Bookkeeper for Your Medical Practice: Essential for Financial Health
A specialized bookkeeper is essential if you’re managing a medical practice. A bookkeeper for your medical practice handles the daily finances, ensuring accuracy and efficiency so you can focus on patient care. Let’s explain why a dedicated bookkeeper is crucial alongside a CPA for your practice’s success.
Let’s dive into the distinct roles each plays and why having both is critical for your practice’s success.
The Role of a CPA in a Medical Practice
A CPA is a strategic financial expert. They’re your go-to for high-level planning, tax preparation, and compliance with the ever-complicated landscape of business regulations in healthcare. When you’re setting up your practice, a CPA can help you:
- Review your business plan and financial projections.
- Navigate the specifics of medical reimbursements and insurance.
- Set up a budget for your first year, which is especially crucial during those challenging first few months.
A CPA with experience in the medical field is invaluable. They’ll understand the challenges of cash flow in healthcare, particularly with reimbursements from insurance providers and the complexities of patient billing. Plus, they’ll be familiar with the deductible season — when patients’ deductibles reset, affecting your revenue cycle.
Why You Need a Bookkeeper for Your Medical Practice
Now, let’s talk about the bookkeeper. They’re the ones in the trenches, managing your day-to-day finances. A bookkeeper ensures that everything is organized, accurate, and up-to-date. Here’s what a bookkeeper for a medical practice typically handles:
Accounts Receivable and Payable
They’ll manage payments coming in and bills going out, ensuring that your QuickBooks (or whatever software you use) is up-to-date and reflects every transaction. This includes everything from office supplies to patient co-pays.
Reconciliation and Reporting
Your bookkeeper will reconcile your bank statements monthly, comparing what’s been received and what’s gone out to ensure everything matches up. This might sound tedious, but it’s vital for spotting discrepancies and keeping your finances accurate.
Insurance Payments Verification
Here’s a task unique to medical bookkeeping: verifying insurance payments. Insurers like Blue Cross or Aetna will send electronic fund transfers (EFTs) or checks for claims, and it’s your bookkeeper’s job to confirm that these payments match up with expected reimbursements. They’ll work with your billing staff to check that what was billed gets paid.
Why You Shouldn’t Use Just Any Bookkeeper
Choosing a bookkeeper with experience in the medical field is critical. Here’s why:
- Medical Billing Nuances
- They need to understand the ins and outs of medical billing, including explanations of benefits (EOBs), patient balances, and insurance adjustments. This is complex territory, and if they’re unfamiliar with it, things can slip through the cracks.
- Collaboration with Your CPA
- An excellent medical practice bookkeeper will work closely with your CPA, setting up your chart of accounts correctly and ensuring all financial records are ready for tax season. The CPA will provide guidance on tax deadlines and state-specific business requirements, but the bookkeeper handles the day-to-day details.
How a Bookkeeper Works with Your Billing Staff
Your bookkeeper collaborates with billing staff in a medical office to ensure the finances are in order. Here’s what this looks like:
- Tracking Patient Payments
- The bookkeeper works with the front desk to track all patient payments, from co-pays to patient balances. They ensure the correct amounts are collected, documented, and accounted for, ensuring your practice collects every dollar it’s owed.
- Monitoring EFTs and Insurance Deposits
- Whether an EFT or a paper check, the bookkeeper monitors your bank account to verify that every expected insurance payment arrives. If there’s a discrepancy, they’ll follow up to resolve it promptly. This level of oversight prevents revenue leakage and keeps your practice financially healthy.
The Financial Health Team: CPA vs. Bookkeeper
Think of the CPA and bookkeeper as the doctors of your practice’s financial health. The CPA is like a specialist, examining the financial condition and offering long-term treatment plans. On the other hand, the bookkeeper is more like the primary care physician — they’re there day in and day out, keeping an eye on the pulse of your finances, making sure everything functions smoothly.
When both work together, you get:
- Big-picture financial strategy (from the CPA).
- Daily financial accuracy and accountability (from the bookkeeper).
This partnership ensures your medical practice runs smoothly and is prepared for every financial season, from deductible resets to tax time.
Setting Up for Success Before You Open Your Doors
Here’s a pro tip: involve your bookkeeper before you open your practice. Why? Setting up a chart of accounts, tracking early expenses, and keeping receipts organized from day one can save you many headaches later. Without this, you may find yourself buried in receipts and scrambling to catch up on bookkeeping — not ideal when focusing on patient care.
If you can keep accurate records from the start, your CPA will have everything they need for tax filings and strategic planning. Plus, you’ll have a clear view of how your spending is tracking against your budget.
Essential Bookkeeping Software for Medical Practices
So, you’re convinced that a bookkeeper for your medical practice is a must. Great! Now, let’s talk tools. A reliable bookkeeping system is essential for organizing all those moving financial parts — from insurance reimbursements to patient co-pays and vendor invoices. And yes, the software you choose can make or break the efficiency of your practice’s finances.
Why QuickBooks is a Popular Choice (and When It’s Not Enough)
For many medical practices, QuickBooks is the go-to choice. It’s user-friendly, widely supported, and packed with features that can help streamline your financial tracking. However, there are a few things to keep in mind:
Ease of Use
QuickBooks is popular because it’s intuitive and accessible, even for those without a background in accounting. Your bookkeeper can use it to track daily transactions, handle payroll, and manage accounts payable and receivable.
Integration with Other Systems
QuickBooks offers integrations with many medical billing software solutions. This is key, as it allows data to flow seamlessly from your billing platform into your bookkeeping system, reducing errors and saving time. But note: not all integrations are created equal. If your practice relies heavily on specialized software, make sure it “plays nice” with QuickBooks or whatever accounting software you choose.
Limitations for Medical-Specific Needs
While QuickBooks is a solid choice, it may only cover some of the needs of a medical practice. For instance, it doesn’t natively handle EOBs (Explanation of Benefits), which means your bookkeeper may need to check insurance payments against expected reimbursements manually. If this sounds too time-consuming, explore options designed specifically for healthcare.
Other Bookkeeping Tools Tailored for Medical Practices
If QuickBooks feels limiting, consider other software options catering to healthcare’s unique demands. Here are a few worth exploring:
Xero
Xero offers functionality similar to QuickBooks but is often preferred by bookkeepers because of its flexible reporting and user-friendly dashboard. Like QuickBooks, it has an extensive library of integrations, but it’s also known for its real-time financial reporting — perfect if you want to keep a close eye on cash flow and profitability.
Kareo
Kareo isn’t just an accounting solution; it’s an all-in-one practice management software. It includes billing and EHR (Electronic Health Records) features alongside bookkeeping. This can be a huge benefit if you want a single platform that connects your bookkeeping to your clinical and billing operations. However, it’s generally more expensive than traditional bookkeeping tools, so you’ll want to weigh the cost against the benefits.
TherapyNotes
TherapyNotes is another medical-specific solution that combines practice management and accounting tools. It’s especially popular among mental health providers, but it’s suitable for various medical practices. TherapyNotes offers billing and revenue management tools, making it easier to handle insurance claims and track payments all in one place.
Bench
Bench is a bookkeeping service that combines human bookkeepers with software to handle your financials. While not specifically tailored for medical practices, Bench provides a dedicated bookkeeper to work with you, which could be a great option if you want an all-in-one service without managing software. Remember that you’ll need to check with them to see if they’re experienced in handling medical-specific financial needs.
How Your Bookkeeper Can Use These Tools for Medical Practice Finances
With the right software in place, your bookkeeper for medical practice can operate much more efficiently, allowing them to focus on the tasks that matter. Here’s how they can make the most of these tools:
Automate Recurring Transactions
Software like QuickBooks and Xero can automate recurring transactions, like monthly rent payments, utilities, and subscription services. This saves time and reduces the chance of missing important payments.
Generate Monthly Reports
Financial reporting is critical in a medical practice. Your bookkeeper can use these tools to create monthly income statements, balance sheets, and cash flow reports. This data isn’t just for taxes — it gives you a clear snapshot of your practice’s financial health and helps you make informed business decisions.
Track and Reconcile Insurance Payments
Reconciling insurance payments with claims is one of the trickiest parts of medical bookkeeping. Most medical billing software will generate reports of expected payments, but it’s up to the bookkeeper to cross-check these against the actual deposits in your account. A bookkeeper with the right software and experience in healthcare can save your practice thousands by catching errors and ensuring all payments are accurately documented.
Handle Payroll and Employee Expenses
Payroll is often a considerable expense for medical practices, especially if you employ multiple providers, administrative staff, and support personnel. Your bookkeeper can use accounting software to manage payroll efficiently, ensuring employees are paid on time and correctly. They’ll also track employee expenses, which is essential for accurate tax time reporting.
Common Bookkeeping Pitfalls for Medical Practices (and How to Avoid Them)
Even with the best software and an experienced bookkeeper, a few common mistakes can slip through the cracks. Here are some pitfalls to watch out for:
Overlooking Small Expenses
Every little expense adds up, and in a busy medical practice, it’s easy to lose track of small purchases like office supplies or one-off equipment repairs. Make sure your bookkeeper logs everything, no matter how minor it seems. This gives you a clearer picture of where your money is going and can reveal spending patterns you want to adjust.
Not Keeping Up with Reconciliations
Reconciliation is one of the most important parts of bookkeeping, especially in healthcare, where multiple income sources exist (insurance, patient payments, etc.). If your bookkeeper isn’t reconciling accounts monthly, errors can snowball, leading to bigger problems come tax season.
Ignoring Deductible Season
Deductible season (typically at the start of the year) can cause cash flow issues for many practices. Patients must pay out of pocket until they meet their deductibles, which can slow down revenue from insurance payments. An experienced bookkeeper will help you prepare for this dip by budgeting accordingly and setting aside reserves to get through lean months.
Building a Strong Partnership Between Your CPA and Bookkeeper
Your CPA and bookkeeper aren’t just two separate entities handling different financial tasks — they should work together for the good of your medical practice. Here’s how they can build a strong partnership:
- Communication is Key
- Regular communication between the CPA and bookkeeper is essential, especially during tax season or when planning for the deductible season. The CPA can guide the bookkeeper on specific tax deductions or compliance requirements, ensuring nothing is missed.
- Quarterly Financial Reviews
- Schedule quarterly reviews with your CPA and bookkeeper to review financial performance, catch any emerging issues, and adjust your strategy if needed. These check-ins can provide insights into spending patterns, revenue trends, and potential areas for improvement.
- Long-Term Financial Planning
- Your CPA will help you with high-level financial planning, such as forecasting and budgeting for the following year. The bookkeeper, on the other hand, will provide the detailed data needed to make accurate projections. This teamwork allows you to create a realistic budget that reflects both the current state of your practice and future goals.
FAQ
Why do I need both a CPA and a bookkeeper for my medical practice?
A CPA and a bookkeeper is crucial because they serve different but complementary roles. A CPA provides high-level financial strategy, tax planning, and compliance advice, while a bookkeeper manages daily financial operations like tracking expenses and verifying payments. Together, they ensure your practice’s financial health.
What is the role of a CPA in a medical practice?
A CPA is a strategic financial advisor, helping with tax preparation, compliance, and long-term financial planning. They assist in reviewing your business plan, setting up budgets, and navigating complex healthcare regulations, ensuring your practice meets all legal and financial obligations.
What does a bookkeeper do in a medical practice?
A bookkeeper handles day-to-day financial tasks such as managing accounts receivable and payable, reconciling bank statements, and verifying insurance payments. They ensure all financial transactions are accurately recorded, keeping your finances organized and up-to-date for smooth operations.
Why is it essential to hire a bookkeeper with medical experience?
A bookkeeper with medical experience understands the complexities of medical billing, insurance reimbursements, and patient payments. They are familiar with explaining benefits (EOBs) and insurance adjustments, ensuring that all financial nuances specific to healthcare are properly managed.
How does a bookkeeper work with billing staff in a medical practice?
The bookkeeper collaborates closely with billing staff to track patient payments, monitor insurance deposits, and verify that expected reimbursements are received. This teamwork ensures accurate financial records and helps prevent revenue leakage, maximizing your practice’s profitability.
What bookkeeping software is recommended for medical practices?
Popular bookkeeping software for medical practices includes QuickBooks, Xero, Kareo, and TherapyNotes. QuickBooks is widely used for its ease of use and integrations, while Kareo and TherapyNotes offer medical-specific features. The best choice depends on your practice’s specific needs and existing systems.
When should I hire a bookkeeper for my medical practice?
It’s advisable to hire a bookkeeper before you open your practice. Early involvement helps set up a chart of accounts, track initial expenses, and organize receipts from day one, saving you headaches later and ensuring accurate financial records from the start.
What are common bookkeeping pitfalls for medical practices?
Common pitfalls include overlooking small expenses, neglecting regular reconciliations, and not preparing for cash flow challenges during the deductible season. If not properly managed by an experienced bookkeeper, these issues can lead to financial discrepancies and cash flow problems.
How do the CPA and bookkeeper collaborate for the practice’s success?
The CPA and bookkeeper share information and align on financial strategies. The bookkeeper provides accurate daily financial data, while the CPA uses this information for tax planning and compliance. Regular communication ensures your practice’s financial health and preparedness.
Why is setting up bookkeeping before opening my practice necessary?
Setting up bookkeeping before opening ensures financial systems are in place. This includes creating a chart of accounts and tracking early expenses, which aids in budgeting and tax preparation and prevents the stress of catching up on financial records later.
Final Thoughts on Hiring a Bookkeeper and CPA for Your Medical Practice
Starting and running a medical practice is enormous, especially concerning finances. While you focus on patient care, you need a dedicated team handling the financial side — that’s where a bookkeeper for your medical practice and a CPA comes in.
The CPA: Strategic Financial Advisor
Your CPA is the big-picture strategist who guides taxes, compliance, and long-term financial planning. They’re the ones who’ll ensure your practice stays on top of its tax obligations, meets state and federal regulations, and maintains a sustainable financial trajectory. With a CPA experienced in the healthcare sector, you gain a knowledgeable advisor who understands the unique cash flow challenges and regulatory requirements specific to medical practices.
The Bookkeeper: Day-to-Day Financial Manager
Meanwhile, your bookkeeper is the day-to-day financial gatekeeper, handling the ins and outs of accounts receivable, accounts payable, payroll, and financial reconciliations. This role is even more specialized in medical practice, with the added responsibility of verifying insurance reimbursements and monitoring patient payments. A good bookkeeper keeps your practice running smoothly, giving you accurate, real-time financial data so you can make informed business decisions.
Why Both Roles Matter
Think of the CPA and bookkeeper as two sides of the same coin. The CPA provides the strategy, while the bookkeeper executes it in real time. Together, they create a robust financial support system that allows you to focus on growing your practice and providing excellent patient care. Skipping one or the other leaves gaps — without a bookkeeper, you’re likely to lose track of daily cash flow; without a CPA, you might miss out on essential tax planning and compliance.
Getting Started
To set your medical practice up for success, take your time with receipts or scrambling to reconcile accounts at tax time. Hire a bookkeeper familiar with the medical field before you even open your doors, and make sure you have a CPA on board to guide your financial planning. This proactive approach ensures that you’ll have the right systems in place from day one, giving you a clear view of your finances and freeing you up to focus on patient care.
By having a bookkeeper and a CPA in your corner, you’ll be better equipped to navigate the ups and downs of running a medical practice, handle the cash flow challenges of the deductible season, and ultimately, build a financially healthy business.