their tax liability from the partnership’s taxable income. If the partnership incurred losses in prior years, those losses should be considered against the current year’s operating income. A cumulative approach to taxable income allows tax distributions to reflect partners’ overall tax obligations based on net income over time.
Example: A partnership has current taxable losses of ($500) and ($100) in years 1 & 2 and taxable income of $1,000 in year 3. The cumulative taxable income approach would yield taxable income of $400 for purposes of calculating the tax distributions in year 3.
To calculate a tax distribution, partnerships typically multiply taxable income by an assumed tax rate. This rate estimates the partner’s tax liability on their share of passed-through income and determines the size of the distribution. Once taxable income is defined, the next step is selecting an appropriate assumed tax rate.
A commonly used method is the look-through approach, which focuses on the partner’s actual tax exposure. This includes considering the highest applicable federal and state individual tax rates based on where the business operates.
Example: Using the 2025 rates, a partnership in North Carolina might apply a combined rate of 41.25% (37% federal plus 4.25% state). This approach aligns the tax distribution with the partner’s expected tax burden.
If a partner’s share of current taxable income is considered passive, it may trigger an additional tax of 3.8% Net Investment Income Tax (NIIT). Since NIIT is determined at the partner level, it’s often excluded from the assumed tax rate used for distributions. However, partnerships should evaluate whether to include or exclude NIIT during negotiations.
As state tax rates have increased, partnerships often manage cash flow by setting a maximum assumed tax rate (also known as the assumed tax rate ceiling) within their tax distribution provisions.
Example: A commonly used maximum rate is 45%, which combines: 1) the highest federal individual income tax rate of 37%, 2) the 3.8% NIIT, and 3) a blended state rate of 4.2%.
After defining taxable income and the assumed tax rate, the final step is to determine the timing of tax distributions. Although partners are generally required to make quarterly estimated payments on passed-through income, partnerships may not have a reasonable income estimate until later in the year. As a result, it’s common for partnerships to issue a single tax distribution in the fourth quarter of the calendar or fiscal year.
Tax distributions are significant for partnerships and should be carefully considered and negotiated. Analyzing the definitions of taxable income and assumed tax rate in combination with determining when to make distributions should all be part of effective cash flow and treasury management.
Our High-Net-Worth team is here to help your organization with tailored tax planning strategies. Contact us below to get started.
For information about the tax implications of buying and selling in a partnership, read our related article.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
In today's Tax Thursday in Three, Bergin Fisniku gives an update on the federal government shutdown and what taxpayers can expect with delays in processing returns.
In spite of the shutdown, the IRS is moving forward with implementing the provisions of the One Big Beautiful Bill Act (OBBBA), bringing significant opportunities for tax planning. Bergin discusses the key changes to review, including 100% bonus depreciation, changes to interest deductibility under Section 163J, and immediate expensing for domestic R&D. Each of these provisions can offer different benefits for taxpayers depending on individual circumstances. Now is the time to consult with your advisor to optimize your strategy in light of these updates.
Watch the full video below.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
