The building blocks of accountancy

This month, it is time for ‘C’ in our A-Z guide of essential matters that consultants and GPs need to consider to run their private practices efficiently. Susan Hutter reports.

To quote the Dragons’ Den TV programme: ‘Turnover is vanity, profit is sanity, but cash is reality’.  

This is now more important than ever for all businesses, including medical practices, as it is vital to manage cash flow effectively. Practice owners must constantly look at ways to improve cash flow into the business including: 

 Speeding up the collection of money from patients/insurance companies. It is vital that the practice’s bookkeeper/personal assistant is always on top of this (See ‘Self-pay is on the rise, so don’t ignore it’). 

 Making use of the maximum credit period the practice is offered by its suppliers. But do not upset the landlord! 

 Using specialist medical fee collection agencies for invoicing and collection. 

These agencies are particularly useful when it comes to dealing with embassies. 

is for Costs

As well as cash coming into the practice, it is also important to look at what is going out. For example, are there areas of practice expenses that can be reduced, outsourced or generally made more efficient? 

This could include:  

 Renegotiating leases. When you are coming up to a break clause in the practice lease, see if you can negotiate a decrease in rent. Remember that consultants and GPs, generally, offer a very good covenant.

 Ensure that you are using the discounts available on basic overheads such as stationery, couriers and travel. 

 Look at the structure of the back-office staff. Is it possible there is an overlap with certain work? Is there any way you can use the practice accountant to assist with certain processes, thereby reducing, say, one staff member?

is for Control 

 Consultants and GPs, like all business owners, must run the business rather than allowing the business to run them. Ensure that you have clear, up-to-date and accurate financial information. This will not only be a requirement for providers of finance, but will also enable doctors to make sound decisions based on real information rather than on instinct. 

Most consultants and GPs do not produce interim accounts. How­ever, it is important to have up-to-date, and accurate, lists of monies owed to and by the practice and to ensure that this is reviewed at least on a monthly basis and action taken where necessary. 

It is also worth producing a simple cash-flow forecast so that you can cover ‘cash heavy’ times and be prepared for them. This would include paying the tax bill. 

The practice accountant will be able to assist you with this. 

is for Children 

 It is worth consultants and GPs considering employing their children in the business. They must be at least 16 years old and it must be shown that they are carrying out proper work for the practice. 

Many doctors enlist their children to assist with IT projects such as setting up and maintaining the practice database or even doing book-keeping work. 

In the tax year 2019-20, one can earn up to £719 a month without having to pay tax or National Insurance. 

As long as the salary is commensurate with the work carried out, and it can be demonstrated that the work actually is being carried out, the salary for the child will be tax-deductible in the practice accounts. 

As always, it is important to take professional advice before proceeding with any of the above suggestions.  

Susan Hutter (right) is a partner at Blick Rothen­berg and part of the team that advises medical practitioners

See ‘“B” is for book-keeping’