Home Medical Practices Accounting for Medical Practices – What You Need to Know

Accounting for Medical Practices – What You Need to Know

While hospitals and private practices need to focus on their core responsibility which is providing health care services, other required processes must not be ignored. This is extremely important as the goal of almost any organization, whether non-profit or otherwise, is to maximize revenue while decreasing costs and expenses.

As such, it is critical that accounting is an essential part of the organization. While others may think that this is a very complicated job, having the right knowledge about accounting, which is considered to be the language of business, can go a long way towards satisfying this particular need in your practice.

Here is everything that you need to know about accounting for medical practices and how you can apply this in your hospital or practice.

Know About GAAP

All businesses regardless of the industry follow a set of rules and procedures when it comes to accounting and preparing financial statements. These are called GAAP or Generally Accepted Accounting Principles. Financial statements following GAAP rules can be easily interpreted by any accountant.

In some cases, companies are required to follow GAAP standards especially if they are publicly traded. Those who do not follow GAAP are also more likely to be audited. Perhaps most importantly, those who are seeing loans or additional grants may not be considered unless they are using GAAP standards that can be more easily understood and evaluated.

Accounting Methods

When doing accounting for a medical practice, it is important to determine which type of accounting method you should use. There are two types of accounting methods, namely accrued and cash basis accounting.

The main difference between the two methods is that accrued accounting determines receivables and payables upon receipt or submission of a bill. On the other hand, cash basis accounting accounts for expenses and incoming cash only when payments have been made.

You may consult with your accountant as to which method is best suited for your practice. There are also some pros and cons to each method that an accountant can better discuss with you.

Get a Bookkeeper

A bookkeeper is someone that records all transactions that are going on within the practice for use by the accountant later on. This task is in conjunction with the data and documents that other staff are creating such as receipts, billings, and the like.

You can have a bookkeeper as part of your accounting staff or simply hire someone part-time who can visit you regularly so that they can update your books. A good bookkeeper must be able to balance your books so that accountants will not have a difficult time preparing accurate financial statements for you to review.

Be Thorough in Keeping Records

It is important to be able to keep accurate records as garbage input will translate to garbage output. This should include complete information not only concerning numerical figures but also data such as;

  • Patient name and other information
  • Social security numbers
  • Insurance information
  • Co-pay details
  • Medication name and treatments
  • Addresses

In order to create fully accurate financial statements, all transactions must be accounted such as utility bills and petty cash expenses as well as other forms of revenue. Even any donations made should be recorded as these can be tax-deductible. These are not only good accounting practices but are also solid guidelines for regulatory compliance accreditations such as HIPAA or ISO.

Simplify Processes

Having simplified processes will not only eliminate wastage in terms of man-hours and expenses, but it can also decrease turnaround times so that actual service can be provided faster. Perhaps more importantly, simple processes that require fewer steps will lead to less accounting work and transmission of documents that can lead to inaccurate data.

Department heads can meet and discuss current procedures. They can come up with ways on how to cut back on redundant procedures and reengineer them in such a way that it will require fewer resources. Simple procedures can lead to an organization running more efficiently, and this would also translate to be a faster accounting process.

Invest in Software

Software geared towards the medical profession is a great way to capture data. This can save a lot of time especially since all information has already been digitized and can be retrieved almost instantly. Some can even generate financial statements by themselves, and you just have to have them checked by an accountant for verification of completeness and accuracy.

You can look for programs that offer a complete suite of functionalities that can cover all aspects of your operations. While some may consider using an enterprise-level application as a luxury, it will usually pay for itself over time due to the benefits that it can provide long term.

Outsource Accounting Jobs

Having an accountant under your payroll may be excessive, especially if you are running a private practice. Also, a CPA’s salary can be quite expensive, so having them around during times when financial statements are not a requirement can be wasteful if that’s their only responsibility.

With this in mind, it is recommended that those in the health care industry simply hire accounting consultancy firms to do these tasks for them. They can also supply bookkeepers that can work with your team to update your books.

Outsourcing accounting jobs is a practical idea for private practices as well as for small to medium-sized hospitals. You just have to make sure that they are well-versed in hospital administration so that they will have the experience and expertise necessary to handle transactions specific to your industry.

Learn to Review Financial Statements

Financial statements are not just for compliance purposes. As part of management, those who have medical practices, as well as medical executives, should know how to read and understand financial statements.

Information derived from transactions can be translated into profit and loss statements that can determine how profitable the organization is. It can also be used to make management decisions such as cutting back on certain expenses or letting go of redundant personal.

Being able to use financial statements as a tool to make your practice grow and improve is one of the most important benefits that an accurate and complete financial statement is capable of providing, which is why it is recommended that you understand the concepts mentioned above as well basic accounting principles.

- Advertisment -

Most Popular

Tips to Use Instagram for Medical Practices

Almost 80 million photos are being posted on Instagram each day. These come from celebrities, influencers, and regular people as well. However,...

Starting a Medical Practice Checklist

So you want to start your own medical practice? Congratulations! Having a private practice can be very rewarding in many ways. However,...

Types of Insurance That You Need to Have for Your Medical Practice

Insurance is a very important thing to have both personally and in business. This is especially true if you have a medical...

How to Develop Content Marketing Materials for Your Medical Practice

Content marketing is the future of online marketing. The trend now is no longer about just plain sales and marketing materials that...

Social Media Marketing for Medical Practices

Social media is a very powerful tool for reaching a very wide audience. It serves many purposes, but it all leads to...

Why Do You Need to Use Digital Marketing for Your Medical Practice?

The goal of any business, whether it be a medical practice or otherwise, is to gain profit. To gain profit, aside from...

How to Create a Business Plan for Medical Practice

If you want to create your own medical practice, know that it can be a very difficult process. However, it's only the...

The Relevance of Bookkeeping for Medical Practices

A hospital or medical practice’s main function is to provide quality health care to patients, and everything else is secondary. Being able...

How to Effectively Do Marketing For Medical Practice

We currently live in a world where marketing is king. How you handle your marketing can determine your client share in the...

Accounting for Medical Practices – What You Need to Know

While hospitals and private practices need to focus on their core responsibility which is providing health care services, other required processes must...

How to Implement Risk Management in Medical Practices

Lawsuits and other major issues are the banes of any organization. This holds true especially when it comes to the healthcare industry....

Softwares for Medical Practices – What Should They Contain?

Gone are the days where hospitals and private doctors stored and maintained multiple folders in rooms of cabinets. Everything is digitized nowadays,...

Public Health Issues Being Faced by Australians

Australia is considered to have one of the best health care systems in the world. It has consistently been ranked to be...

How Telehealth Psychology Impacts Mental Health

Telehealth has done wonders towards improving the quality of life for the general public. Especially now when social distancing is necessary to...

Doctors Without Borders – Who Are They?

The world can be a difficult place to live in, especially with several environmental, civil, and political turmoil that most countries are...

Non-Communicable Diseases and Why You Should be Concerned

While the world is still reeling from COVID 19, we should not forget that we are in danger of more conditions that...

Health Issues Women Should Watch Out For

While diseases such as cardiovascular conditions and diabetes are fairly common for people of all genders, women must take even more care...

Telehealth and Nursing – Promoting Good Health Together

Telehealth is a wonderful piece of technology that can provide numerous benefits, not only for patients but for doctors as well. Nurses,...

Understanding Medical Law – What is it About?

Medical law is a type of philosophy that is often misunderstood. Is a medical lawyer a doctor or a lawyer? What is...

Medicare and Telehealth – Are You Protected?

Medicare is the foundation of the Australian health care system. It is used to help covers for the cost of healthcare among...

Can I Sue My Doctor for Malpractice? What You Need to Know

The main reason for going to the doctor is to seek treatment for any condition that ails us, or at least to...

8 Types of Medical Doctors – What Do They Do?

A vast majority of us have a family doctor and, if we are lucky enough, they would be the only one tending...

Australian Health Care System: An Overview

Living in Australia certainly has some advantages, and access to good quality health care is definitely one of them. Australians enjoy one...

Medical Malpractice Demystified

What Is Medical Malpractice? Medical malpractice occurs when a doctor, a hospital, or a health care specialist hurt...

Top 5 Countries With The Best Healthcare System

Access to health care is a basic human right. Everyone deserves to have access to good health care, and many governments prioritize...