Like all businesses, those in the medical sector need to keep on top of their finances. Whether you’re a doctor, nurse, or partner of a small private GP practice, it’s essential to make sure you’re keeping things running as smoothly and efficiently as possible when it comes to your accounts.
But, as expert accountants for medical professionals, we know that your sector faces unique challenges. That’s why we’ve put together this short guide to medical practice accounting, to help you stay on track.
What makes medical practice accounting different?
When you set up a private medical practice, or join one as a partner, you’ll probably be aware that there’s one thing your medical training didn’t teach you – how to own and run a business. As a healthcare professional, you might feel unprepared and overwhelmed at the prospect of managing your accounting and tax responsibilities – and it’s completely natural for you to feel that way.
There’s also the fact that, aside from business ownership being a world apart from your medical career, the way billing works in private healthcare makes things a little more complicated than other industries.
Because of the multiple parties involved in paying for private healthcare (like you, your patient, and their insurer), there are several moving parts, leaving greater room for error.
Mistakes can be made, patients can forget to pay, treatment might cost more than anticipated, and insurance companies can reject claims. That’s why having a robust, effective system for tracking and organising your accounts is absolutely essential.
What do your annual accounts need to include?
As a business owner, you have a legal responsibility to report your accounts to HMRC at the end of the financial year. Your accounts are a collection of all your annual financial data, and structuring them properly, in a way that makes sense and is easy to interpret, is important to get right from the start.
Here’s what you need to include:
- Balance sheet – an overall breakdown of your financial position when it comes to year-end (including anything you owe and any partners’ funds or capital accounts)
- A profit and loss statement (P&L) – you’ll need to categorise and account for all of your income and expenses (both NHS and non-NHS). Once you’ve got your final profit minus loss calculation, you’ll get an idea of how much you’ve got available for profit-share, and of how you’re doing compared to last year
- Distribution of net income – outlining exactly how you’ve divided up any profits between the partners
- Additional notes – it’s useful to provide a more detailed breakdown of some of the above, like things you’ve included on your balance sheet. If you’ve bought an expensive diagnostic tool, or reworked your surgery in any way, it’s worth providing context. If you’re not sure whether information is relevant, check with an accountant, who’ll be able to help
- Partner sign-off – if there’s more than one of you involved in running the practice, it’s important that you share accountability for your medical practice accounting. All partners should co-sign your document.
Making things run smoothly
Putting your medical practice accounts together might sound straightforward from the list above, but there are lots of factors to consider. Reporting as you go, keeping things organised and on track, and working to tight deadlines alongside the day job can easily become too much to handle.
There are some things you can do, though, to make this easier.
First, think about leveraging cloud-based accounting software. There are lots of options out there that’ll help you automate, record and track key financial data – whether it’s customer billing or upgrading your equipment.
A good practice management system can help you automate and access things like patient appointments, liaising with patients and insurers, recording treatment plans and prescriptions, and logging additional details.
Then, think about who the responsibility for your accounts ultimately sits with.
Will you appoint one key partner to do most of the work? If so, do you need to invest in some financial education by sitting down with an accountant to work through processes and best practice? Or, can you share the load and delegate some of the more manual tasks (like bookkeeping) to your admin team?
Get the expert advice you need – today
A well-organised set of medical practice accounts can ultimately help you build a better business. You’ll have a full understanding of your business’ position – which means you can plan ahead, adjust your operations, benchmark your performance against your competitors, and make savvy investment decisions when it comes to new hires or other major outlays.
Sometimes, it’s more cost-effective and efficient to get professionals involved. Chances are you didn’t go into medicine to spend your time poring over the books, but that’s what accountants are for.
If you’re interested in seeking help with your medical practice accounts, get in touch with the team at Harries Watkins Jones today.