Written By: MB Group
Running your clinic or medical practice is one of the most fulfilling things you can do. You'll have the determination and clarity that you are doing your best to further our understanding of the human body and how we can increase our health and longevity.
Even with the best intentions, businesses must remain competitive in the economic landscape. To be able to focus on maintaining your business, your accounting and tax strategies need to be optimized to not only safeguard your profits but to be able to take care of your staff and patients.
Join us as we dive into the best practices that can benefit your medical clinic or practice and how you can understand and maximize your advantages.
Before diving into the best practices, it's essential to understand why accounting for your healthcare practice is important yet different from other businesses. Financial reporting, accurate record-keeping, and consistent analysis are critical for profitability and operational efficiency.
This is paramount to your practice as a physician. Just like you regularly check your patients' health, you must regularly check your company's financial health to assist everyone to the best of your ability.
Financial literacy and a healthy strategy can help much more than your bottom line; it can help you innovate in your field.
Once you've understood the importance of regularly tracking your revenue, expenses, and other accounting principles, you must lay a strong foundation. This foundation comes from your method, which you can select from two primary techniques.
This method has more to do with timing over your business practices. It is helpful to recognize revenue and expenses the moment they are incurred without trying to match them up.
In contrast, cash-based accounting aims to match revenue and expenses once they are in (or left) your business. This functional difference helps actualize your cash flow, as they are only recognized once expenses are paid or money has reached your hand.
You must consider revenue recognition preferences, tax implications, and practice size to choose the best one. Speaking to a professional is highly recommended.
Accepting payments in a medical practice is not like any other business. Your clinic thrives off reimbursements and insurance payouts. To safeguard and maintain a healthy cash flow, timely claim submissions are required; fully understanding your services' extent and how to get paid for them is paramount.
For example, streamlining operations and using medical billing software can help reduce the administrative burden on yourself and your staff. Staying current with regulatory, compliance and legal changes in the medical environment can help you maximize your revenue while using potential business expenses to your advantage.
Legal requirements and regulations by respective bodies and insurance agencies aren't just helpful for the going concern of your business. Still, it also helps you to conform to all rules and requirements.
The medical industry is heavily regulated, and rightfully so, which means that non-compliance can lead to reputational damage and hefty fines. This is why it is crucial to stay ahead of the curve and always inform yourself of any changes. Working with a licensed CPA well-versed in healthcare accounting can help give you the peace of mind that you are compliant.
A medical practice or clinic is rarely funded by one person, even if you can access liquid capital. Supplies, equipment, staff, and other expenses are required up-front, and the necessary equipment cannot always be purchased as needed. You may also have had to pay professional dues or licensing fees.
You will most likely have taken out debt or an equity partner to fund this investment. Proper accounting methods are critical to upholding your end of the deal. Interest payments, for example, need to be paid out regularly to avoid penalties — and the interest can often be written off as a business expense.
If you need to pay dividends to your equity partner, they will require substantial financial statements to see how the business is running and if they are making any profit.
Proper accounting practices are much needed before you file your taxes. If you rely on financial statements once a year, you're unclear about how much capital and resources you have available to grow your business throughout the year.
Establish a regular cadence to review your accounts receivable and expenses to maximize timely payment and collection, which can increase the amount of healthy and liquid cash flow available to you and your business.
Even the most fantastic physician, offering life-changing services, must wear the hat of a business owner occasionally. Regardless of how many hours you work in your business, you must still work on it to ensure its longevity and that you can continue to help your patients.
With proper accounting practices, tax hedging strategies, optimizing your cash flow, and knowing which expenses you can write off, you will make significant changes in the profitability of your business.
Working with a CPA is much more than just money-saving techniques. Our experienced team has helped medical and healthcare practices just like yours. We can help you maximize your tax and accounting strategies while giving you the peace of mind that you are in conformity.
Contact the MB Group today to learn how we can help you focus on your patients while we take care of the rest.
Tags: Physicians Business Accounting
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