As a physician, the main focus in your practice is on providing high-quality patient care. However, it still makes sense to pay careful attention to your medical practice’s accounting. While you are a doctor, you are also a business owner who strives to operate a profitable practice. Making sure that your practice is successful and highly profitable requires you to keep accurate financial records so that you can see areas where your practice might need tightening. It is also critical for ensuring that you remain compliant with the relevant state and federal tax laws. Here are four accounting tips from TMD Accounting to help you keep your medical practice financially healthy.

1. Be Careful When Choosing Your Accounting Software.

Many doctors are unsure which accounting software they should use for their medical malpractices. You might think that all accounting software is basically the same and to simply choose the cheapest software you can find. Some doctors rely on spreadsheets, believing they are cheaper and easier to use.

However, trying to keep track of everything on spreadsheets can mean that you are expending too much labor costs and effort, and it can also result in simple inputting errors. Spreadsheets can also make it difficult for you to review your financial information and make fully informed forecasts about your practice’s future.

Choosing the cheapest accounting software off the shelf might also not be the best idea. You need to find software that is relevant to medical practices. When you choose the right accounting software, it can reduce your need to expend added effort, provide you with a better insight into your practice’s profitability, make the tax season easier, and allow you to share information with your accountant via the cloud.

The best way to find the right software for your medical practice is to talk to your accountant and ask for suggestions. At TMD Accounting, we work with many different types of accounting software every day, and we can provide some suggestions about which one will work best for your business.

2. Choose the Right Accounting Method for Your Medical Practice.

As a medical practice, you can choose from one of two types of accounting methods for your business, including cash basis accounting or cash accrual accounting. In most cases, your practice manager, administrator, or accounting firm will pick the type of accounting that will work best for your medical practice.

No matter which type of accounting method your practice uses, it is critical that your manager has a deep level of understanding of how the chosen method works and the applicable financial terminology used while performing day-to-day operations.

Cash Basis Accounting Method for Medical Practices

If your medical practice uses the cash basis accounting method, you will account for expenses at the time that they are paid. Account receivables will be counted when you receive payments. Most physician-owned medical practices prefer the cash basis accounting method.

If you are using this method, you will receive your payment on a predetermined schedule after all of your practice’s expenses have been paid. It is important for your manager to also think about larger expenses, including your malpractice insurance. Since these types of expenses are normally paid each quarter, it is important for your manager not to distribute money that should be earmarked for these quarterly expenses.

Accrual Accounting Method for Medical Practices

If your practice uses the accrual accounting method, expenses will be accounted for as soon as you receive the bills instead of when they are paid. You will also account for your receivables at the time you send a bill to a patient instead of when you actually receive the payment.

Under this accounting method, your income will have already been accounted for at the time your patients pay their bills. Most medical practices do not use the accrual method because of its difficulty. However, the accrual method of accounting might provide a more accurate picture of the health of your practice at any point in time.

3. Schedule Profit and Loss Statements

One accounting tip that medical malpractices can borrow from how big businesses conduct accounting is to produce profit and loss statements on a quarterly basis. Depending on your medical practice’s size, your profit and loss statement can be fairly simple or quite complex.

Producing profit and loss statements can be an effective way for you to quickly check the overall financial health of your medical practice. Profit and loss statements help by validating your practice’s daily records, identifying discrepancies, and providing insight into your practice’s patient flow and where you might want to invest money in your business.

While profit and loss statements can be invaluable, most medical practices do not use them because of having fairly simple business models. However, producing profit and loss statements each quarter can provide you with important insight and can be a powerful tool to use for your practice.

4. Choose the Right Accountant for My Small Business

Many doctors who have their own medical practices are very busy and find accounting to be overwhelming and confusing. If your practice is very busy, your office manager might also have his or her hands full and feel overwhelmed by the practice’s accounting needs. Hiring the right accountant can help to simplify your practice’s accounting and ensure that you understand exactly where your practice is at financially and areas in which improvements can be made.

At TMD Accounting, we offer experienced small business accounting services for medical practices. When you work with us, you can focus on delivering the best level of care to your patients while we handle your accounting. Our accounting services are comprehensive and scalable, and we can customize your services to meet the particular needs of your medical practice. Some of the types of services we offer include accounting and bookkeeping for medical practices, tax preparation, medical practice controller services, and more. To learn more about how we can help with your accounting needs, contact us today to schedule a consultation at 1-856-228-2205.

As a doctor or other medical professional, you mainly focus on patient care. However, your medical practice is still a business, and you want it to be profitable. You can have a thriving practice with a solid business plan and the right bookkeeping system. Before you can do that, you need to keep your financial records in order. Here are a few ways that bookkeeping can help boost the profitability of your medical practice.

Bookkeeping Tips for Your Medical Office

You want to ensure that all of your books are up-to-date and accurate in your practice. If you are a solo practitioner, that can be stressful. There are a few ways to manage your books. First, you need to choose your accounting method. There are two types of accounting practices in the medical industry: accrual or cash basis accounting.

For the medical industry, accrual accounting is the most common form of bookkeeping. With this method, you count for all the expenses when you receive a bill. Along with that, you will note any receivables from your patients at the moment of billing. While using accrual accounting is common, it is not always the best practice.

Some medical practices use cash basis accounting. The method is similar to accrual accounting, but billables and receivables are logged when paid, not received. Many physicians and medical professionals prefer this type of accounting. With that, medical practices will have the most up-to-date view of their finances. There is a drawback. Cash basis accounting cannot help practices prepare for large quarterly expenses, such as malpractice insurance. If you are not careful, big expenses can sneak up in your practice.

Managing Your Practice’s Health

When you accurately manage your books, you can keep an eye on the health of your medical practice. If you want to know the pulse of your business, make sure to create a schedule for profit and loss statements. When you create these statements, you have an overview of your losses and gains. You can eliminate any discrepancies and decide where to invest your money with that information. While these statements are not required to operate a medical practice, they will provide you with some insights into your finances. That information can help you to improve your business.

Now that you know the basics of medical practice accounting, here are a few ways to improve your medical practice’s profitability.

Review Your Fee Structure

You want to take time to review your fee structure. Make sure that you are charging your patients the correct amount. It might be appropriate to bulk bill your patients in some situations, but you need to have strict criteria and policies for this type of billing. Reviewing your fees can ensure that your practice maintains a higher level of profitability.

Control Your Costs

Your medical practice is like any other business. When you manage your costs, you can improve your profitability ratios. Make sure to look at those areas of high expenses, such as rent and wages. While managing wages for a highly trained staff is difficult, you can find ways to reduce rental costs. In some cases, sublet those empty rooms to other practitioners. Not only can you mitigate rental fees, but you will provide better medical options for your patients.

Maintain an Efficient Patient Management System

Matching supply and demand can be a complicated process for your medical practice. You could be the best doctor in the area, but you will not earn income without any demand. For that reason, you need to find the right balance between these two factors. You will want to review your system for patient management. Take a look at your booking system. It might not be efficient at creating appointments. Untrained staff members can also lead to ineffective patient management. For example, they might not know which questions to ask to schedule appointments correctly. Along those same lines, you want to make sure you have medical assistants and nurses to help with patients.

Hire Professional Accounting or Bookkeeping Help

If you are extremely busy, you will want to have someone look at your books. Your primary focus should be on the patients. However, if you don’t spend time on your finances, your practice might not increase its profitability. You will want to work with a professional accountant or bookkeeper. These experts can give you the right advice about your business. Don’t forget that professional accounting services can save you time and money. Plus, you won’t have to deal with the headaches of straightening out your books.

When you have the best medical accounting management for your books, it can help to keep track of those day-to-day transactions. Along with that, the information becomes more valuable as you gain insights into your business. Once you have a clearer picture of your financial health, you can make those decisions that boost profitability.

It never hurts to speak with a professional who can help you take full control of your medical practice. When you partner with a professional accountant or bookkeeper, you will have more time to focus on patient care rather than struggling with the confusing business side of your practice.

Yes, your medical practice can be profitable, but you need the right system and a solid business plan in place. With some accounting and bookkeeping help, you can achieve those goals.

Let Us Help With Those Next Steps

Whether you are starting your own medical practice or need help with an established one, don’t forget about your bookkeeping. There are several areas where you can cut costs to boost profitability throughout your practice. Removing any inefficiencies can turn your medical practice into a successful business.

If you need small business accounting services, make sure to schedule a consultation with TMD Accounting. Thomas M. Ditullio Accounting has over 40 years of experience, and we can help with various services, including payroll, tax services, and financial management. Schedule an appointment by calling 856-228-2205.