Physicians are in a unique situation when they own their practice. Not only are they consumed with patient care, but they are also the business owner in the private practice setting. Often, physicians do not have the time to devote to practice administration. There are three areas that I encourage all physicians to pay close attention to:
- Analyze financial statements
- Protect against fraud
- Tax planning
Financial statements for practices should be produced on a monthly or quarterly basis. This allows physicians to review the sources of revenue the practice is generating and monitor expenses. Having financial statements prepared in a comparative form will allow a practice to compare the current year’s activity with the results from the prior year. Some key areas to analyze include:
- Collections: Have collections improved on a year-over-year basis?
- Salaries: Are salaries and wages in line with other practices within your specialty?
- Supplies: Are medical supply costs rising on a year-over-year basis?
An outsourced accountant can help analyze practice activity and recommend improving operating results.
The medical practice must set up internal financial controls to segregate duties adequately. This will help minimize possible fraud. Medical practices are subject to fraud risks because of limited employees; typically, one employee handles most of the financial duties. Some items that can be instituted are:
- The employee who enters the bills for payment should not sign the checks.
- The employee who handles cash or check payments does not record the transaction in the accounting records or make the bank deposit.
- Deposit cash and checks daily.
At year-end, physicians should have a year-end tax plan prepared by an outside accountant to minimize income tax obligations. This includes determining the estimated taxable income of the practice and determining if any of the following actions may be necessary:
- Should an employee pension plan be funded for the current year?
- Should a bonus be paid to any employees and the physician?
- Should the practice acquire any needed office equipment?
If you own a medical practice, work on your business. Utilizing the expertise of outside consultants can give you the information you need to make decisions about your medical practice. Call (714) 569-1000 for more information.
