Let me guess, of all the things required to run a successful medical practice I’d bet bookkeeping is not at the top of your “fun list.” We get it. It can be tedious, and it can require several hours each month depending on the size and complexity of your practice.
However, what if I told you that accurate bookkeeping forms a solid foundation for any financial-related decisions you’ll make in the future? It’s true. With accurate and consistent tracking of your practice’s financials, you’ll be poised to make better business decisions when it comes to making future investments, growing revenues, and managing expenses.
In this post, I want to share 5 of the most common bookkeeping mistakes that medical practice owners make, and how YOU can avoid them.
1) Mixing personal and business expenses
This sounds like the most basic advice of all, but it’s a common misstep. First, we need to say it. (However, it’s probably a non-issue with 99% reading this… we hope 😊). You MUST maintain a separate banking account for your practice. The last thing you want to be doing is sorting through hundreds of transactions and manually identifying business vs. personal expenses.
But it goes beyond this. As a business owner you must be very vigilant that no personal expenses are run through your business account.
In most cases, this is straight-forward. Payments toward office equipment and technology, for example, are clearly business expenses. However, what about that medical conference in Florida where you were joined by your family? We have two specific pieces of advice. First, your categorization of business vs. personal expenses must meet the “common sense” test – always do what’s right. Second, when in doubt ask your accountant! It’s just simply not worth the IRS headaches that a bad decision may create.
2) Not keeping ALL your receipts
Retaining receipts may seem a bit “old school” to you, but trust us, it is critical. Not retaining receipts (or misplacing them) will limit your ability to claim those expenses on your tax returns and will result in paying more taxes than is necessary.
Even receipts for small purchases are important. Not only do these small expenses add up over time, but these receipts also serve as important documentation should you ever find yourself subject to an IRS audit.
3) Not reconciling your accounts accurately (or timely)
Reconciling your medical practice’s books with your bank statement every month is one of the most basic (but important) accounting tasks. While it can sound complicated, bank account reconciliation is relatively straight-forward – going line-by-line to match items in your business account with your bank statement to ensure there are no discrepancies. Catching a mistake early makes fixing the issue MUCH easier.
The good news is that today’s cloud-based accounting systems make the monthly reconciliation process super easy. It reduces errors and it allows practice owners to get a real-time sense for cleared transactions and balances.
4) Improperly categorizing expenses
We see this quite often. If you have a spouse or an office manager handling your books, it’s likely he or she doesn’t have knowledge of formal bookkeeping practices. While they may be detail oriented and timely in their work, there is no substitute for knowledge.
Accurately tracking your practice’s income and expenses by using the correct categories ensures proper measurement of profitability. Also, knowing the varied tax treatments of each income and expense category can help you avoid common pitfalls and may even help reduce your taxable income.
5) Not hiring a professional!
There is a reason patients visit your office. You are a professional and have a deep understanding of medical treatments that will help what ails them. The same is true of a professional bookkeeper who specializes in the unique financial matters of practice owners. They are cognizant of the current tax regulations, and they will help provide clarity while avoiding unwanted IRS headaches! Bottom line, they allow you to focus on patient care and other aspects of your business.
The team at STAC Bizness Solutions is dedicated to provided top quality bookkeeping, payroll and advisory services to medical professionals within and outside of The Woodlands, TX area. If we can help you in any way, just call us at 844-424-9637.
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7 Key Financial Practices That Separate Thriving, Growing Practices From The Rest.
There’s no denying it. Creating a thriving practice is about much more than practicing medicine!
Topping the list of “other” priorities is your practice’s financial management. In this short guide, the experts at STAC Bizness Solutions outline 7 financial best practices that differentiate struggling practices from those which are highly profitable and experiencing healthy levels of growth.