Accounting as a Strong Foundation for your Medical Practice

Table of Contents

1. Introduction
2. The Boring Stuff
3. Digging Deep
4. The Steel and Glass
5. Next Steps

Introduction

The Burj Khalifa in Dubai stands as the world’s tallest building at 2,717 feet. But its true strength lies beneath the surface—192 concrete piles drilled 164 feet into the ground. Even in a calm, low-risk environment, that deep foundation is what allows it to stand tall.

In the same way, every successful medical practice needs a strong foundation. For most practices, that foundation is built on sound accounting.

When building a successful small business (like a medical practice), a strong foundation is essential. Today’s post will focus on some of the keyways in which a solid accounting system will help set a proper foundation for your practice.

Let’s first look beneath the surface at the boring stuff that keeps your practice stable.

The Boring Stuff

Just like concrete hidden beneath the surface of the earth, bank and credit card reconciliations are usually unseen and not thought of much, but if left undone, can lead to costly mistakes.

Reconciliations verify that every transaction—whether it’s a gas purchase, a supply order, or a patient refund—has been properly recorded in your books. Each month, your bank and/or credit card provider issues a statement detailing each transaction within an account. This statement is used to check the bank/credit card company records against the practice’s internal records.

If the monthly reconciliations are left undone, the business owner has fewer assurances that the financial reports are accurate or reliable.

Once the basics are in place, it’s time to dig deeper into compliance.

Digging Deep

An important fact to understand and keep in mind is that tax returns are legal documents. If a government entity (IRS, state, local, etc.) challenges a filed tax return, the business and business owner(s) have a legal issue. As such, financial compliance is of utmost importance.

Financial compliance starts with a very foundational task: proper categorization of all money coming into the business and all money going out of the business.

–   How do you record a loan on the company books?

–   What happens when an owner deposits some of their own cash into the practice bank account?

–   Is that life insurance policy premium payment a deductible expense? What about the group life insurance policy?

–   How do you record the purchase of sports tickets or other entertainment expenses?

–   Is there a difference between a meal purchased for a staff meeting and a dinner with a colleague?

If proper categorization of transactions is a low priority in a practice, compliance with IRS and/or state regulations can be impacted, potentially leading to tax or legal issues.

The Steel and Glass

A well-designed accounting system that incorporates consistent reconciliation and competent transaction categorization is the financial foundation needed to generate usable financial reports for the practice.

A skilled accountant can take the data and craft meaningful reports to help achieve financial understanding and equip the owner(s) with a tool to help plan and manage their practice.

Next Steps

Strong accounting doesn’t just keep you compliant, it helps you make confident, informed business decisions. Schedule a consultation today with DoctorsManagement to strengthen your practice’s financial foundation.

This article was drafted by Andrew Ashton, CPA, with editorial assistance from ChatGPT.

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