Common Bookkeeping Mistakes Doctors Make

Doctors have a lot on their plates. They must diagnose health concerns, recommend treatment plans, and stay ahead of evolving regulatory requirements. All while providing a bedside manner that makes patients feel like they matter.

To expect doctors to add financial oversight to the mix without adequate support is simply unrealistic. Unfortunately, it is the norm more often than it should be.

Keep reading as we explore some of the most common bookkeeping mistakes doctors make and some simple tips on how to avoid them.

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Not Separating Business And Personal Expenses

This may seem like a “no duh” best practice, but it can be an insidious threat to practices that start small and proliferate rapidly. When you start expanding office space and adding team members, that morning cup of coffee and home use of office that were convenient write-offs will inevitably come under scrutiny. Computers, cellphone plans, and software are other expenses that may need to be reclassified.

Solution: Keep separate bank and credit accounts for your practice, even when it is relatively small. Save all receipts and maintain a meticulous paper trail of any purchases the practice makes.

Overlooking Revenue Lags

Unlike most businesses, the revenue streams for doctor’s offices are multiple and complex. In many cases, payment comes from third-party payors. Approvals and disbursement of funds can take weeks–if not months.

Mix this in with traditional cash, check, and credit card payments, and it can be difficult to ascertain just how much money is coming in at any given time.

Solution: Invest in comprehensive financial management for healthcare. By outsourcing the nitty-gritty details of medical bookkeeping, you can guarantee the most accurate, real-time analysis of where your practice stands. The best medical financial management will break down accounts into 30-, 60-, and 90-day buckets, analyze payor behavior, and help you stay on track with payroll and staffing needs.

Lack Of Internal Controls

There is more to the story with medical bookkeeping than simple dollars and cents. Patient confidentiality is a must. Hipaa violations and compliance breaches can result in costly fines that wreck the practice’s bottom line and mar its public image.

In addition, poor internal controls can create a convenient entry point for healthcare fraud and bad actors.

Solution: Segregate duties among your team. Limit multi-tasking and ensure a high level of expertise and oversight on specific tasks. Perform regular reviews to identify weaknesses before they exponentiate. Limit access to sensitive financial information and patient records, enforcing a system of dual authorization as necessary.

Coding Errors

Billing codes. Meant to streamline payment. More often than not, the source of unmitigated headaches. The difference between a “0” and an “o” can delay payment, deny insurance claims, and charge patients for services they never received. And this is just the tip of the iceberg of issues that arise from coding errors.

Solution: Ongoing training for office staff, keeping them up-to-date on the latest code standards. Investment in the latest software that can identify potential typos and/or unusual codes for your practice.

Mix-ups In Accounting Methods

There are two overarching methods of bookkeeping for doctors office facilities: cash basis accounting and accrual accounting.

In cash basis accounting, income is recognized when it is actually received. Expenses are recorded when they are actually paid. This method is generally simpler to manage. It is commonly preferred by smaller practices, as it gives a clear picture of immediate cash flow.

Accrual accounting records income when services are rendered. Expenses are recognized when they are incurred–not when they are actually paid. This is the preferred accounting method for large, complex medical practices that have revenue and expenses coming from all directions.

It will offer a better long-term picture of the firm’s financial performance. It does a better job tracking accounts payable and receivable.

Unsurprisingly, not sticking strictly to one accounting method will create a host of issues. Not only will it muddy the waters of where the practice stands financially, but it can have serious implications for taxation purposes.

Solution: Have clear communication with your accounting team on which method your firm will use. Train employees to record revenue and expenses as such.

Failure To Consider Merchandise Sales

Healthcare is inherently a service-related field. Consultations. Imaging. Procedures. This can make it easy to forget about the goods sold on-site.

Whether it is souvenir sales from the gift shop of a large medical complex or a bottle of multi-vitamins sold at the front desk of a small practice, these merchandise sales are just as much a part of the bottom line as services rendered.

Solution: Train office staff to input transactions as they occur, issuing receipts for all sales of merchandise. Invest in the best software that records these types of transactions in real time and sends them to the appropriate revenue bucket.

Avoid Bookkeeping Oversights And Maximize Profit For Your Healthcare Practice

It is too much to expect doctors to perform their medical duties while also monitoring financial records. By considering any of the points listed above and employing the common-sense solutions, medical practices can avoid the common bookkeeping errors that can set them back.

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