This post will outline the basic structure of how to track and manage basic finances in an independent doctor’s office. Proper financial management is high on the scale of professional satisfaction when done well, and also high on the stress scale when not done well. We’re not in the health care filed in order to earn money as a primary objective, but managing it well has to be. Future blog posts will address the details of actually billing and managing practice income; this one will focus on the basic setup necessary.
Tools
Many times a doctor will be working with an inherited set of financial management tools, or something just copied from a colleague or friend. Here is a description of the best set-up for your office and personal finances.
- Online banking. This is available from every large-scale commercial bank in the US. Most systems are free, fast, and can be accessed from mobile devices if that becomes advantageous. Enabling and using online services is actually more secure than using a paper system.
- Online bill pay. This takes a bit of time to set up, but is well worth the effort. This is faster, cheaper and more secure than using paper checks. You can still keep paper checks for occasional use when necessary. After you use online banking for a short period of time, your paper checks will become progressively obsolete.
- Payroll service. Using a payroll service will take a burdensome task off your plate at low cost. Doing 2 payrolls a month will typically cost in the range of about $60 for an average size office. Payroll companies will also file your payroll tax reports at the state and federal level, so this task goes away as well. In addition, the outsourced company takes responsibility for any reporting errors, so the risk of fines or interest on unpaid tax is no longer yours.
- Direct deposit. Using direct deposit from your payroll company will give you a faster and more secure way to pay your employees.
- Quickbooks. This program is extremely powerful and versatile. It should be used to track expenses primarily, because your practice management software is used to track income and accounts receivable. The essentials version is about $27/month, and the version with payroll (if you choose to do this yourself) is about $53/month. If you have never used quickbooks, it’s best to have your bookkeeper or CPA set the accounts up properly so your expenditures will go into the right place. Once it’s set, the program remembers previous payees, and these expenses will automatically give useful data about your financial health.
Many times, the doctor will not be directly involved in any of this, and will have handed the process over to someone else. The typical recipients are the spouse, or an outsourced professional. This is certainly viable, but not without costs and burdens. My recommendations are that the doctor at the very least is aware of all facets of the above items, and has a way to easily monitor what is going on. If not, it’s easy for small errors or problems to go undetected and to create much bigger issues further down the line.
Procedures
Having orderly procedures in place for routine financial transactions will decrease your stress and set the stage for higher profitability.
- Make nightly deposits of cash and checks. This is done most easily with a debit deposit-only card attached to the clinic checking account.
- Do payrolls semi-monthly, not biweekly. This will avoid the cash-crunching effect of having 2 months in the year with 3 payrolls. It will also avoid the effect of that third payroll coming on the last day of the month, with the other monthly bills due the following day.
- Have a time lag between the end of the payroll and the pay date. For most offices, the following scenario is easy to implement: There are 2 pay periods in the month. Pay period one goes from the 1st-15th, and the second goes from the 16th -31st. Pay period 1 pays on the 21st and pay period 2 pays on the 7th of the following month. This gives you time to gather payroll information and to process it without the fire drill of having to get the checks and reports out the next day. It also takes the cash pressure away rom the 1st and 15th of each month.
- Pay bills weekly, all at the same time. You can use a pending paper folder for paper bills, and an electronic version of the same thing on your desktop for electronic bills.
- Shred paper versions of bills you can retrieve from the vendor later if necessary. This decreases your filing burdens and decreases your risk of stolen information. You can always retrieve billing information from the power company (for example) should that become necessary at some point in the future.
- Pay vendor bills through credit rather than debit, assuming you can maintain a zero balance on your credit card monthly. If there is ever a dispute regarding what you purchased, you have some recourse through the credit agency, but you do not have any recourse if you used a debit card to pay it.
The more you can systematize this, the less dominant or intrusive it will be in your professional life. Think of it as necessary housekeeping: short and simple unless we are dealing with accumulations or backups.