What You Need to Know About Accounting for Medical Practices
Accounting for the healthcare sector is more difficult and time-consuming than accounting for an ordinary small firm, which has its complications. Your clinic will not only need to keep track of patient payments. But you may also have to deal with Medicare, Medicaid, and insurance companies regularly to maintain your fees. Use this blog as your resource for everything information you need to know about medical practices and accounting. Whether you’ve just started your medical business or have been having trouble with it for a while.
Select the Appropriate Accounting System for Your Medical Practice
Medical practices have a choice between using accrual or cash basis accounting when it comes to accounting for doctors.
Accrual accounting allows medical accountants to record costs when you receive your bills rather than when you pay them. The billing of patients is likewise subject to this regulation. Due to its complexity, many medical clinics do not use accrual accounting, even though it often offers more accurate accounting than alternative approaches.
Compared to other accounting techniques, cash basis accounting is far more prevalent in medical practices. Adopting this strategy entails recording expenses as they are paid and receivables as they are collected. After all unpaid bills have been resolved, a doctor will often be compensated.
What Your Medical Practice Needs You to Precisely Track
Whether you use accrual basis accounting or cash basis accounting, there are numerous things that your medical practice accountant or healthcare CPA must monitor and account for. You will be in charge of tracking more commonplace goods that small businesses that are not in the medical industry must also track. This is in addition to some items that are specific to the medical profession.
Retaining Records and Documentation
The health of your business depends on maintaining correct records and paperwork for your medical practice. Records and documentation that are misplaced or wrong might result in delays and eventually increase your costs.
You’ll be in charge of maintaining the following records and paperwork:
- Basic details on the patient
- Insurance information
- Treatment background
- Forms of consent
Although maintaining accurate records has always been difficult, it was much more difficult before the invention of computers. Computer records have been digitalized, which has made a challenging task more doable.
Payment and Invoicing
While digitization has helped with recordkeeping in some ways, paying for medical services is more difficult. A denied claim or other roadblock is more often in this industry. This is because of the numerous moving components and conflicting interests that exist during the process.
A claim denial may be the consequence of a minor administrative error or a more serious problem that an insurance provider or government-run Medicare has discovered. Patients who don’t pay their bills on time or at all may be a problem for medical practices.
While there isn’t a perfect answer to these problems, developing procedures for better data monitoring and organization can assist billing problems to become fewer regular headaches.
Financial Reports and Statements
The financial stability of your medical practice is shown through your financial statements and reports. You should frequently review the balance sheet, income statement, and cash flow statement for your medical practice. You can stay on top of crucial indications, such as:
- Cash flow
The ability to make data-supported decisions and correct minor issues before they grow into more major systemic patterns depends on your ability to keep track of your medical practice’s financial health. Monitoring your patient’s physical health frequently is in both of your best interests, as is monitoring the health of your medical practice.
Taking Charge of the Receivables
Maintaining a healthy cash flow, which serves as the circulatory system of your company, is made possible by managing the accounts receivable for your medical practice. You won’t be able to pay your staff and take care of your business bills if your cash flow isn’t in order.
Getting paid for your services is a never-ending challenge. Therefore, you need an effective billing team to assist your medical practice receive payments more quickly. The top teams increase effective billing procedures, eliminate ineffective processes, and innovate with fresh concepts that improve your financial situation.
Forecasting and Planning
Another important component of your financial puzzle is creating a budget and projection for your medical practice. For instance, cash flow forecasting enables you to spot cash shortages before they have a significant impact on your company. By recognizing cash flow problems, you can cut costs and work to collect unpaid debts before they have an impact.
If you don’t budget and forecast, you won’t know your expenses or whether your business is still profitable. Without them, you won’t be able to determine whether you have enough money to cover your fixed costs for operating your medical business, including paying your staff.
Regulations and Compliance Obligations
The compliance and regulatory regulations related to your patients’ data are other features specific to medical operations. The Health Insurance Portability and Accountability Act (HIPAA) is undoubtedly already recognizable to you. The federal statute known as HIPPA established uniform criteria to prevent the release of patient health information without their knowledge or agreement.
It’s critical to ensure data security while adhering to constantly evolving compliance rules. If you’re not aware of the most recent industry standards, you can be breaking them very quickly.
Work With Professional Accountants
Even without accounting for your medical practice, carrying out the essential tasks of your business is challenging and time-consuming. Because healthcare accounting is difficult, many healthcare professionals turn to Your Part Time Accountant, the nation’s top virtual accounting agency for small businesses.
We offer the answer you need at a price that works for you, whether it’s business tax counseling, small business taxes, bookkeeping for medical practices, or any of our expert services.