As if going to medical school and preparing to save lives for years was not enough, you need t worry about finances as well. If you are from a medical background, chances are, you have not gained training in accounting.
The accounting medical industry is growing and is different from accounting for other businesses. Owners or management teams of medical institutions need to deal with insurance, patient payments, government schemes, and so on.
This blog will help you gain a better understanding of accounting for medical practices through tips.
The Basics and Tips for Accounting Medical Industry
These are some basic practices that are important to incorporate into setting up your business to maintain profitability.
Picking the Right Accounting Method
Your medical group’s management team can use cash-basis accounting or accrual accounting to track expenditures and income.
Cash basis accounting means recognizing revenue when payments are received. We record expenses only when they reflect in your bank account.
When we conduct actual basis accounting, we record expenses when they are incurred and revenues when treatment is completed. Accrual basis accounting does not focus on whether payments have actually come in or gone out. Therefore, income is recorded when services are provided to patients. We record income regardless of whether the insurance company or a third party has paid an invoice to your medical practice.
In the accounting medical industry, cash basis accounting is commonly used. Cash basis accounting is more simplified than accrual basis accounting. Through cash basis accounting, we ensure your business does not pay taxes on revenue that has not been received.
Outsourced accounting services make work easier for you by recording your transactions when they enter your bank account. Specialized accounting services make accrual adjustments by tracking accounts receivable and accounts payable to give you the best of both worlds.
Distribution of Profits
You need to properly split income between partners in your medical practices in the form of an operating agreement. Here are three ways to agree on splitting profits.
- Equal Allocation: if you and your business partner allocate work equally, then the equal allocation of profit would work best for your accounting medical industry. This includes charting, managing staff, administrative services, and paying bills.
- Pro-rata Allocation: Partner compensation, in this case, is based on production. Their percentage of gross collections reflect in their percentage of profit.
- Corporate Spilt: In this case, partners can have two roles, an investor role, and a clinical role. Doctors or dentists receive their salaries, and then the remaining profits are divided equally.
You need an attorney or a CPA to make a profit allocation plan that works best for your business partners and your medical practice.
Make Well-behaved Applications of Accounting Software
For the accounting medical industry, medical billing is crucial and costly if done wrong. Here are some steps We can help with to collect payments for provided services:
- Collecting patient information at the right time: Make sure you gather patient information like name, contact details, address, Aadhar card Number, and insurance details.
- Make your patients sign an assignment of benefits document: This statement will assign payment to your practice under the patient’s insurance plan, but you can also send the bill to their insurance company.
Outsourced accounting services use top-notch medical billing software to make sure the billing process goes smoothly. We help you increase collections, code services, and submit claims through our software. Outsourced accounting services can help you maintain medical billing procedures to ensure that you do not lose out on income.
Financial Statements Must be Reviewed Regularly
The financial statements of your medical practice give you an idea about your business’s financial health. We can help ensure that your balance sheet, income statements, and cash flow statements are reviewed regularly. By constant review of your financial statements, you are aware of your current financial position and can make informed financial decisions with our help.
A common mistake made by healthcare professionals is looking at financial statements only once a year. That, too, takes place only when the accounting team asks for financial data to prepare for taxes.
Our accounting services will make sure you review your medical practice's financial statements monthly. This will give you an idea of cash flow and profitability regularly. Our services also allow you to correct issues before they become legal hassles. Outsourced accounting services ensure that you keep track of your progress toward financial goals.
Why You Need Outsourced Accounting Services
Epecia’s role in the accounting medical industry is crucial. We take care of long-term costs like the cost of using software like QuickBooks by yourself, especially because physicians are not accountants. We handle accounting software with ease and make sure your books are maintained properly. Outsourced accounting services can also provide you with an understanding of tax planning strategies to save money.
Get professional accounting help from Especia today! Especia helps you make the most of our services and stay on top of your finances.
Mistakes to Avoid in Accounting Medical Industry
Starting a medical practice takes more responsibility than any of us can imagine. If you are from a medical background, you are likely to have needed to become an administrator, an accountant, and a human resources professional as well. Luckily, accountants can make your work easier for you by making sure you avoid these mistakes.
You may make these mistakes because you have too much on your plate, and we are here to take accounting off your hands. Here are some common mistakes you may be making when it comes to accounting in the medical field.
Bookkeeping Done Wrong
Bookkeeping is not usually on the priority list for a physician, especially ones buried in medical work. Inaccurate books, however, are harmful to businesses as they lead to overspending.
Without real-time financial data, you will be unaware of the profit margins made by your business. This will result in you not knowing whether you can cover expenses like loan payments or not.
Outsourcing accounting services can greatly help you in tracking your finances accurately and in a timely fashion. To make things more convenient for your medical practice, we offer online accounting services. Our trained bookkeepers ensure that you spend more time growing your business and saving lives instead of worrying about bookkeeping and tax filing.
Making Your Cash Flow Suffer
The key to maintaining accounts receivable is maintaining a healthy cash flow in your practice. You need to receive payments from patients for the treatment they receive to pay your other employees or make profit margins.
Our skilled accountants and professionals make sure books are updated with real-time financial information and cash flow forecasts are made. An outsourced team of professionals helps you spout potential cash shortages, allowing you to make plans to recover from them. We provide solutions like trimming expenses or tapping business lines of credit, helping you get paid faster.
Avoiding Bank Account Reconciliations
A problem commonly faced by medical professionals while managing finances is reconciling bank and credit card accounts. This accounting medical industry process involves making sure information matches your bank or credit card statement and your financial statements. One example is you can look at the legitimacy of a transaction in case you see a charge you do not recognize, like a charge for surgical equipment.
This seems like an easy-to-overlook task, but it defines the financial health of your company. Outsourced accountants help with this task to ensure that you are protected against fraud and errors. We also help you handle unusual expenses before it leads to negative cash flow or bounced checks.
Not Separating Business and Personal Expenses
Being from the medical field, you may make the mistake of using the business's cash as your chequebook. This includes incurring personal expenses like car leases and family vacations on your business's practice. This can put you in danger of a legal audit and cause problems between you and your partners. When you look for a line of credit, banks will be wary in case they know of you using the business's account for personal expenses.
Outsourced accountants categorize your expenses, making sure you do not intertwine your personal and business finances.
Especia can help you with basic tips and tricks when it comes to accounting in the medical industry. We give your finances the attention they deserve and help you stay on top of your books. Allow us to gather real-time financial information for you and record it accurately, ensuring that there are no errors. Correct bookkeeping can ensure a healthy cash flow, ensuring that you have enough money to cover the expenses of treatment.
Reach out to Especia for outsourcing accounting services today!
Is bookkeeping important for medical practices?
Yes, bookkeeping is crucial to ensure the financial health of medical practice.
What is the medical accounting software used by Especia?
Especia uses software like ZohoBooks and QuickBooks to record transactions accurately.