As a Doctor, you may be able to do things like preparing invoices, meeting tax obligations, or managing cash flow, but accountants can do those things better. However, if you’re still a small business owner, you can do these things yourself.
Doctors with a larger sales volume will need an accounting agency to keep track of their finances. This can be a time-consuming task to do on your own, so it’s a good idea to use an accounting firm.
This article will tell you about the different options available to doctors and the associated costs.
What is accounting for medical practices?
Accounting is the process of recording and summarizing financial information to ensure a company is in a healthy financial position and follows accounting rules. This includes keeping track of expenses, preparing tax returns, and checking the accuracy of financial statements.
Small business owners have basic bookkeeping and accounting skills, but they don’t have the knowledge about financial concepts and practices needed to make good decisions. This can make it hard to figure out how to spend money and manage finances.
How to do accounting for medical businesses in 7 steps
We’ll walk you through each step to understand the basic accounting procedures to manage your finance properly.
Find the most suitable accounting software
It’s a tool to help you keep track of your business finances. This can include recording transactions, processing invoices and bills, making a chart of your business finances, and creating financial statements.
Studies have shown that businesses that use accounting software are usually more profitable and have more cash flow. It also helps reduce the time spent on accounting tasks by 34%.
We looked into what options would work best for doctors and found some things that might be helpful.
Record entries in your software
Your computer has a place where you can write down what you do on it. This is called a “record” or “log.” Every time you do something on your computer, your computer records a “record” of that activity.
When you get accounting software, you’ll need to record all of your business transactions and revenue. The software will then calculate your profit and prepare financial statements based on your input.
You’ll need to keep track of rent and salaries as recurring expenses to save time tracking the same amounts every month. You’ll also need to create invoices for each client to track revenue.
The accounting software displays a chart of your business’s financial status. This includes information about income and expenses.Screenshot from ZohoBooks’s dashboard
Record every transaction as soon as it’s done to ensure the accuracy of the records.
Record Cost Of Goods Sold (COGS)
COGS stands for “cost of goods sold.” It’s a metric used to calculate the total cost of the inventory that a company has sold, including both the original cost of the items and any additional costs (like shipping and handling) associated with selling them.
This information is important because it can give a more accurate picture of a company’s financial performance by taking into account the actual costs involved.
This includes the amount that was spent on the items when they were first bought, as well as any additional purchases that have been made since then.
Adding products and services to the accounting system will calculate your COGS based on the invoices you create.
Make a chart of accounts for proper bookkeeping
Making a chart of accounts is important for keeping track of the doctor’s finances. This chart will show how much money the doctors have spent on salaries, rent, and other costs, and it will show how much money the doctors have earned.
The chart of accounts in a doctor’s business would include accounts for money made from sales, what it costs to make the food, what the doctors spend on things like rent and salaries, what it owns (like ovens and machines), and how much money the doctors has left over.
When a business makes sales and spends money to buy things like supplies and pay people to help, that’s called the costs of doing business. Then, the business might have money left over (called profits) or might have to borrow money to cover those expenses.
After that, the business might have to give some of that money back to shareholders (called equity) or keep it all (called retained earnings).
Automate the accounting process to save time
Accounting process automation saves time by automating tasks that can be time-consuming, like reconciling accounts, paying salaries, and issuing invoices.
Automating the accounting process can help save businesses time each week. One example of an automation tool that can help is invoice processing software. This software can save businesses up to 50% of the time it would take to process invoices manually.
Hire an accountant
They can help you set up automated processes that will automatically take care of your business finances. An accountant can help you keep track of your finances, so you don’t have to pay any fines or penalties.
An accountant can help you keep your business finances accurate and organized. It’s a good idea to hire one if you don’t have time to do the work yourself.
Best accounting agencies for Doctors
Here are some good accounting firms you might want to consider.
1-800 Accounting Agency
1-800Accountant is an accounting agency based in New York. 1-800Accountant specializes in working with small businesses. It offers services starting from $0 to $375/month, which is quite affordable.
Accotax Accounting Agency
Accotax is an accounting agency based in London that works internationally with small businesses, partnerships, and other business types. Accotax’s pricing is perfect for startups and self-employed as it ranges from $265 to $600/month on average.
It has a 4.9-star rating on Google My Business, a 4.7-star rating on Facebook, and a 4.9-star rating on Trust Index.
Best 5 Accounting Tips For medical practices
1-Use accrual-based accounting to record transactions
2-Understand basic tax requirements
3-Keep your business bills
4-Reconcile your transactions
5-Create a business bank account
Use accrual-based accounting to record transactions
Accrual-based accounting means accounting for a business in a way that recognizes revenue and expenses when they actually happen, rather than when money is actually exchanged. This way, businesses can better track their financial performance over time.
Accounting that uses accrual-based principles helps businesses understand how much money they have earned, and how much they have spent, over time. This helps businesses plan in a more realistic way, knowing that they will likely have to pay for things like expenses sooner than they might have thought.
The auditing process ensures that a company’s financial reports are accurate and follow Generally Accepted Accounting Principles (GAAP). This helps ensure that the company’s operations are consistent with other businesses in the same industry.
Understand basic tax requirements
Once you have determined which forms need to be filed, be sure to consider any deductions or credits that could reduce the amount of taxes owed. Businesses use forms such as the 1120S and 990T to report their income and expenses.
There are many types of deductions that people can take on their taxes, such as mortgage interest payments, charitable donations, and medical expenses.
One type of deduction people often use is credits, which are like subsidies given to people in order to encourage them to spend money in certain areas. Some common credits people may use are child care costs, earned income credit, and student loan interest deductions.
Be sure to report all your income accurately, including wages from employers, self-employment earnings, dividends from investments, and any capital gains or losses from stocks or mutual funds.
It is important to remember all sources of taxable income when preparing your tax return, as underpayment penalties may be incurred if you are later audited by the IRS.
Each state has its own tax laws and filing deadlines, so be sure to consult those before April 17. Additionally, pay attention to any special tax rules that apply to your state.
Keep your business bills
Managing your bills can be a difficult task, but having a system in place will help you keep your business running smoothly.
One way to manage your finances is to set up an online payment system that allows you to pay bills quickly and easily. Melio is an excellent example of such a system.
These will help make sure payments are made on time, which can help avoid late fees or interest charges.
Your reminders can help you avoid missing payments, and automating your payments can save you time and money in the long run.
Reconcile your transactions
Reconciling helps you make sure that all the financial records in your accounting system are accurate and up-to-date. It also allows you to identify any discrepancies or errors, so someone can quickly rectify them before they become a problem down the line.
To reconcile a debt, you need to gather all relevant documents, including bank statements, invoices, and receipts. This will help minimize any discrepancies between what you owe and what you’ve actually spent on items.
The next step is to enter each transaction into the online banking feature, which will then download the transactions from the bank account. Next, the transactions should be verified against the associated paper trail documentation, such as invoices and receipts.
If something is not correct, there may be a discrepancy that needs to be investigated further.
Create a business bank account
As a business owner, setting up a business bank account is essential for managing your finances. Having an organized and separate bank account helps you keep track of income and expenses as well as ensure that you are properly paying taxes.
The company’s insurance policy protects it from financial liability if something goes wrong. Before starting a business bank account, it is important to consider the steps involved.
To start a business, you need to decide what type of entity your business will be: a sole proprietorship, partnership, or corporation. Once you know this, you need to research different banks to find the best one for your needs.
You’ll need to gather all the necessary documentation, such as articles of incorporation or DBA forms and proof of identity. Finally, you’ll need to make an initial deposit into the new accounts, so they can be activated immediately.
A dedicated banking solution for small businesses can be set up relatively quickly and does not require complex procedures. This will help ensure that all funds related to the business are tracked efficiently and avoid any potential legal issues down the line.
Accounting for doctors FAQ
How often should I review my books and financial records, so they stay accurate and up-to-date?
It’s always recommended that you review your financial records to stay accurate and up-to-date. Monthly reviews include financial statements, balance sheets, cash flow statements, and any other documents related to finances.
It’s also important to make sure all transactions have been properly recorded, so they appear accurately in reports like profit & loss statements or accounts receivable/payable summaries. If your business changes rapidly, you may need more frequent reviews to ensure that all aspects are up to par.
If there are large fluctuations in revenue from one month to the next (such as seasonality), it might be helpful to have weekly reviews in order to track changes over time more accurately. This way, you’ll know exactly what taxes you need to pay as part of running your doctors.
What taxes do I need to pay as part of running my doctors?
As a doctor, you will need to pay taxes such as sales tax, employer payroll tax, and more. It’s always a good idea to consult with an accountant who will be able to understand specific requirements depending on your state’s laws.
Regular bookkeeping monitoring helps businesses stay compliant with regulations and maintain track of their overall success metrics.