1. Chapter 21
Accounting Practices

2. Computerizing the Entire Facility

3. 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

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

5. 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

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

7. 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

8. 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

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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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)

26. 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

27. 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

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