Master the Art of Bookkeeping for Your Health Practice: A Comprehensive Guide for New Health Professionals
As a new health professional, you've spent so much time in school obtaining your designation, but unfortunately, one of the most critical pieces to a successful practice is skipped–bookkeeping for health professionals! Proper financial management is crucial for the success and growth of any practice, but so many new health professionals avoid mastering it at the beginning of their careers. Don't wait until you've got multiple locations and staff; master the art of bookkeeping early to grow your practice faster!
This comprehensive guide will provide you with all the necessary tools and advice to master the art of bookkeeping for your new health or medical practice. We will cover essential bookkeeping practices, managing finances in multi-location practices, personal vs. business accounts, equipment tracking and depreciation, avoiding common accounting mistakes, and when to seek professional assistance.
Tyagi Group has helped hundreds of health professionals and clinic owners master bookkeeping and grow their practices. By the end of this post, you'll feel confident and prepared to make informed financial decisions to ensure the long-term success of your new health or medical practice.
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Short Summary
Embrace digital solutions, develop a tailored chart of accounts and utilize Electronic Practice Management Software to manage finances.
Embracing digital solutions such as Quickbooks to help with organizing your books digitally and storing data.
Prioritize bookkeeping, maintain healthy cash flow & consider professional assistance for financial success in healthcare practices.
Separate personal and business accounts to simplify bookkeeping & maximize tax deductions.
Essential Bookkeeping Practices for New Health Professionals
Bookkeeping provides real-time financial data, allowing you to understand your monthly spending, determine the profitability of your practice, and ensure you have enough funds to meet payroll, loan payments and other expenses. Well-documented records will help you make more informed business decisions and contribute to the financial health of your business.
This section will discuss three essential bookkeeping practices for new health professionals: embracing digital solutions, developing a tailored chart of accounts, and using electronic practice management software.
Embrace digital solutions and financial data
Adopting digital solutions for your bookkeeping needs has become increasingly essential because they save time, reduce errors, provide seamless information sharing with your accountant, and provide more accurate and up-to-date financial information. Some popular digital solutions our clients use include accounting software like Intuit QuickBooks and NetSuite.
By embracing digital solutions, you can streamline the process of recording financial transactions, generating reports, and managing your practice's finances, setting you up for success in the long run.
Develop a tailored chart of accounts
A tailored chart of accounts is essential to accurately categorize specific revenue, expenses, and liabilities and derive valuable insights from financial statements. This customized list of accounts is specific to your practice and industry, allowing for more accurate financial reporting and simplified tax filing.
To create a tailored chart of accounts, consider using consistent account numbers, creating accounts for each type of transaction, and using descriptive account names. By developing a tailored chart of accounts, you can better understand your practice's financial health and make better-informed decisions.
It is also essential that you separate your personal expenses from your business expenses, and using only your business bank accounts for all your business costs and revenue is recommended. Naturally, personal expenses should not fit into any chart of accounts categories.
Use Electronic Practice Management Software
Electronic Practice Management Software (EPM) can be a game-changer because it can help you identify data trends, facilitate more informed business decisions, and decrease the number of matters to be concerned about monthly, like invoicing and accounts receivable. Some popular EPM systems our clients use include Jane App, OWL and Practice Better, which can aid with scheduling, charting, invoicing, and billing.
Using EPM can help streamline the process of bank account reconciliation, which is critical for preventing and detecting fraud and errors. Integrating Electronic Practice Management Software into your practice can enhance efficiency, reduce errors, and stay on top of your financial health.
Managing Finances When Working at Multiple Locations
Many new health professionals work in multiple clinics, which can present unique challenges, such as ensuring consistency in financial reporting across all locations, managing cash flow and expenses for each location, and addressing differences in tax laws and regulations across different locations. To effectively navigate these challenges, it is essential to centralize your financial management.
This section will discuss this strategy in detail to help you streamline your finances when working in multiple clinics.
Centralize financial management across multiple health & medical practices.
Centralizing financial management involves establishing a unified system to manage all financial transactions across all of the locations in which you are working. This system should accurately track income, expenses, and taxes and generate reports to evaluate each location's financial performance. It should also help you understand the profitability of your practice at each location and help you make informed decisions about which clinic you should focus on.
Centralizing financial management can streamline processes, decrease expenses, and provide an accurate overview of your financial standing. By centralizing financial management, you can effectively monitor and manage the finances of your multi-location practice.
Personal vs. Business Accounts: Why Separation Matters
Differentiating between personal and business accounts is crucial for clearly understanding your financial standing, streamlining accounting and bookkeeping, and providing legal protection while limiting personal liability. It also simplifies tax returns and audits and enhances the credibility of your practice.
This section will discuss the importance of separating personal and business accounts with two strategies: simplifying bookkeeping and maximizing tax deductions.
Simplify bookkeeping
By separating personal and business accounts, you can simplify bookkeeping and make maintaining accurate records of all income and expenses easier. This saves you time and effort and ensures that your financial data is accurate and up-to-date.
Accounting software, such as Intuit QuickBooks, can streamline this process and help you automate tasks like expense tracking, invoice generation, and financial report creation. Quickbooks also seamlessly integrates into many EPMs. By prioritizing bookkeeping with the right tools, you can make better-informed decisions.
Maximize tax deductions
You know the importance of maximizing tax deductions, but many new health professionals skip investing in professional accounting services for their tax returns and miss out on massive tax opportunities. By separating your personal and business accounts, you've taken the first step to saving more on your tax return, but we always recommend working with an industry-specific accounting service to ensure you get all deductions and credits.
By maximizing tax deductions, you can effectively reduce your practice's tax liability and keep more of your hard-earned money.
Equipment Tracking and Depreciation
You'll likely need to purchase equipment for your new business, which may include a massage table, a tablet or computer, or even a massage gun. Proper equipment tracking and depreciation management can ensure accurate cost reporting and help you monitor the depreciation value of all equipment annually.
In this section, we will discuss the importance of equipment tracking and depreciation and two strategies to achieve this: understanding depreciation methods and monitoring asset values.
Understand depreciation methods
Depreciation is the gradual decrease in the value of an asset over time. By understanding various depreciation methods, such as straight-line, double declining balance, units of production, and sum of years digits, you can choose the right method for your practice and accurately calculate depreciation for your equipment.
This ensures that your financial statements accurately reflect the value of your assets.
Monitor asset values
Monitoring asset values involves keeping a close eye on your equipment's and other assets' value over time. This can help you identify any potential issues with the asset and make informed decisions about maintenance, replacements, future investments and how many years the equipment is expected to last.
To effectively monitor asset values, it is essential to define your assets, track their performance over time against industry standards, and calculate depreciation accurately and consistently. By regularly monitoring asset values, you can ensure the financial health of your medical practice and make smart decisions about your assets.
Avoiding Common Accounting Mistakes in the Health and Wellness Industry
Even the most dedicated healthcare professionals can fall victim to common accounting mistakes that can jeopardize the financial health of their practice. This section will discuss two common accounting mistakes in the healthcare industry—neglecting bookkeeping and failing to maintain healthy cash flow—and provide strategies to avoid them.
By addressing these issues, you can ensure your medical practice's long-term financial stability and success.
Prioritize bookkeeping
One common accounting mistake in the healthcare industry is neglecting bookkeeping. It's easy to focus on patient care and leave bookkeeping on the back burner. However, this can lead to inaccurate books and excessive expenditures. When bookkeeping is non-existent or disorganized, it can lead to underclaiming or overclaiming tax expenses, which result in higher tax liability. All of these can cause a lot of financial stress.
To avoid this, prioritize bookkeeping by establishing an efficient and accurate accounting system, including setting up a chart of accounts, tracking expenses, and reconciling accounts. Regularly review your financial reports to verify their accuracy, detect inconsistencies, and make necessary adjustments.
Outsourced bookkeeping
If you can't consistently tackle this task, it may be time for outsourced bookkeeping. An accounting professional can provide business advice, help you track revenues, ensure you have enough cash, and assist with tax planning. The cost of bookkeeping services and accounting support can be well worth the investment if it supports your ability to remain tax-compliant and grow your practice.
By prioritizing bookkeeping, whether it's done by you or outsourced, you can ensure the financial security of your new small business.
Maintain healthy cash flow
Another common accounting mistake in the healthcare industry is failing to maintain a healthy cash flow. To avoid this, closely monitor your cash flow by keeping track of income and expenses, understanding cash flow cycles and trends, and developing a business budget.
Additionally, create cash flow projections regularly by forecasting cash flow, analyzing trends, and understanding the impact of market changes. Lastly, recognize issues promptly by tracking cash flow, assessing the financial status of your practice, and taking proactive measures to address potential problems.
By maintaining a healthy cash flow, you can ensure the long-term financial stability of your medical practice.
Professional Assistance: When to Seek Help For Your Health or Medical Practice
As your business grows, you may need help managing all aspects of your finances on your own. In such cases, seeking professional assistance can be invaluable in ensuring the growth of your practice.
In this section, we will discuss the different types of assistance we recommend, including online courses, hiring a Certified Professional Accountant (CPA) and options for bookkeeping.
Online Financial Education
There are many online education options to help you not only master your bookkeeping but also set up your new health business for long-term financial success. We recommend choosing educational programs with the following considerations:
Developed by a professional accountant or CPA to ensure the most credible and up-to-date information.
Industry-specific education to help you avoid common mistakes, maximize deductions and learn from others in the health and wellness industry.
Support is included so you can ask questions and speak with a professional.
Templates and worksheets are available to help you get started faster and ensure you're doing things right.
With those considerations in mind, you can choose an online educational program best suited to your unique needs. A great example of an online course for new health professionals to master their business finances is Tyagi Group's Business Foundations: The Online Course For New Health Professionals. Explore it now!
Benefits of hiring a CPA
Hiring a CPA can provide numerous benefits, including ensuring compliance with tax regulations, optimizing tax advantages, and offering impartial financial advice. CPAs can also handle complex tasks and possess specialized expertise, which can be invaluable in navigating the unique financial challenges healthcare professionals face.
CPA vs. Online Course
Compared to an online course like Business Foundations, a CPA is a higher investment and may not be necessary when starting your health business. If you need help deciding whether to start with an online course or hire a CPA, book a free call with our expert team, and we'll help you understand the pros and cons of each so you can make an informed decision. Our calls are no-pressure opportunities to learn and make smart financial decisions. Book Now!
Bookkeeping Options
Outsourcing bookkeeping services can be a cost-effective alternative to hiring in-house staff. It can help you focus on your core operations while ensuring accurate and up-to-date financial data for your practice. When starting your health business, it may be more cost-effective to begin doing bookkeeping yourself to understand your business finances and cut unnecessary expenses.
Tyagi Group offers bookkeeping education and templates in Business Foundations and provides professional bookkeeping services when you are ready to outsource.
The Power of Bookkeeping for Health Professionals
Mastering the art of bookkeeping is essential for ensuring long-term financial health and success. By implementing these essential bookkeeping practices, you can confidently navigate financial challenges as a new health professional and focus on providing the best possible care for your patients.
Remember, the financial health of your business is just as important as the health of your patients. By taking the time to understand and implement these bookkeeping strategies, you can ensure a bright and profitable future for your business. Now, it's time to take control of your finances and make informed decisions that will lead your practice to success.
Frequently Asked Questions
What is the purpose of bookkeeping in healthcare organizations?
The purpose of bookkeeping in healthcare organizations is to ensure accurate tracking of financial records, prepare balance sheets and income statements, analyze ledgers, provide tax advice and essential financial guidance, and create a clearer understanding of where money is going.
This allows organizations to manage their budget effectively, stay compliant with taxation regulations, and make informed decisions about the future.
How do I get bookkeeping skills?
To get bookkeeping skills, you can take an online course like Business Foundations to improve your knowledge and skills. With the right training and skills, you can become proficient at bookkeeping for your business.
What should be included in bookkeeping?
Bookkeeping involves keeping accurate and organized records of financial activities. This includes creating balance sheets, invoices, cash flow statements, income statements, accounts receivable reports, and other financial documents.
