As a doctor, you should put patients’ needs first. However, if you open your own office, additionally, it is indispensable to keep an eye on accounting for medical practices. Owning a medical facility necessitates maintaining correct financial records and tax compliance. To get some helpful accounting advice to improve your flows, keep reading.
Bookkeeping subtleties to consider for medical practices
Medical practices need accounting and bookkeeping to guarantee financial success and regulatory compliance like any other business. Here are a few crucial things to remember regarding accounting for medical practices.
Accounting software
Medical institutions must utilize specialized accounting software designed for their sector. Popular choices include Sage, Xero, and Quickbooks. These programs allow owners to monitor costs, earnings, and balance sheets. It also offers information about the practice’s financial situation.
Track income and expenses
Proper economic management is critical to achieve success in any business. It’s essential to maintain accurate records of all income and expenditures, including rent, salaries, medical and office supplies, insurance premiums, and utility bills. Companies should regularly audit their costs to identify unnecessary spending and save money.
Proper documentation
Medical offices must meticulously record all fiscal activity. It includes obtaining receipts, invoices, and bank statements. Accurate documentation of financial matters is essential to stay organized during audits or tax season.
Accounts receivable
Patients’ financial obligations to the facility are called accounts receivable. Maintaining track of the outstanding sums and pursuing unpaid debts is critical. To make tracking simpler, medical offices might implement computerized invoicing systems.
Accounts payable
Accounts payable is essential — it involves tracking the money you owe to vendors, suppliers, and creditors. It’s necessary to maintain accurate reports and payable records to make sure that payments are made promptly and avoid any late fees.
Tax compliance
Doctors and medical centers must stay up-to-date with their taxes, ensuring that all necessary federal and state income taxes, payroll taxes, and sales taxes are filed promptly. Not following the laws could lead to serious legal repercussions.
Professional accounting assistance
Hiring an experienced public accountant is always a wise decision, even for small healthcare organizations. They can provide beneficial advice regarding filing taxes, help you stay compliant with legal regulations, and offer guidance about investment decisions.
Basic tips to control finances
Some small tips can help you to manage your bookkeeping. Pay attention to the most important ones:
- Keep accurate records: Keep track of all transactions, including income and outgoing costs. Using a system, keep an eye on every financial activity’s receipts, invoices, and bills.
- Monitor your expenses: Manage all your costs, ensuring they are appropriately categorized, including rent, utilities, wages, medical equipment, and taxes.
- Employ an expert: Employ a qualified public accountant, professional bookkeeper, or accountant to manage your accounts and taxes to assure accuracy.
- Manage your cash flow: Keep an eye on your accounts receivable and payable to keep track of your cash flow. Always ensure you have enough money to take care of your costs and pay your debts.
- Automate your medical billing: Enhancing your accounting process by introducing a digital billing system would be beneficial. It can help you quickly and securely send bills and receive payments electronically, reducing potential errors.
Moreover, stay on top of your books and reconcile them periodically. It will help you to detect and correct any discrepancies between your financial statements and bank accounts and leave you with accurate records.
How to choose the software
Bookkeeping software should be customized to meet your specific demands. Select software that can adjust to your unique cash basis accounting requirements. You can use such criteria:
- Integration: The accounting software has to work with the doctor’s office’s other programs, including Electronic Health Records (EHR), practice management, and inventory management programs.
- Protection: To protect patient information, ensure the software complies with HIPAA regulations and industry standards in data protection.
- User-friendly: The software interface must be simple to use and written in clear and intelligible language so your team can use it without specific training.
- Customer service: You should have access to high-quality customer service, which includes updates and technical assistance for your clientele.
- Price: Select software that offers the functionality you need at a fair price.
Consider using cloud-based accounting software, which offers access and frequent upgrades and backups anytime, anywhere. You may select the ideal accounting apps to employ in your medical practice by carefully considering these things.
Selecting the best method of accounting
Medical practice management involves two types of accounting: cash basis and accrual. Usually, a business administrator, manager, or accounting firm will decide which approach suits the organization’s needs.
Accrual
One of the traditional types of accounting is accrual accounting. When the company receives an expense invoice, accountants record it. Additionally, any patient accounts receivable should be taken into account at the time of billing rather than at the time of payment. Although it’s a typical accounting procedure among private firms, it’s not always the ideal choice.
Cash basis
The cash accounting approach is comparable to the first approach. The distinction is that invoices and accounts receivable are registered upon payment rather than upon receipt. This strategy is preferred by the majority of medical offices since it accurately captures the current situation of the firm. It’s crucial to budget for significant quarterly costs, such malpractice insurance, while using this strategy. If you don’t properly prepare ahead, hidden expenses may surprise you as you’re checking out.
Common accounting mistakes to avoid
Here are a few typical errors that can happen if you don’t manage your medical accounting properly.
One of the most popular mistakes is that medical practices often neglect analytical reporting about their business. Analytics are crucial to managing and expanding a firm. It is usually important to comprehend if the balance sheets are current, whether the total cost of capital has grown since the business opened, and how the cash flow predictions seem best for growth. All of this provides a thorough knowledge of how your organization is performing. You are stepping into the unknown blindly without frequent reporting. You may use it to make wise choices.
One of the most irritating, frequent, and expensive problems for any new organization is medical billing and coding mistakes. Every year, new payment codes and rules are implemented. Sometimes the modifications won’t affect you, and other times they’ll give you a migraine. To keep your finances in order and your company compliant, you can keep up with any essential billing and code changes by using expert accounting assistance. You may concentrate on leading your team, attracting additional clients, and developing your own abilities rather than worrying about the distinction between a refused claim and a denied claim.
How to avoid mistakes
Errors are sometimes unavoidable. However, you can try to steer clear of the popular mistakes. Some of the best actions you can take are listed below:
- Separate accounts to divide commercial and personal use: You must later separate the two if you use duplicate bank accounts for the company and private transactions. To spare yourself the headache, divide them from the start.
- Create a unique chart of accounts: The income, costs, assets, and liabilities of medical practices are complex. Setting up specific accounts in your accounting software aids in maintaining accurate and usable bookkeeping.
- Keep a record of the assets you buy: Medical practices require pricey equipment to function. Keep separate records of these expenses since you must capitalize and depreciate them rather than immediately deduct them.
Proactive steps to streamline your accounting from the start will be beneficial in the long run. To prevent any potential issues in the future, it is essential to be meticulous about them from day one. Being prepared is much better than struggling with accounts later on.
Wrapping up
In conclusion, accounting and bookkeeping are essential to gain the financial stability of medical facilities. These firms must keep up-to-date records, control all ins and outs, and adhere to tax regulations.
Accounting plays an important role in helping to protect a medical practice from fraud and financial mismanagement. Through careful record-keeping, it is possible to detect suspicious activity and protect the business from financial loss.
You are free to choose whether to hire bookkeepers or outsource the job. In any case, asking for professional accounting assistance will free up time and resources that may be used to take care of patients and level-up service.
