The healthcare industry has recently found itself sandwiched between the worst pandemic in living memory and profound disruptions such as smart systems to standardise front and back-office operations, and value-based payment models to enable providers, payers, and patients to achieve the best possible treatment outcomes at the lowest costs.
As one of the core functions, effective accounting allows healthcare organisations to remain functional and stay compliant with the latest regulatory requirements.
To ensure every member of the accounting team can perform their job effectively, they need a solution that can automate repetitive tasks so they can focus more on other critical areas.
Read more: Must-haves of healthcare accounting software
Here are a few accounting best practices that you, as a manager of a healthcare business, need to take into account.
Healthcare accounting best practices
1. Don’t overlook the chart of accounts
Chart of accounts plays a significant role in providing you with a snapshot of the company's current financial condition. A well-structured chart of accounts lays down the foundation for a healthy general ledger.
Not all charts of accounts are created the same. How extensive and detailed the chart of accounts depends on your business needs.
To create a more effective chart of accounts, you need to ensure:
- Consistency: the results on your chart of accounts will frequently get compared over time. It is critical to standardise and have as few charts of accounts versions as possible to maintain its consistency and comparability.
- Organisation: regularly review the account list to reduce accounts that contain unimportant amounts, thus, keeping the number of accounts more manageable.
2. Upping you accounts receivable game plan
There is a myriad of factors that lead to poor cash flow, such as missed investment opportunities, poor management, or late payment from patients. Other times, the insurers only make partial refunds or reject the entire claim.
To secure a balanced account receivable, you need to take into account the following critical elements:
- Minimise bad debts: try to collect payments as soon as possible. The more you let it sit, the less likely you will get paid. Categorise your bad debts into different sections based on their timeline, and focus your effort on the newest debts to yield the greatest return.
- Automate operation: free up your AR staff as much as possible with automation - automatically sending invoices, notices, and reminders. Automation also helps your staff to eliminate possible human errors, allowing them to focus on more critical tasks instead of these labour-intensive responsibilities.
- Identify patterns with real-time data: maybe you have been very effective at collecting payments, but the insurers are denying claims at a higher rate. Take a look at your data in real-time, and at an on-going basis to pinpoint any patterns, or trends to find out the root cause of the problem.
- Focus on coding: accurate medical codes can save your time from collecting or resolving denied claims, ensure everything is billed and processed quickly.
3. Keep an organised stash of physical receipts, and collect taxes right away
Keeping a complete, accurate, and readable physical record of invoices help you get a better grasp of where the money is going and coming. On the other hand, these paper receipts can take up quality spaces and take a lot of time to search for if not documented and stored neatly.
Storing physical receipts in a ring binder is not a bad idea, but make sure you have implemented an organisational method to keep everything neat and easy to search for. You can also take a picture, or scan the receipt, and store their digital records neatly on a shared platform.
In terms of taxes, you may feel tempted to forget about all issues associated with taxes right until the last moment. However, the longer you hesitate, the more errors you might make. Try your best to pay for all taxes immediately when payroll is generated and at points of sale. By not deferring, it prevents you from having to resolve large lump sum payments in your taxes at the end of the year as well as prevents you from any late penalty payments.
4. Stay updated with your profits and losses
Profit and loss (P&L) statement help you to quickly identify bookkeeping discrepancies, pinpoint areas that generate the most revenue, obtain a bigger financial view and the patient flow, and understand where you can reinvest money into the business.
We all know that the P&L statement, when reviewed together with the balance sheet and cash flow statement, can provide managers and decision-makers an in-depth look into the current financial performance of the business.
It is also critical to compare the P&L statements from different periods to truly understand how the business evolves. The transformations in revenues, expenses, or net earnings over time are more meaningful than the actual numbers.
An accurate, detailed P&L statement helps businesses to forecast and create budget easier, determine trends, set future directions, and spot early signs of problems.
5. Make use of the latest technological advancements
We are fortunate enough to live in a technologically advanced world. There are more than a handful of smart solutions available to help our businesses to tackle nearly every single issue.
Among all, cloud technology is a movement that receives significant recognition and adoption in recent years. Adopting cloud-based solutions is no longer viewed as something "out of the ordinary.” Many businesses nowadays expect software providers to offer cloud solutions to accommodate their needs. And the healthcare industry is not an exception.
Healthcare organisations can leverage the immense benefits of cloud solutions to enhance the patient experience, streamline operational processes, and increase the bottom line.
Disparate systems and an overwhelming amount of transactions create complexity and make the process of consolidating financial data challenging more than ever. To break down corporate silos, your healthcare business needs to consolidate activities into a centralised cloud platform to simplify payment, improve agility while staying compliant with local regulations and laws.
Check out our whitepaper “Why smart CFOs are moving to the cloud” to learn more.