Healthcare Accounting: Common Mistakes Every Provider Needs to Know
Educate yourself with expert advice to know to protect your specialty medical practice and maximize profitability.
Healthcare accounting is complicated – but it’s something that you must get right to have a healthy practice! Any number of small mistakes can cause a tidal wave of issues throughout the business – whether it’s fraud, errors on cash vs accrual tracking, inaccurate tracking of incoming revenue, lack of understanding of customer acquisition costs, and more.
While the in’s and out’s of specialty practice accounting is not a focus of your training, there are a number of experts whose job is to help you make sense of this complex system of billing, regulations and compliance.
As part of the Growth-Driven Practice Series, we recently hosted a webinar with guest presenter Matt Garrett, founder of TGG Accounting. The goal of the webinar was to educate and help distill the down and dirty basics that can make or break your practice.
This was one of the most powerful presentations we’ve hosted through the series, and the full 30 min webinar could truly revolutionize how you think about your practice financial fundamentals.
Want to watch? Click here to view the webinar recording.
To bring you additional value, we summarized some of the key points in this article.
Tightening up your accounting practices increases profitability
Accounting shouldn’t be sorcery that happens in the back room of your practice. It’s a rule-based system, and those rules haven’t changed in over 500 years – but – some practices try to get creative with their accounting practices due to lack of understanding or lack of process.
“Creative accountants go to jail,” reminds Matt Garrett, entrepreneur and founder of TGG Accounting.
Matt has helped plenty of practices tighten up their accountability and increase profitability as a result. His message is clear: 100% accurate accounting is more achievable than you think and settling for anything less is a disservice to your business.
“If the average practice could increase their gross profit margin by 4.5%, it would translate to a 45% jump in profitability.”
That’s a slight edge that has a significant upside for your specialty practice.
Getting the full picture of what’s going on in your practice
Believe it or not, just one in 50 small businesses have 100% accurate accounting. If that statistic seems a little alarming to you, well—that’s because it is. The keys to long-term sustainability and growth lie in your accounting department’s ability to capture the full picture of what’s coming into and out of your practice in real time.
Better accounting begins with a shift in your mindset.
You must first believe that you can achieve 100% accuracy in your practice’s accounting, and then you must impress that belief upon your accounting department. Start by asking yourself the following questions:
- Does your practice have a documented, replicable process for accounting, or does all that vital information live inside the head of a single employee?
- Do you think about the triple bottom line or just the “bottom line”?
- What are the cost of goods in your business? Are these properly accounted for?
Many practices have just one accountant balancing their books. Let’s imagine that you approach this employee (let’s call him Jack) with a simple proposition:
“Hey Jack, Would you be willing to thoroughly document how you run all of my practice’s accounting procedures, complete with diagrams, arrows, and footnotes, in exchange for an extra two weeks of vacation time this year?”
If Jack says, “Sure thing, consider it done,” then you’ve taken a big step in increasing accountability within your practice. If Jack says no, or stumbles in his response, then either Jack doesn’t really know what he’s doing, or Jack is stealing from you.
42% of fraud occurs due to a lack of internal controls
When you treat your business’ accounting like most people treat IT and assume it’s over your head or “not your thing,” you leave yourself vulnerable. Not only that, but you leave money on the table, whether it’s because you don’t know it’s there, or there’s fraud going on somewhere in the business.
What can your accounting department do to collect payments sooner?
In today’s digital age, administrative processes should not be holding them up.
- Are you using outdated systems in your reporting?
- Are you waiting until the middle of this month to know how you did last month?
- Are the employees who help you with patients being counted in overhead?
These kinds of questions are part of what Matt calls “success by a thousand cuts''—the idea that small efforts to be more efficient can have major impacts. For example, if the average practice could increase their gross profit margin by 4.5%, it would translate to a 45% jump in profitability.
Want more tactical accounting advice?
This article is just a snippet of Matt’s thought-provoking presentation as part of our Growth-Driven Practice Series. To learn more about the accounting challenges that face practices like yours and some actionable tips that you can apply today, check out the webinar recording.
For more resources to grow your practice, browse the library of resources available through the Growth-Driven Practice Series.
Bonus: TGG Accounting is even offering a free medical practice financial review for webinar attendees. If your practice could use a second set of eyes on your books, contact us and we’ll get you in touch with their team for a complimentary review.