Accounting for medical practice: Accounting for Medical Practices: Tips and Best Practices Bench Accounting

Accounting for medical practice

As a result, it’s easy for new practice owners to make mistakes as they transition into business ownership. Fortunately, modern cloud-based software solutions can automate many of the most time-consuming aspects. That noticeably reduces the strain on your administrative staff with bookkeeping and accounting responsibilities.

Keeping up with accounting can be a struggle for many clinics, particularly when it comes to a single practice with multiple locations. Adopting cloud-based accounting apps can get your books back on the road to recovery. Whether you’re just opening your doors or have been in practice for over 30 years with multiple locations, there’s always an opportunity for improvement with accounting for medical practices.

Large health care organizations pretty much have to use either medical office accounting software or medical billing services (we’ll come back to that). The sheer volume of patients that walk through their doors makes simple Excel spreadsheets unmanageable. MPM might be up to the challenge, but to be on the safe side, you should definitely look into both billing modules of practice management and standalone medical practice accounting software. If practice management software already plays a critical role in your medical office, then medical accounting software is probably unnecessary. Practice management’s billing and coding functionalities include the most important accounting software features for health care organizations, including insurance claims management and cash flow monitoring. So if your practice already deploys practice management — or is looking to implement it — you don’t have to double up with medical office accounting software.

What are Medical Billing Services?

This process involves matching transactions recorded in your records to the information on your bank or credit card statement. If you see a charge for cotton swabs, for example, that you don’t recognize, or a payment for an outpatient procedure you didn’t expect, you can investigate and ensure it’s legitimate. When you started your medical practice, you likely took on far more responsibility than you imagined. Not only are you responsible for providing patient care, but you’re also the accountant, marketing manager, human resources manager, and more.

It’s also common for payers to have their own fee schedules, meaning accountants regularly face the complexity of keeping track of a huge web of different billings, receivables, and allowances. Patient care can be your main priority, but your medical practice is also a business. As a result, you need to take the time to review your financial statements and reports to draw conclusions that can inform your business decisions.

  • Once you’ve paid for medical billing training and the processing software, you’ll have a better return on your investment.
  • To make matters worse, the unique nature of the healthcare industry creates financial issues beyond what most business owners face.
  • Once the service receives your paperwork, the company will manage your claim submissions, tracking and basic data entry tasks.
  • When it comes to what providers actually charge these payers, transparency is a major concern and one in which accountants are often involved.

As a healthcare provider, you probably want to focus on serving your patients and spend as little time as possible worrying about the financial health of your business. An efficient accounting system is essential for doing so without harming your practice. Owning your own medical practice is an exciting prospect, but it comes with additional accounting responsibilities. While you’d probably prefer to focus on providing healthcare services to your patients, you can’t afford to ignore the business side of your operation. Another often-overlooked aspect of medical practice management is reconciling bank and credit card accounts.

Billing systems can come with a serious price tag, and cash flow bottlenecks can occur if you have a staff of only one or two billers. If one of your employees becomes sick, takes a vacation or quits, then you’ll be facing retraining expenses for a new employee as well as a potentially stalled billing department in the interim. First of all, let’s define what, precisely, medical practice accounting software is. Accounting is the least of medical students’ worries as they work their way to becoming full-fledged medical practitioners. Nevertheless, accounting remains a critical part of their life as these new doctors start up their own medical practices. A medical practice such as a clinic is no different from other businesses, and as such, a working knowledge of accounting is required if things are to run smoothly.

Make sure you investigate the different options to make an informed decision based on what option best equips you to care for your patients. When you opt for outsourcing, your staff will forward bills and other financial documents to a medical billing service provider. Once the service receives your paperwork, the company will manage your claim submissions, tracking and basic data entry tasks. Typically, you’ll pay a medical billing company a percentage of the amount that they collect. The cost for new equipment, technologies, invoices from suppliers, along with everyday expenses such as rent, communication, and utilities can lead to an inbox pile-up if you’re doing everything on paper.

However, it makes cash flow monitoring harder, so remember to track that separately. The cash basis of accounting involves recognizing revenues when you receive them and expenses when you pay them. Meanwhile, the accrual basis recognizes revenues when you earn them and expenses when you incur them. In addition to working with a skilled medical billing team to speed up collections, work with your accountant or bookkeeper to prepare cash flow forecasts. This will help you spot potential cash shortages before they happen so you can make a plan to trim expenses, ramp up collections, or tap a business line of credit. Unlike EHR and EMR software, it doesn’t track their medical histories, but rather their billing information.

Commingling business and personal expenses

Health care accounting software streamlines patient management tasks like patient accounts, collections and copays. Additionally, it handles back-office and billing functions such as accounts payable, accounts receivable and general ledger features. Medical office accounting software also helps manage the often complex workflow of processing claims with insurance providers and Medicare/Medicaid programs. It automates the process of importing data, checking it for accuracy (scrubbing) and generating reports based on the data for decision-makers to utilize. Charting software (EMR/EHR), medical billing software, patient scheduling software and medical practice management software all offer unique benefits to health care organizations of all sizes. Giving your patients the ability to schedule and pay at their convenience not only provides a valuable service, but can also help to improve overall cash flow by reducing no-shows and late payments.

Accounting for medical practice

This gives you a complete record for each patient’s billing histories, payment habits, insurance coverage level and type, etc. The record lets you send bills, request payments, create automated reminders and deliver collections letters if necessary. Notably, when hospitals receive payment from insurers, those funds are usually only a portion of the value of the services rendered, leaving the rest as receivable.

How Is Accounting For Medical Practices Different?

Both methods of accounting have their pros and cons and must be assessed on a case-by-case basis. However, if we go by the popular option, Bench highlights the cash-based accounting method to be popular among medical practices. Our Boca Raton, FL CPA firm is experienced in working with healthcare professionals like eye doctors, chiropractors, veterinarians, and others to handle their accounting and reduce their tax obligations.

The staff augmentation solution is the perfect mix of cost-efficiency and expertise that small businesses require. By leveraging EA’s staff augmentation solutions, medical practitioners can provide the best care to patients without taking any pain for accounting and finance requirements. The cash basis is easier to implement, but it generates financial statements that poorly represent a medical practice’s profitability. Doctors often provide services and go without the corresponding revenues for months, if they ever receive them at all. Medical practice accounting is different from accounting for other types of businesses. You don’t just need to account for patient payments—you also need to deal with insurance companies and government-backed programs like Medicare and Medicaid.

Before committing to any products, make sure you’ve chosen ones that can interface with each other seamlessly. Here are some best practices you can implement to optimize your accounting function and minimize the time you have to spend managing it. The many years you spent in medical school were highly effective at preparing you to assist your patients. Unfortunately, they probably didn’t do as good a job of teaching you how to be a business owner. Make sure you have a separate business bank account and business credit card for the practice, and keep all business and personal expenses separate. Whatever you can do to optimize your accounting from the start will pay dividends indefinitely, so be as diligent as much as possible from day one.

Accounting for medical practice

Billing software lets users identify and address administrative issues before it becomes a serious problem. Expertise Accelerated, led by veteran CPA Haroon Jafree is one such service provider. Cash accounting, on the other hand, only records revenue and expenses when the transaction has been finalized. It’s a simple, straightforward method, and it can be sufficient in certain industries with less complex accounting requirements. However, this method is normally not a good fit for health care facilities because payments can take months to be finalized – and sometimes, they may not ever be finalized.

Staying on top of accounts receivable is crucial for maintaining a healthy cash flow in your practice. If patients aren’t paying you for your services, you won’t have enough cash to pay employees, cover other expenses, and take home profits. Reviewing your balance sheet, income statement, and statement of cash flows each month can help you keep tabs on your current cash position, receivables, payables, liabilities, revenues, and expenses. The additional salaries and expenses for employee benefits are likely to increase your practice’s overhead.

As a result, healthcare professionals are often unprepared to manage their company’s accounting and tax responsibilities. To make matters worse, the unique nature of the healthcare industry creates financial issues beyond what most business owners face. Billing management can be a tough choice since service providers and in-house software both offer advantages and disadvantages. For instance, if you’re just getting started, it may make more financial sense to outsource. If your practice already has a billing system in place, a system upgrade may be all that you need.

Gusto gives business owners total control over the payroll process and all of the factors that come with staffing. Reduce the headache and countless hours filing payroll taxes, checking timecards, and managing employee benefits—Gusto does it all. Established in Jacksonville, Florida over 15 years ago, we have extensive experience helping medical practices like yours thrive.

The sheer complexity of medical practice accounting makes software essential for healthcare providers. It’s prohibitively difficult and time-consuming to keep track of everything by hand. If you choose accrual basis accounting, on the other hand, you recognize revenues when you earn them and expenses when you incur them—even if the payments haven’t come in or gone out yet. In other words, you record income on your books when you provide services to patients, regardless of when the insurance company or other third party pays your invoice.

Health Care Accounting Software: Does My Practice Need Better Medical Accounting?

The George Washington University’s online Healthcare MBA blends business and healthcare concepts in a rigorous and experiential program. The program provides traditional MBA core courses and specialized healthcare electives to help tailor the curriculum to your goals. However, providers like hospitals often end up with numerous outstanding checks due to recipients who have died or moved. In some states, funds from such uncollected checks must be turned over to the state government because of unclaimed property laws. Details in these reports may include cash flows, balance sheets, statements of operations, and changes in net assets. Tax-exempt hospitals are also required to itemize uncompensated community care benefits such as charity care.