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Friday, January 31, 2014

Bookkeeping pitfalls for practices to avoid

In the small practice setting, physicians often don’t realize that they are losing money due to suboptimal bookkeeping practices. While doing it yourself may seem like a way to save money on monthly accounting fees, the decision not to hire a professional may be costing you more than you realize. In many smaller practices, one of two scenarios occurs: Either 1) the physician is doing his or her own bookkeeping, or 2) office staff may be recording and coding transactions.

Bookkeeping services help ensure accurate financial records
Coding errors complicate bookkeeping and waste time
Each transaction has the potential to impact the taxes you pay. The integrity of your financial reporting, which should inform the major decisions you make for your practice, depends on the day to day accuracy of your recorded transactions. This is the information you should be using to trend your practice’s performance, decide whether to bring on another doctor or nurse practitioner, negotiate managed care contracts, offer new services, apply for a loan, or adjust staffing.  

At first glance, picking expense categories in Quickbooks seems pretty basic compared to the complexities of practicing medicine, so many physicians opt to do their own bookkeeping. One of the problems with this is that a physician’s time is best spent on billable activities, such as treating patients, or other activities that cannot be performed by another person whose credentials are not “M.D, ” or “D.O.” Despite the fact that many physicians are very knowledgeable in business in general, what is obvious to an accountant who looks at financials all day long may not be as obvious to a doctor who looks at his or her financials once a month. For example, one physician I worked with did not realize that some of his cash receipts from Blue Cross were being coded as an expense. This was occurring because the physician had a personal health insurance policy through Blue Cross, and so transactions with “Blue Cross” were being automatically coded to health insurance expense rather than revenue.

Realizing that their time is better spent with patients or on business development efforts, some physicians choose to have office staff maintain the books. The problem with this approach is that often office staff are not trained in business accounting and have not worked as full time bookkeepers. They may be fulfilling other roles, such as scheduling patients and verifying insurance.

Below are just a few signs that you may have issues with your bookkeeping. (This list is by no means all inclusive):
  • Wide variations in expense categories from year to year
  • If a sort by vendor shows a single vendor being coded to multiple accounts (for example, if purchases from a suture supplier have been coded to accounts other than medical supplies, such as office expense, miscellaneous expense, etc.)
  • It should be easy to estimate expenses for certain accounts, like salaries, maintenance contracts, or equipment leasing. If these accounts seem greatly over or understated, you may have an issue.
A bookkeeping service or a part time CFO with experience in physician practices, knows what to look for and can ensure that you have meaningful financials to make informed decisions and to minimize your tax liability.

About the author: CFO Business Growth Solutions, LLC is a provider of part time CFO and interim CFO Services, nationwide accounting & bookkeeping Services, debt restructuring and management turnaround, business intelligence applications and due diligence support services. For more information go to http://www.cfobgs.com/

Image license: Dr. Harry Gouvas, CC BY SA 3.0, GFDL

1 comment:

  1. Thanks for the tips. If one can't really do the bookkeeping for himself, he should find services that will prepare reports for him.