A medical practice can have full appointment books, a strong reputation and steady revenue coming in, and still have very little clarity about how the business is actually performing.
That is because running a medical practice involves much more financially than simply recording patient payments and paying the bills.
There may be practitioner payments, employee wages, superannuation, software subscriptions, medical supplies, equipment, rent, insurance, merchant fees and dozens of other transactions moving through the business every month.
As the practice grows, the financial side becomes increasingly difficult to manage from a bank balance or a spreadsheet updated whenever somebody has time.
Bookkeeping for medical practices should give clinic owners a clear, current picture of what is happening financially so they can make better decisions about staffing, expenses, cash flow and future growth.
If you own or manage a medical practice, here are some of the financial systems and numbers worth getting right. Choose Your Clinic for more information: Cosmetic, Dental, Physio
The Gecko Snapshot: Bookkeeping for Medical Practices
What clinic owners need to know in under a minute
A busy clinic is not automatically a profitable clinic.
Good bookkeeping helps medical practice owners understand where revenue is coming from, what the practice is spending, what needs to be paid and whether the business is generating enough margin to support its team and future plans.
For a growing medical practice, that means being able to:
The bottom line: bookkeeping is not simply about keeping records for your accountant. Done properly, it gives you the financial visibility needed to run a stronger medical practice.
A full appointment book doesn’t tell you how profitable the practice is
One of the easiest traps for a clinic owner is assuming that because the practice is busy, the business must be performing well.
Appointments may be booked weeks ahead.
Practitioners may have full schedules.
Revenue may be increasing.
But revenue is only one side of the picture.
The practice also has to pay for the people, premises, systems and resources required to deliver those services.
Depending on the practice, expenses may include:
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- wages and salaries
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- practitioner or contractor payments
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- superannuation
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- reception and administration staff
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- rent and occupancy costs
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- medical and clinical supplies
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- equipment
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- insurance
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- software and practice-management systems
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- merchant and payment-processing fees
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- bookkeeping and accounting
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- professional registrations and subscriptions
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- marketing
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- utilities
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- cleaning
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- telephone and internet
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- finance repayments
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- other operating expenses
A practice can therefore increase revenue without necessarily increasing profit at the same rate.
Good bookkeeping gives you the information needed to look beneath the topline number.
Rather than simply asking:
How much did the clinic bring in this month?
you can start asking:
What did it cost us to generate that revenue, and what was actually left?
For practices wanting greater visibility over the financial side of the business, Gecko Cloud Solutions’ support is designed around the operational needs of clinics and healthcare businesses.
Bookkeeping for Medical Practices: Keeps the day-to-day bookkeeping current
Medical practices can generate a significant number of transactions.
Patient and client payments come in.
Suppliers need paying.
Subscriptions are deducted automatically.
Wages are processed.
Practitioners may need to be paid.
Equipment is purchased.
Expenses move through different cards and accounts.
When bookkeeping falls behind, the problem is not simply that there is more work to catch up later.
The information being used to run the practice becomes less reliable.
If the accounts are two or three months behind, the clinic owner may be looking at financial reports that no longer reflect what is happening now.
A regular bookkeeping process should help keep areas such as:
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- bank reconciliation
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- transaction allocation
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- supplier bills
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- customer or patient accounts
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- payroll transactions
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- expense records
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- practitioner-related payments
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- GST records
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- outstanding invoices
reasonably current.
The more current the records are, the more useful the financial information becomes.
Bookkeeping for Medical Practices: Know where your practice revenue is actually coming from
Total revenue matters, but understanding the composition of that revenue can be even more useful.
A clinic may receive income through different practitioners, services, locations, funding arrangements or payment channels, eg Medicare, DVA, private health funds.
Without a suitable financial structure, all of that income can become one large number.
That makes it harder to understand which parts of the practice are growing and which may be underperforming.
Depending on how the practice operates and how its accounting system is configured, management reporting may help owners examine performance across relevant areas of the business.
The aim is not to create unnecessarily complicated reporting.
It is to make sure the bookkeeping system produces information that is actually useful to the people running the clinic.
A report that simply says the practice earned a certain amount last month is helpful.
A system that helps management understand how the business generated that revenue and what it cost to generate it is much more valuable.
Bookkeeping for Medical Practices: Understand your practice overheads
Medical and healthcare businesses often carry substantial fixed and semi-fixed overheads.
The doors need to stay open whether the clinic sees ten patients that day or fifty.
Rent still needs to be paid.
Administration staff still need to be paid.
Software subscriptions continue.
Insurance, utilities, cleaning and professional costs continue.
That means understanding the clinic’s underlying operating costs is important.
Clinic owners should have a reasonable idea of questions such as:
What does it cost to operate the practice each month?
Which expenses are increasing?
How much of our revenue is being absorbed by overheads?
Are expenses increasing faster than revenue?
Do we have enough margin to comfortably add another employee or practitioner?
Good bookkeeping gives you the underlying data needed to answer those questions.
Without it, decisions can easily be based on assumptions.
Bookkeeping for Medical Practices: Cash flow and profit are not the same thing
A medical practice can be profitable on paper and still experience cash flow pressure.
That can happen when money comes into and leaves the business at different times.
For example, the clinic may have generated strong revenue during the month, but at the same time need to cover:
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- payroll
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- superannuation
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- rent
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- practitioner payments
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- supplier invoices
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- insurance
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- equipment costs
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- tax obligations
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- software costs
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- other operating expenses
The bank account may look healthy immediately after a busy billing period but fall quickly once those obligations are paid.
Alternatively, income may have been earned but not yet received.
That is why the amount showing in the bank account should never be treated as the complete picture of the practice’s financial position.
Good bookkeeping helps management see both what has been earned and what cash is actually available and what still needs to be paid. Talk to us about Bookkeeping for Medical Practices.
Keep on top of money owed to the practice
Depending on the way a medical practice bills, some revenue may not arrive immediately.
Whenever money remains outstanding, it is important that somebody knows about it.
A bookkeeping system should make it reasonably easy to determine:
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- what has been invoiced
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- what has been paid
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- what remains outstanding
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- how long amounts have been outstanding
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- whether follow-up is required
A small number of overdue accounts may not seem significant individually.
Across a busy clinic, however, unpaid invoices can add up.
The practice has usually already incurred many of the costs associated with delivering the service.
Staff have been paid.
Rooms have been used.
Supplies may have been consumed.
Administration has occurred.
If the corresponding income is delayed, that places additional pressure on cash flow. Talk to us about Bookkeeping for Medical Practices.
Payroll becomes more important as the clinic grows
A growing medical practice may employ reception staff, practice managers, nurses, administration staff and other team members.
That brings another layer of financial administration into the business.
Payroll can involve areas such as:
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- timesheets
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- wages and salaries
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- PAYG withholding
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- superannuation
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- leave records
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- allowances where relevant
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- payroll reporting
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- employee records
The bookkeeping and payroll functions also need to work together.
If payroll expenses are not being correctly reflected in the accounting records, the financial reports may not accurately show what it costs to operate the practice.
This becomes increasingly important as the team grows.
A clinic that started with one owner and one receptionist may eventually employ a substantial support team.
The financial systems that worked when the practice was small may no longer be suitable once the business reaches that point.
Gecko also provides support around Payroll Services for businesses needing a more structured approach to ongoing payroll administration. Talk to us about Bookkeeping for Medical Practices.
Bookkeeping for Medical Practices: Keeping practitioner payments organised
Medical practices can operate under a range of different business and practitioner arrangements.
The specific legal, tax and contractual treatment of those arrangements should always be determined with the appropriate professional advice.
From a bookkeeping perspective, however, one thing remains important:
The financial records need to accurately reflect what has happened.
If the practice is responsible for processing or recording payments associated with practitioners, those transactions should be handled consistently.
Clinic owners should not have to reconstruct months of payments later to understand who was paid, when they were paid or how transactions were recorded.
A consistent process reduces administration and makes financial reporting much easier to interpret. Talk to us about Bookkeeping for Medical Practices.
Don’t use the bank balance as your financial report
It is tempting to check the business bank account and use that number to decide whether the clinic is doing well.
But the bank account cannot tell you the whole story.
Imagine the practice has $100,000 in the bank.
That may look strong.
But perhaps:
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- wages are due this week
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- superannuation needs to be paid
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- rent is approaching
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- practitioner payments are due
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- supplier invoices remain outstanding
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- equipment finance needs to be paid
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- GST or other obligations need to be allowed for
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- insurance is due next month
The available amount can look very different once those commitments are taken into account.
Your bank account tells you the amount of cash sitting in an account at a particular moment. If you are concerned – talk to us about Bookkeeping for Medical Practices.
It does not tell you whether the medical practice is profitable.
That is why accurate bookkeeping and meaningful financial reports matter.
Keep business and personal spending separate
This becomes particularly important for owner-operated practices.
Using a personal card for a clinic purchase once in a while can usually be dealt with.
Repeatedly mixing personal and business spending creates unnecessary bookkeeping work and makes the accounts harder to understand.
The more transactions that need to be questioned, reclassified or explained later, the less efficient the bookkeeping process becomes.
Keeping business transactions moving through appropriate business accounts and systems creates cleaner records.
Cleaner records generally mean clearer financial information. Talk to us about Bookkeeping for Medical Practices.
Make your accounting and practice systems work together
Most modern medical practices already use multiple digital systems.
There may be:
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- practice-management software
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- accounting software
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- payroll software
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- payment systems
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- banking platforms
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- expense-management tools
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- rostering or workforce systems
Technology can make financial administration far more efficient.
But simply having several platforms does not mean the practice has a good financial system.
If information is being entered multiple times, transactions are not being reconciled, nobody knows which system contains the correct figures, or reports are not being reviewed, the technology may be adding complexity instead of removing it.
The goal should be a practical process that reduces duplication and gives the practice reliable financial records.
Not every system needs to do everything.
They simply need to work together well enough that the practice can trust the information being produced. Talk to us about Bookkeeping for Medical Practices.
Financial reports should help you make decisions
Bookkeeping becomes much more valuable when the information moves beyond compliance and starts supporting management decisions.
A clinic owner should ideally be able to access useful information about areas such as:
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- revenue
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- operating expenses
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- payroll costs
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- outstanding accounts
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- cash position
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- profitability
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- changes in major expense categories
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- financial trends over time
These figures can help when considering decisions such as:
Can we afford another receptionist?
Is it time to add another practitioner?
Can the practice take on a larger premises?
Are staffing costs increasing too quickly?
Do we need to review our overheads?
Is revenue increasing without a corresponding improvement in profit?
Do we have enough cash to make a major equipment purchase?
The purpose of financial reporting is not to produce reports nobody reads.
It is to give owners and managers the information needed to make better decisions.
Know your numbers before expanding the clinic
Growth often introduces costs before the additional revenue arrives.
A larger premises may mean a higher bond, additional rent and fit-out costs.
Another practitioner may require another room, equipment, administration and marketing.
Additional employees increase payroll costs immediately.
New technology may require implementation and ongoing subscriptions.
That means clinic growth should not be assessed solely on whether demand exists.
You also need to understand whether the financial position of the business can support the next step.
Before making a significant expansion decision, clinic owners should have reasonable visibility over questions such as:
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- What is the current monthly operating cost of the practice?
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- How much cash is normally available after regular commitments?
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- What will the additional overhead be?
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- How much additional revenue needs to be generated?
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- How long might it take for that revenue to build?
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- What happens to cash flow while that growth occurs?
Good bookkeeping provides the foundation for those conversations.
When does doing your own bookkeeping stop making sense?
Many medical practices start small.
The owner may initially manage invoices, reconcile the bank account and keep track of expenses themselves.
There is nothing inherently wrong with that.
But the calculation changes as the practice grows.
More practitioners create more transactions.
More employees mean more payroll.
More patients mean greater administrative volume.
More systems create more data.
More expenses need monitoring.
Eventually, the time being spent on bookkeeping becomes time that could be spent managing the practice, supporting staff, improving patient experience or planning future growth.
Signs that the practice may have outgrown its current bookkeeping approach include:
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- bank reconciliations regularly falling behind
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- financial reports not being available when needed
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- uncertainty around outstanding accounts
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- payroll taking too much management time
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- transactions frequently needing correction
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- BAS preparation becoming a last-minute scramble
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- difficulty explaining where the practice’s money is going
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- important decisions being made primarily from the bank balance
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- bookkeeping taking evenings or weekends to complete
At that point, outsourcing is not simply about removing an administrative task.
It can be about creating a more reliable financial system for the business.
Medical practices have different financial pressures from many other businesses
Healthcare businesses have their own operational environment.
A medical practice needs to balance the demands of running a commercially sustainable business while supporting practitioners, staff and patients.
That means the financial administration needs to work around the practice rather than become another burden for the people running it.
The same applies to related healthcare businesses. Gecko’s support is designed around many of the same challenges facing growing healthcare practices.
The bookkeeping itself still needs to be accurate.
But just as importantly, it needs to produce information in a way that helps the practice operate. Talk to Gecko Cloud Solutions about Bookkeeping for Medical Practices today.
Bookkeeping for Medical Practices: Better bookkeeping gives clinic owners better visibility
The purpose of bookkeeping for a medical practice is not simply to have tidy accounts.
It is to give the people running the clinic a clearer picture of what is happening financially.
You should be able to understand:
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- what the practice is earning
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- what it is spending
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- what remains unpaid
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- what obligations are coming up
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- what payroll is costing
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- how cash is moving through the business
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- whether revenue growth is translating into sustainable financial performance
When that information is current and reliable, managing the business becomes easier.
You can identify problems earlier.
You can ask better questions.
And you can make important decisions with more information behind them. Talk to us about Bookkeeping for Medical Practices.
Bookkeeping support built around medical practices
Running a medical practice already involves managing patients, practitioners, employees, appointments, systems and an enormous amount of administration.
The financial side of the business should not be something you only understand when BAS or tax time arrives.
Gecko Cloud Solutions helps medical practice owners create greater clarity around the bookkeeping and back-office processes supporting their business. Find us on Google.
Whether the practice is becoming busier, adding team members, increasing its overheads or preparing for its next stage of growth, having reliable financial information makes those decisions easier.
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Frequently Asked Questions: Bookkeeping for Medical Practices
What does bookkeeping for medical practices include?
Bookkeeping for medical practices can include recording and categorising transactions, bank reconciliation, managing supplier bills, monitoring outstanding accounts, recording payroll transactions, maintaining GST records and preparing financial information for the practice. The exact requirements depend on the size and structure of the clinic.
Why is Bookkeeping for Medical Practices Important?
Bookkeeping helps practice owners understand what the clinic is earning, what it is spending, what payments are outstanding and what financial obligations are approaching. Reliable records also provide the foundation for useful financial reporting and better business decisions.
How often should a medical practice update its bookkeeping?
The appropriate frequency depends on the volume and complexity of the practice. However, a busy clinic generally benefits from keeping bookkeeping reasonably current rather than allowing transactions to accumulate until BAS or tax time. Practices with employees, high transaction volumes or multiple practitioners may require particularly regular processing.
Can bookkeeping tell me whether my medical practice is profitable?
Bookkeeping provides much of the financial information needed to assess profitability, including revenue and operating expenses. Meaningful accounting and management reports can then help the practice examine whether revenue is translating into profit and how costs are changing over time.
When should a medical practice outsource its bookkeeping?
Outsourcing may make sense when bookkeeping is regularly falling behind, payroll and transaction volumes are becoming more complex, financial reports are unreliable or the owner and management team are spending too much time on financial administration. The appropriate point will depend on the individual practice.
