US healthcare facilities require reliable financial reporting so that they can analyze their performance for the year and plan for the following year. The complexity of accounting in the healthcare sector may be attributed to patients' revenue, insurance payments, payroll, supplies, equipment, facilities, and regulations among others.
The end of the year serves as an ideal period during which practice owners will be able to reconcile their accounts, identify inconsistencies, analyze profitability, and prepare for various financial decisions. Using offshore healthcare accounting services, these facilities will be able to keep their accounts organized and receive timely financial reports.
Why Year-End Financial Reporting Matters for Healthcare Practices
Year-end accounting gives practice owners an insight into the financial condition of their businesses.
Understanding the Financial Performance of Your Practice
Through your financial statements, you can see if there is any growth in revenues, any changes in operating expenses, and any changes in profitability.
By analyzing this data, you can get an insight into what is working well for your business and what needs improvement.
Tax and Financial Planning
Having accurate data on the year-end will enable the tax professional to prepare your returns and find any planning opportunities.
Having organized financial statements will also help in preparing the budget for the next year.
Key Financial Reports to Review
Practice owners need to analyze several key financial statements before ending the year.
Profit & Loss Statement
The profit and loss statement is useful for gaining insight into revenue, expenses, and net income.
Practice owners should conduct a comparative analysis of the current-year data against prior years and try to find out why there have been notable changes in revenue, payroll, supplies, rent, technology, and other expense items.
Balance Sheet
The balance sheet reveals the assets, liabilities, and equity position of the practice on a yearly basis.
Practice owners should analyze such accounts as cash, accounts receivable, loans, equipment, credit cards, and others for the accuracy of reported balances.
Cash Flow Statement
Profitability does not necessarily mean the availability of cash in a business.
A cash flow statement can help practice owners see how money flowed through their business and whether operations produced enough cash to cover expenses, loan repayments, equipment purchases, and other expenses.
Review Healthcare Revenue Before Year-End
Revenue is a very critical area that requires careful scrutiny since the health care practices may collect revenue from patients, insurance companies, and government programs.
Reconcile Revenue and Accounts
The owners of healthcare practices must reconcile the revenue collected through the billing and practice management software with the accounts recorded in the accounting system.
These differences will require an investigation into whether they result from timing, posting errors, omitted transactions, among others.
Review Receivables Outstanding
It is necessary to review the receivables outstanding.
Using an aging report, one can easily find out which receivables are past due, slow-paying and those that require further consideration and proper accounting treatment.
Review Employee-Related Expense and Payroll
Payroll expense is normally one of the biggest expenses in any healthcare practice.
Verify Payroll Records
At year end, there is a need to check the wage expense, payroll taxes and all employee-related expenses.
In addition, payroll records have to be reconciled with a general ledger account.
Review Benefits and Payments to Contractors
There is a need for the owners of the health care practices to also review the payments to benefits and contractors.
Review Medical Supplies and Operating Expenses
There are considerable expenses incurred through healthcare practices in terms of medical supplies, office supplies, equipment maintenance, technological advances, and others.
Identify Unexpected Changes in Expense Items
Expense items such as major accounts should be compared with previous periods.
Any unexpected changes in the supply cost, software cost, utility cost, or administration expenses should be further investigated.
Check Vendor Account
Vendor bills need to be reconciled to ensure the proper recording of liabilities on the correct period.
This will ensure that expenses are not overlooked in the year-end financial statement.
Examine the Practice's Fixed Assets and Medical Equipment
Fixed assets and medical equipment are major investments of a practice.
Keep Up-to-Date Asset Listing
It is important that practice owners update their asset listing on medical equipment and other fixed assets prior to year end.
The listing of the assets helps ensure accurate reporting of the practice's assets in the balance sheet.
Determine Depreciation
Depreciation needs to be reviewed to ensure consistent accounting of applicable fixed assets.
Also, the accounting records should be reconciled with the practice's tax professional.
How Outsourced Accounting Services Can Support Healthcare Practices
Many practices do not need to build a large internal accounting department to maintain reliable financial reporting. Outsourced accounting services for healthcare can provide access to accounting professionals who understand the recurring financial needs of medical practices.
Reduce the Administrative Burden
Outsourced professionals will be able to manage day-to-day accounting, reconciliations, accounts payable, accounts receivable, and accounting statements.
This will give practice owners and healthcare professionals more time to focus on their patients and practice management.
Make Month-End and Year-End Easier
With consistent monthly accounting, year-end accounting becomes much simpler.
If there is regular reconciliation and review of financial statements during the year, it will leave very little to worry about at year-end closing.
Healthcare and Medical Accounting Services for Growing Practices
Increasingly sophisticated finance in growing practices may demand increasingly sophisticated accounting assistance due to the increased complexity of their financial affairs.
Support Multiple Providers/Locations
Those practices that have multiple providers/locations may find the need for separate monitoring of revenues, costs, and profit generation.
Healthcare and medical accounting services could assist in organizing such finances into distinct sections without compromising the ability to consolidate the reports.
Support Expansion/Investment Decisions
Financial reporting could enable the practice owners to know whether they have the financial strength to hire more people, buy more equipment, build more clinics, or diversify the scope of their services.
How to Prepare for a Stronger Financial Year Ahead
End-of-year reporting is not only about closing the books but also can assist owners of medical practices in preparing for next year.
Create a Realistic Budget
Base your revenue and expense expectations for next year on previous financial performance of your practice.
Realistic budgeting can assist you in measuring your performance and spotting problems earlier.
Identify Cost Saving Opportunities
Analyze regular expenses and see if there is anything excessive or inefficient.
Small savings in different expense areas can make a big difference for your bottom line.
Conduct Financial Reviews
Do not wait for the end of the year to evaluate your financial situation.
It makes sense to conduct monthly or quarterly financial reviews.
Choosing the Right Healthcare Accounting Partner
When a practice outsources its accounting function, the service provider needs to be aware of the financial dynamics of a healthcare business.
Search for Healthcare Accounting Expertise
A provider who has experience with medical practices will know about matters relating to payments from patients, payments from insurance companies, payroll, medical supplies and equipment, and accounting at the practice level.
Look at the Scope of Services Provided
Decide whether the provider offers bookkeeping, reconciliation, accounts payable, accounts receivable, financial reporting, payroll support, and year-end accounting services.
The correct scope will be one that will fit the needs of the practice.
Focus on Security and Communications Issues
It is important that accounting providers have security procedures and communications systems in place.
The year-end financial reporting helps healthcare practice owners to assess their business's financial status, address any accounting problems and plan for the new year. Going through income statements, receivables, payrolls, expenses, assets, liabilities and financial statements may be useful in assessing the practice performance.
For those practices that need extra help, healthcare accounting outsourcing with The Fino Partners can help you access the assistance of accountants without having a large finance department in-house. If there is a proper use of healthcare accounting services, practice owners can organize their financial records and devote themselves to patient treatment and business development.
