Physicians are in a unique situation when they own their own practice. Not only are consumed with patient care but in the private practice setting they are also the business owner. 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 outside accountant can help in analyze practice activity and make recommendations on how to improve operating results.
The medical practice needs to setup internal financial controls to have adequate segregation of duties. This will help minimize possible fraud. Medical practices are subject to fraud risks because of limited employees and 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?
Whether you own a medical practice or a manufacturing facility, take time to work on your business. Utilizing the expertise of outside consultants can give you the information that you need to make decisions about your medical practice. For more information call Greg Lewis at (714) 569-1000.