Too often financial statements are over looked in managing a medical practice - a big mistake since financial statements should be used not only to file taxes, but also as a guide to uncover issues like lost revenue and extra costs.
Too often financial statements are over looked in managing a medical practice. Many small companies are not aware that they do not have adequate financials for guiding their business affairs or they are just not utilized to their full capabilities. Or they rely upon in-house staffers who are not fully aware of tax rules, how to treat transactions properly or, most importantly, how to advise the business owner.
The small business owner has an employee who inputs the data into their accounting program, but too many times does not have their trusted business advisor review the data, provide tax planning, have conversations related to business operations during the course of the year. The small business owner ends up waiting until after the year is over and then trying to fix things when it is too late to do so.
Many times the cost for this wait can result not only in over paying taxes, but also prevent planning because of ever-changing tax rules. Or even trying to understand why revenues are lower: is it related to less work, a change in coding, reduced reimbursements or is it something else? Is revenue lost in the coding process, or in follow-up to ensure that insurance companies do reimburse for all procedures and services performed?
What are some key things to know about financial statements? Knowing how to work with the numbers in a company's financial statements essential.
Financial statements are scorecards; they provide a measurement of performance over a period of time.
How do receivables look like compared to the prior year or the prior quarter? Even if not booked on a financial statement they should be monitored, but too many times they are never reviewed. How much revenue has been lost? Will your staff discuss this openly? When was the last time your staff brought the topic up to indicate that receivables were not collected, were improperly coded or that they failed to follow up?
What about comparing revenues by quarter, by year? Why are they up or down? Is the coding being done differently? What about your expenses? Rent is generally fixed, communication costs are generally the same, but what about supplies? Office supplies, staff wages?
Does your staff understand why these numbers are different? Can they provide analysis and feedback? In order to better manage a practice it is essential to ask these questions on a regular and ongoing basis.
There is a long laundry list of questions that an owner can and should seek out with a consultant. Having an ongoing year-round relationship with your advisor can result in huge savings, not only in taxes, but in operational efficiency of an office. It can allow for changes in the financial scorecard so it can be better related to managing the practice.
The financial statement should not only be used to file taxes, but they need to be used for managing the practice as a guide to uncover issues. Once lost, revenues can never be recaptured and costs incurred can never be reversed.
Mike C. Manoloff, PC, a Houston CPA firm, is a full-service accounting, tax planning, tax preparation, payroll and business advisory firm which includes doctors and physician groups, oral health and dentist, home health care, cost reporting and medical arts. We partner with you to identify the goals and objectives you have for your business and work with you to achieve those goals. Mike may be reached at (713) 774-7766 or at email@example.com.
Mike C. Manoloff, PC, is also a proud member of the National CPA Health Care Advisors Association. HCAA is a nationwide network of CPA firms devoted to serving the health care industry. Members provide proactive solutions to the accounting needs of physicians and physician groups. For more information contact the HCAA at firstname.lastname@example.org.