Business accounting and bookkeeping involve a variety of financial reports. In each of them, you will find the information you need to develop an accurate and holistic picture of your organization’s financial health. In any small business, including your medical practice, data-driven decisions start with reliable data.
Every doctor completes years of training to become skilled in their field, but when it comes to the business of managing their practices, they often lack the same data-driven rigor. Here are five financial reports physicians should run every month to prepare for the next month’s activity.
Profit and loss
Profit and loss reports, also known as statements of operations, provide an overview of your practice’s performance. The frequency of P&L reporting varies, and monthly, quarterly, and annual statements are all necessary. P&L reports track sales trends and profit ratios over time. They help practitioners identify areas for improvement and determine if their current strategies are working effectively while offering information needed to make budgeting and operating decisions. P&L reports serve as a valuable tool for practitioners and are a key component of financial planning specifying the data needed to accurately measure success.
The P&L can be used to set goals and track progress. After completing the report, income is compared against expenses. These expenses include the cost of selling your products, administration expenses, taxes, interest on loans, marketing budgets, potential losses, and costs incurred to generate revenues. Business expense totals then are deducted from sales revenue to determine net income. These numbers can help shape your pricing, marketing efforts, and expenditures.
The P&L report is a helpful tool for comparing performance against competitors and industry averages. Based on this information, better strategies can be developed, and more informed decisions can be made. This helps companies boost their profits and gain a competitive edge.
P&L shows revenues generated during a specific period. It’s critical to collect and review the information monthly, as a single report is merely a snapshot of time. Continuous monitoring is invaluable if you want your practice to thrive for years to come.
Aged Accounts Receivable
The A/R report summarizes the potential revenue you can receive from payers and patients for the services you’ve provided. Any payment can be negatively affected or delayed, which is why physicians must review their A/R monthly.
Accounts receivable and accounts payable are integral parts of accounting, regardless of how big or small your business is. The balance sheet shows how your business performs based on the accounts receivables (A/R) and the accounts payable lists. If you neglect either side, your practice’s financial health and stability will be affected.
Days in A/R indicate how long it takes to collect a specific client’s account. The ideal number of days is 30 or less. 50 or more days is not a good number. Analyze the percentage of total A/R in each aging category. More than 10 to 15 percent of accounts with 120+ days indicate a problem.
Examine A/R by individual payers to determine if specific companies are slow to pay. Pinpoint the reasons by reviewing the explanation of benefits (EOB) for denial patterns like non-covered services, deductibles, ineligibility, or incorrect modifiers. You may need to adjust your operations or train your staff accordingly to minimize denials. Re-bill insurance companies for denied claims. Review the appeals process where needed and monitor accounts receivable monthly to ensure payments are received on time.
Write-offs or adjustments are detailed categories where staff post differences between your actual payment and standard fee. Contractual adjustments and multiple procedure discounts are among them. However, they also include adjustments for denials such as patient ineligibility or coding errors. In addition, they include A/R clean-up actions like bad debt and small balance adjustments.
Several pages should be included in this report and adjustments should be detailed. If your report contains broad categories such as “miscellaneous” or “insurance write-off,” that’s a problem. Vague-sounding categories and large dollar amounts often require more detailed adjustment categories.
Credit balances are financial liabilities. If they are accurate, you must pay them back to patients or insurers. Unchecked Credit Balance reports may result in owing a large payback amount that can put a strain on a practice’s financial health. These reports should be monitored monthly and researched, verified, and refunded. The goal is to keep your report as close to zero dollars as possible.
Patient Balance Trio Pack
In the past, patient revenue has been relatively small compared to insurance revenue. As a result, practices wouldn’t be devastated if collections fell. Patient financial responsibilities now represent real money and require renewed attention. Three reports can be used to assess patient receivables.
The largest balances should appear first in patient A/R, generated in descending balance order, not alphabetically. Ensure that the status of the top 10 accounts is updated every month. Utilize automated, recurring, payment-plan software to establish payment plans instead of simply sending statements and calling patients. Front-desk staff should always ask for past-due balances when patients come in for their appointment.
Payment plan status
Know which patients are current and which are falling behind. Staff members should be trained on how to deal with non-compliant patients and how to work with them to stay on track with scheduled payment arrangements.
Accounts that are recommended for collection or are bad debts
Unfortunately, some patients are unable to pay or refuse to pay. It is poor financial management and stressful for the staff to keep these accounts on the books for years. Prepare recommendations on which patient accounts should be sent to collections along with backup information. In case of bad debt, either approve a write-off or send them to collections, but they should not remain in receivables.
Your business’s financial health depends on these five monthly reports. Managing accurate accounting and bookkeeping can be challenging for business owners. In today’s busy climate, few business owners have the time, training, and expertise to prepare reports. Virtual OfficeWare Healthcare Solutions has the software and solutions — and we are ready to help. Our dedicated team will help you keep your finances in order so you can focus on reviewing the big picture to grow your practice.