According to 81% of business decision-makers, their business suffers due to a lack of advice and knowledge of accounting, financial planning, and other related responsibilities. But any business that wants to succeed must be able to handle its accounting. Even those in the medical field.

Business accounting helps check revenue, expenses, and cash flow. Also, it improves their financial performance and reduces the risk of fraud. And it ensures they follow the rules. So, it is vital for healthcare organizations.

So, in this blog, we’ll explore some accounting practices for medical companies. Let’s get started!

Tips for successful accounting in medical practices

Medical professionals must provide quality patient care. But they also face accounting complexities. This can make it challenging to ensure the financial health of their practice.

Thus, to help with this, here are some tips for successfully managing accounting tasks in medical practices:

1. Establish and maintain clear policies and procedures

“It takes a team approach for effective financial management. Gone are the days of working in silos. It is important to educate every member of every department on what the revenue cycle is and how their role plays a part in it. Once they understand how they are impacting quality patient financial care, they want to learn more. I found the secret to success is to involve them, give department goals, set benchmarks, and share the results. Implement weekly meetings to review opportunities that have been identified, review processes, discuss challenges, and get their input.”

~ Carolyn Rubin, Vice President, Revenue Cycle Innovations at Anthelio Healthcare Solutions

Financial management policies and plans should cover specific areas, including billing and collections, expense management, and financial reporting. When there are clear rules, it’s easier to avoid confusion or mistakes. Your employees should know what they need to do to manage money. For example, they should regularly follow the rules to avoid mistakes or fraud.

2. Use of accounting software

Special computer programs for keeping track of income and expenses are known as accounting software. They can help medical offices make wise choices since they can:

• Automate invoicing
• Track accounts receivable
• Track accounts payable
• Provide timely financial statements

Lots of accounting companies also offer computer programs that can be personalized to your business needs. These tools can make it easier to keep track of financial information. You can also pair it with your practice management solutions (PMS), which helps you to–

• Schedule appointments
• Capture patient records
• Bill patients
• Store treatment plans
• Submit Insurance Claims

This way, you can have all the data in one place.

3. Engage a professional accountant

Healthcare providers sometimes do their own bookkeeping to save money. But it can be problematic. Medical practices need specialized knowledge of accounting and expertise. And mistakes can cost more later. For instance, you may miss some tax-saving plans.

A trained accountant can help you. It may seem expensive initially. But sound financial management and planning will save you more in the long run.

4. Regular financial review

It’s essential to check your finances regularly to do well in accounting. By reviewing your balance sheet, income statement, and statement of cash flows every month, you can keep track of the following:

• current cash position
• receivables
• payables
• liabilities
• revenues
• expenses

Some healthcare professionals only check their financial statements once a year when their accountant asks for information to do taxes.

Financial reviews help if they are done often. After all, if you see problems early, you can fix them quickly. Furthermore, if you don’t understand something, you can always seek an explanation from your accounting partner.

5. Choose the correct accounting method

There are two types of accounting methods –

• Cash-basis accounting
• Accrual accounting

The cash basis method does not use accounts payable and receivables. Instead, revenue is recorded when you receive it, and expenses when you pay them.

In contrast, accrual accounting recognizes revenue even when you have not received or paid it yet. In other words, it does not matter who will pay the bill—the insurance company or a third party—you record income when you offer the service to the patient.

Of these two, cash-basis accounting is a common practice in the medical industry. Why? For the following reasons:

• Easier than accrual accounting
• You don’t have to pay taxes on revenue you have not received yet

6. Determine Profit Sharing

If you have partners in your medical practice, it’s important to decide the profit share. You can do it in three ways –

• Split it equally: This system will work well if the partners
  • Share an equal workload
  • Bring in equal revenue
  • Shoulder equal responsibilities
• Pro-rata – This method divides the profit on the basis of each partner’s production. The percentage of profit reflects the percentage of the gross revenue they bring during a time period.
• Corporate split – In this method, each partner has a dual role: clinical and investor. Here the salary is paid on the basis of their clinical role. Once all the bills are paid, the remaining profits are split equally.

Avoid these medical accounting pitfalls for a successful practice

Some medical companies take on too many responsibilities. And they often can’t handle them all. So, they should avoid some common errors that can happen:

Ignoring accounts receivable

If your patients don’t pay, you won’t have enough money to pay your workers, cover expenses, or earn revenue. So, to make sure you have enough cash, work with a good billing team and consult your accountant about cash flow forecasts. Otherwise, you might have to cut expenses or take out loans.

Ignoring bank account reconciliations

You need to match the transactions in your records to your bank or credit card statement information. It helps you prevent and detect fraud and errors. Regular reconciliations allow you to quickly handle anything unusual before it leads to bounced checks or negative cash flow.

Wrapping up

Effective financial management is vital for medical practices to succeed. After all, it improves their financial performance and reduces the risk of fraud.

Also, they should establish clear policies and procedures, regularly review finances, and invest in financial education, professional accountant, and accounting software. Meanwhile, they should avoid common errors like ignoring accounts receivable and bank account reconciliations.

Nonetheless, if you have questions about accounting, you can seek guidance from GJM & Co. Our experienced professionals will help you understand the important details. Furthermore, they will suggest best practices and manage your financial accounts for you.

Should you have any queries or need consultation, Schedule a Call today or write to us at info@gjmco.in.