Chapter 21 Accounting Practices

Computerizing the Entire Facility

Bookkeeping and Accounting Systems Financial records should show the following at all times: Amount earned in a given period Amount collected in a given period Amount owed in a given period Where expenses were incurred in a given period

Bookkeeping and Accounting Systems Single-entry System Daily journal or log Patients’ statements Ledgers Checks Disbursement records Advantages and disadvantages

Bookkeeping and Accounting Systems Pegboard System “Write-it-once” system Payments, charges, collections, identified on NCR forms layered over pegs on a board Many use charge slip or encounter form Advantages and disadvantages

Bookkeeping and Accounting Systems Double-entry Two aspects involved in every transaction Assets equal liabilities plus owner’s equity Advantages and disadvantages

Bookkeeping and Accounting Systems Total Practice Management System (TPMS) Computerized systems Patient data and scheduling EMRs and EHRs Insurance coding and billing; processing claims electronically Figure 21-1

Bookkeeping and Accounting Systems Total Practice Management System (TPMS) Computerized systems Management and human resources; payroll, purchases, personnel records Bookkeeping and accounting; generation of financial records including business income and expenses

Bookkeeping and Accounting Systems Total Practice Management System (TPMS) Purchased from medical software companies or built to clinic specifications Advantages and disadvantages

Bookkeeping and Accounting Systems Computer and Billing Service Bureaus Through office’s own computer terminal, office is tied directly to bureau’s mainframe computer Through online servicing, where office has its own terminal

Bookkeeping and Accounting Systems Computer and Billing Service Bureaus Through off-line batch processing Negotiate and sign a contract to protect privacy and confidentiality of patients in any service bureau arrangement

Day-end Summary Gives a quick analysis of end-of-the-day financial status Identifies all financial transactions Provides month-to-date totals Identifies year-to-date accounts May include a deposit slip for day’s bank deposits

Day-end Summary Tips for finding errors Check addition of all columns, horizontally and vertically Compute the difference in totals that are out of balance Search day sheet and patient accounts for that amount If the error is divisible by 9, there may be an error in transposition of number

Day-end Summary Tips for finding errors If the error is divisible by 2, the amount may have been posted in the wrong column Check to make certain correct amounts were carried forward Errors in electronic system are caught earlier, but any input error will cause errors throughout the financial record

Accounts Receivable Trial Balance Prepared prior to creating monthly statements Will indicate any problem between daily journal and ledger (Procedures 21-1 and 21-2)

Accounts Payable Promise to pay for supplies, property, merchandise, or service bought on credit Most common liability in a physician’s office Invoices will indicate charge; check against the order

Accounts Payable Note in tickler reminder so payment is made to receive any discount Prepare check and write check number on invoice indicating date paid

Disbursement Records Track disbursements and post to appropriate accounts Computer system does this automatically Pegboard system requires manual entries Computer system will have a check-writing file for writing checks Pegboard system will have a check register that records all checks written

The Accounting Function Financial accounting provides information for external entities Managerial accounting generates financial information to help managers do their jobs Cost accounting determines cost of running facility

Cost Analysis Determines cost of each service Fixed costs do not vary in total as number of patients vary Variable costs vary in direct proportion to patient volume

Financial Records Income statement Balance sheet Itemized statement of assets, liabilities, and owner’s equity Provides information regarding status of basic accounting elements Double-entry system with debit and credit entries Total dollar amount of debit entries must equal total dollar amount of credit entries Figure 21-1

Useful Financial Data Accounts receivable ratio Measures speed at which outstanding accounts are paid Goal of collecting policy should be turnaround time of two months or less Formula: Total Accounts Receivable Divided by Monthly Receipts = Turnaround Time

Useful Financial Data Collection ratio Shows percentage of outstanding debt collected Goal should be 90 percent collection ratio Formula: Total Receipts Divided by Total Charges; Receipts must include any adjustments

Useful Financial Data Cost ratio Shows cost of procedure or service Can help determine cost effectiveness Formula: Total Expenses Divided by Total Number of Procedures for One Month

Legal and Ethical Guidelines Embezzlement can occur even when using very careful hiring practices Accountant and managing provider should make regular and irregular audits of accounting practices Separate duties among employees so that no one person has total control over all financial transactions Only one person should use the signature stamp; or do not use one at all Bank signature card includes the name(s) of those authorized to sign checks (the fewer the better)

Legal and Ethical Guidelines Bonding Fidelity bonds reimburse the practice for any monetary loss caused by practice employees; there are three types Position schedule bond covers the position Blanket-position bond covers all employees Personal bond covers specific individual by name

Legal and Ethical Guidelines Bonding Protects providers, the practice, and employees should there be a problem with finances during their shift Cost depends upon risk, but is well worth the protection

Legal and Ethical Guidelines Payroll W-4 form Salary calculations Withholding taxes Social Security calculations Utilization review