The medical industry is characterized by regular payments from patients, reimbursements, payroll, supplies purchases, vendors, and general operating costs. If the practice doesn't have an established month-end bookkeeping procedure, minor issues will soon escalate to bigger problems such as misreporting and cash flow management. The month-end process enables the owner to know more about income, expenses, outstanding receivables, and performance of the practice financially.
For those practices without adequate accounting staff, outsourced bookkeeping services in the USA can offer assistance in monthly reconciliation, financial statements, accounts payable, and other bookkeeping procedures. Also, you may employ a virtual bookkeeper or bookkeeper for hire who maintains the books on your behalf.
Why Month-End Bookkeeping Matters for Medical Practices
Month-end bookkeeping is not just about closing a reporting period but is an excellent time to analyze financial transactions, correct mistakes, and ensure that financial records correctly show what happened during the month.
Multiple revenue and expenses sources are common among medical practices, which makes regular financial analysis especially beneficial for them.
Providing a Complete Financial Overview
An accurate month-end close provides practice owners with information about:
- How much revenue was entered
- What expenses were raised
- How much money the practice has in cash
- Who owes the practice money and how much
- What vendors' invoices were left unpaid
- If the financial performance follows expectations or not
Without proper bookkeeping, the decisions made by the owners would be based on old or incomplete data.
Correcting Small Mistakes before They Multiply
Some accounting mistakes can be more difficult to fix if they stay unnoticed for several months.
Regular monthly reconciliation could help identify duplicates, missing entries, misclassifications, and discrepancies between accounting records and real accounts.
The Medical Practice Month-End Bookkeeping Checklist
Consistent checklists will make the month end procedures easier to conduct. While there could be different month-end procedures in your practice, the following issues should be reviewed.
1. Verify all Bank Accounts
The first procedure to follow is to review your practice’s accounting records versus your bank statements.
The bookkeeper will have to ensure that the transactions recorded match the activity on each business bank account.
Checking Points of Bank Reconciliation
Check:
- Deposits
- Checks and e-payment
- Bank charges
- Transfers
- Outstanding items
- Unreconciled items
Any discrepancies should be investigated before closing the month.
2. Verify Credit Card and Payment Accounts
Medical practice may utilize business credit cards and e-payment accounts for various purchases including supplies, software, travel, equipment, and many other expenses.
These accounts also need to be verified.
Reasons to Verify Credit Cards
Credit card transactions may be recorded inaccurately, doubled, or assigned to incorrect categories of expense.
Review of statements versus accounting system will help to keep track of expenses and ensure reliability of your monthly financial reports.
3. Review Patient and Insurance Receivables
An essential component of accounting for medical practices is accounts receivable, because revenues might originate from patients or third parties.
Month-end procedures include reviewing the outstanding accounts receivable.
Review Outstanding Accounts
The practice needs to examine:
- Outstanding patient balances
- Insurance related accounts receivable
- Aging balances
- Issues with payment
- Significant outstanding amounts
It does not necessarily imply the bookkeeper is responsible for collection procedures. Proper reporting will provide additional data for the practice management about the amounts that still are outstanding.
4. Review and Record Revenues
Revenue must be analyzed in order to ensure proper accounting for month-end activities.
The practice may need to reconcile accounting and practice/billing management systems data.
Reconcile Billing Data and Accounting Information
As required, the bookkeeping team needs to investigate the discrepancies between accounting data and billing activity.
It may reveal the following issues:
- Missing entries of revenue
- Classifications
- Timeliness
- Unrecorded payments
- Duplicate entries
5. Review Accounts Payable
The accounts payable account includes the bills that the practice owes to pay.
End-of-the-month process includes a check-up on the outstanding vendor invoices.
Check Outstanding Vendor Invoices
It can include:
- Medical supplies invoices
- Rental fees
- Utility bills
- Software subscriptions
- Professional services
- Bills from equipment vendors
- Any operating expenses
Being on top of accounts payable will help to know more about the cash flow of the practice.
6. Check Payroll and Benefits
For many practices, the payroll expense can be the most significant one.
Bookkeeping at the end of the month includes checking the payroll-related accounts.
Verify Payroll Accounts
Payroll-related data to verify includes:
- Gross payroll
- Payroll costs for the employer
- Benefits
- Payroll liabilities
- Retirement contributions, if any
- Payroll payments
The goal here is to ensure payroll transactions are properly accounted for.
7. Check Medical Supplies and Other Operating Expenses
Medical practice buys medical supplies and other things that are necessary for its operations.
Those expenses need to be properly accounted for.
Watch for Unusual Expense Changes
Comparison of current expenses to prior month expenses will provide valuable insights into changes in expenses.
A spike in expenses in relation to supplies is an area that should be reviewed.
The spike may be related to increased patient volume, bulk buying, rising prices, or accounting classifications.
8. Review Fixed Assets and Equipment Purchases
The medical practice may incur purchases for equipment, technology, furniture, or any other assets.
It is important to take into account proper accounting treatment before classifying the purchase as an ordinary expense.
Maintain an Updated Asset Register
The practice's bookkeeping team needs to keep track of the practice's assets, including such details as:
- Date of purchase
- Cost of purchase
- Asset details
- Financing details
- Information about disposal, when it takes place
The practice will need to determine the proper depreciation and tax treatment with the help of its tax advisor.
9. Review Loans and Other Liabilities
The medical practice may have such liabilities as equipment financing, business loan, line of credit, etc.
At the end of the month, the practice needs to make sure that such liabilities are reviewed in its bookkeeping process.
Verify Loan Activity
Make sure that:
- Scheduled payments are recorded
- Principal and interest are categorised
- New financing was recorded
- Loan balances agree with available statements
Accurate liability records help ensure the balance sheet reflects the practice's financial position more reliably.
10. Review the Profit and Loss Statement
Once the primary bookkeeping tasks have been done, examine the profit and loss statement for the month.
This will assist practice owners in understanding income and expenses for the period.
Look for Significant Variance
Compare the current month against other periods or the practice budget as needed.
Look for variances in the following:
- Revenue
- Payroll
- Supplies
- Rent
- Technology costs
- Professional fees
- Major expense categories
Significant variance does not mean there is an issue. It simply means there is something that needs to be investigated.
When to Hire a Bookkeeper for a Medical Practice
Managing all these activities internally can become difficult as a practice grows. Understanding why hire a bookkeeper can help owners decide when additional support is necessary.
When Financial Tasks Take Too Much Time
There is no need for physicians and practice managers to devote a considerable amount of time each month toward reconciling accounts and sorting out transactions.
The role of a bookkeeper is to take care of all the recurring financial administration tasks.
When The Practice Has More Than One Provider/Location
As the number of providers/locations increases, there is also an increase in financial transactions and financial reporting becomes complex.
Professional bookkeeping assistance can ensure that everything remains consistent as the practice grows.
When There Is Delay In Financial Reports To Management
If the financial reports are delayed by several weeks, then the reports will lose their utility because by that time, decisions could have already been made.
A dedicated bookkeeping process can ensure a monthly closing process is established.
Consistent month-end bookkeeping process ensures better insights into the revenue, expenses, receivables, payables, cash flow, and overall financial performance of medical practices. Reconciliation, revenue review, payroll, expenses, asset management, and financial reporting can help to find errors or any unusual activity.
For those practices which lack the necessary internal resources, a virtual bookkeeper can be hired. Investing in a bookkeeper for hire from The Fino Partners can help maintain the monthly close process, while outsourced bookkeeping provides a flexible option for practices with changing accounting needs.
