Accrual Accounting
Accrual accounting is a fundamental principle that requires you to record revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. This principle provides a more accurate representation of your practice's financial position and performance.
Chart of Accounts
Developing a comprehensive chart of accounts specific to your medical practice is essential. It provides a structured framework for categorizing and organizing financial transactions, allowing you to track income, expenses, assets, and liabilities in a systematic manner.
Accurate Revenue Recognition
Applying the revenue recognition principle is crucial for accurately reporting your practice's income. Revenue should be recognized when it is earned and reasonably measurable. For physicians, revenue is typically recognized when medical services are provided to patients, regardless of when the payment is received.
Precise Expense Tracking
Maintaining detailed records of your practice's expenses is important for tax purposes and financial analysis. Track and categorize expenses such as rent, staff salaries, medical supplies, insurance, professional fees, utilities, and other operational costs. This enables you to monitor your practice's financial health and identify areas for cost optimization.
Inventory Management
If your practice maintains inventory, such as medical supplies or medications, it's important to implement proper inventory management practices. This involves accurately tracking inventory levels, valuing inventory appropriately (e.g., using weighted average or specific identification methods), and performing regular physical counts to reconcile inventory records.
Bank Reconciliation
Perform regular bank reconciliations to ensure that your practice's financial records align with the transactions recorded by your bank. This process involves comparing your practice's cash balance with the bank statement balance and identifying and resolving any discrepancies.
Management Reports to monitor and improve financial health
Prepare and review financial statements to gain insights into your practice's financial performance and position. Key financial statements for physicians include the balance sheet (assets, liabilities, and owner's equity), income statement (revenues and expenses), and cash flow statement (cash inflows and outflows). These statements help you assess profitability, liquidity, and overall financial health.
Compliance with Regulatory Requirements
Ensure compliance with relevant regulatory requirements, such as those set forth by the College of Physicians and Surgeons of Ontario (CPSO) and the Canada Revenue Agency (CRA). Familiarize yourself with reporting obligations, billing practices, documentation requirements, and any specific accounting guidelines applicable to healthcare professionals.