Top 5 Accounting Tips for Your Medical Practice
Every business needs a sturdy management system to run smoothly, and medical facilities are no exception. But, managing a medical facility is not a walk in the park for professionals trained to treat people. There are many demands that come along.
First, you may need to hire a physician contract lawyer to ensure you’re compliant with the law and then you’ll need a proper accounting system to stay in business. How do you overcome accounting hurdles as a medical practitioner?
This post covers the top 5 accounting tips for your medical practice. They are:
- Select your method of accounting
- Use cloud-computing accounting software
- Schedule your income statement
- Maintain separate business and personal accounts
- Hire a professional accountant
Let's dive in.
1. Select Your Method of Accounting
One of the essential practices in accounting for medical practice is defining which method of accounting you want to use. There are two methods available:
- Cash accounting
- Accrual accounting
Under cash accounting, you record expenses when you pay for them and record receivables when you receive cash. It is common for private-owned health facilities to use this method as it gives the actual cash in hand the facility has.
On the other hand, accrual accounting allows you to record expenses when you incur them and revenues when you earn them. You record expenses and receivables regardless of whether cash has changed hands.
Accrual accounting gives a more accurate status of an organization because it accounts for receivables and payables. Whichever method you choose, ensure you thoroughly understand how to apply it in daily transactions.
2. Use Cloud-Computing Accounting Software
Are you still using spreadsheets to prepare your financial statements? Then you're missing on the best accounting treat technology has to offer yet. Cloud-based accounting is a secure way of keeping your records centralized and accessible from anywhere.
It reduces paperwork and saves time when you need records for budgeting and forecasting purposes. If you are afraid of cyber threats, you should use a VPN to keep your account secure.
Cloud accounting software updates financial records in real-time, ensuring your accounting balances are accurate and up to date. Examples include:
- QuickBooks Online
- Zoho Books
3. Schedule Your Income Statement
Your primary role as a physician is to keep your patient's records, so you can monitor their health and help them make an improvement. The same should apply to your bookkeeping for healthy financial results. Scheduling your income statement helps you assess whether you are making profits or losses.
You can validate your daily recommendations with an income statement where necessary. In the long run, you'll be able to:
- Make better decisions- Preparing an income statement gives you accurate information about how much money you have. It guides you on how much you should spend and invest.
- Track your profitability- An income statement informs the stakeholders, such as financiers and shareholders, of the state of operations. You can tell when you are making profits or losses.
- Stay compliant with the law- Every business has to pay tax to the government. An income statement provides relevant information necessary for tax computation.
4. Maintain Separate Personal and Business Accounts
One mistake you should avoid is combining your personal income and business income. It complicates the accounting process and presents you as unprofessional. When filing for tax deductions, it’s hard to separate personal and business expenses.
Also, you set yourself up for audit by the Internal Audit Service, which may deny business losses and deductions. To avoid such incidents, maintain two separate accounts and label and adjust all transactions between business and personal accounts.
5. Hire a Professional Accountant
Keeping proper books of accounting in medical practice can be overwhelming. And because of the high demands of your profession, you may miss out on the details of every transaction. Hiring a professional accountant ensures your books are updated, and you're compliant with obligations.
Are you concerned about incurring the extra cost of maintaining a full-time accountant? You don't have to. You can outsource bookkeeping services at affordable prices.
Like any other business, a medical facility should maintain proper books of accounts. Doing so helps you track your financial status and keep improving your performance. With these tips, your accounting process should be seamless.
Image source: pexels.com
Image Link: https://images.pexels.com/photos/210990/pexels-photo-210990.jpeg?cs=srgb&dl=pexels-kuncheek-210990.jpg&fm=jpg
I am a CFP® (Certified Financial Planner).
I have a severe phobia of bridges and dirty balance sheets.
Hobbies: blogging, meditation, and loving Bull Market (my dog).