Part 4: Signs You Need a Healthcare Accounting Solution

How you handle accounting for your healthcare practice has a direct impact on how well it performs. However, investing in a healthcare accounting solution or hiring an accountant for your practice means additional resources spent. Before taking the plunge, these are some key indicators to consider.

You’re hiring staff

Once you have employees working for your company, accounting becomes more complex by an order of magnitude. Income tax and FICA withholding and remittance, employment forms, benefits, time off — these all fall under the category of payroll. 

Whether you hire an external firm to handle payroll for your business or choose a healthcare accounting service with payroll built in, a barebones accounting platform just isn’t going to fly. Errors could lead you to run afoul of the IRS, state tax authorities, and the local employment bureau. 

A recent accounting error has you in trouble with the IRS

In order to accurately file your taxes and report tax deductible expenses, you need an accurate set of books. A relatively minor bookkeeping error could lead to inaccurate filing.  

And when it comes to the filing itself, mistakes you make filling out forms can earn you a penalty from the IRS, or even help to trigger an audit.  Healthcare providers face enough audits from other parties.

Most IRS penalties for late or underpaid taxes won’t be serious enough to endanger your business. But once you make a mistake and your business is saddled with a penalty, consider it a sign you need an updated healthcare accountant or solution.

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You've overdrawn your bank account (more than once)

When your medical accounting is professionally handled, you’re guaranteed an up-to-date balance sheet, financial records, and books that are correctly reconciled with your bank accounts. 

When you hastily do your own accounting, late or miscategorized entries or improperly generated balance sheets can end up giving you inaccurate information about the state of your finances. That makes mistakes like overdrawing your account easy to make.

If you keep coming up short—or, conversely, if you often find you have money in your account you were totally unaware of—it means you lack clear insight into your finances. Time to invest in a stronger healthcare accounting solution!

You can’t answer basic questions about your money

How much did you earn in revenue last month? How much did you pay in expenses? What did you keep as profit? 

If answering these questions has you resorting to spreadsheets, back-of-napkin calculations, and recent bank statements, it means your business’s accounting needs have outgrown your own capacities as a self-taught Quickbooks accountant.

Comprehensive, up-to-date accounting guarantees you always have the information you need about your business—in the form of financial statements—so you can make more strategic, informed decisions.

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Financial admin has you working overtime

Why did you decide to start your own practice? Maybe you wanted the chance to provide a standard of care other practices could not. Or maybe you saw a particular need in your community for someone with your background.

Whatever your reasons, it’s unlikely you forged your own space in the healthcare industry because you wanted to do your own bookkeeping and accounting. If accounting tasks are eating into your off-hours and taking away time that would be better re-invested into your practice, it’s time to off-load that work.

You’ve lost insurance claims or other important documents 

A smooth-running accounting solution with up-to-date entries can serve as a failsafe and ultimate source of truth for healthcare facilities. Ledger entries let you see when you earned money, and for what, and track cash flow—that gap between a claim being filed and your practice being reimbursed.

That makes it less likely you’ll misplace or miscode insurance claims, landing you in trouble with insurance companies and patients alike. If you’ve been losing track of important information, it’s time to get professional accounting and financial management help.

You’re required to start paying quarterly estimated taxes

Once you owe $1,000 in federal taxes, the IRS requires you to start paying over the course of the year in federal instalments.

Estimating how much you need to pay, and making sure you put aside enough cash over the course of the quarter so you can pay on time, can be a serious headache. Underpayment can result in penalties, unless you take advantage of safe harbor rules that only apply if your past tax filings are up to date. Hiring an accountant with experience in the healthcare field significantly reduces the amount of work you need to do.

You’re paying rent

Once you start paying rent, your business needs to perform well in order to cover its overhead, and you need records of your expenses—which, besides rent, may include utilities or maintenance fees—so you can benefit from tax deductions.

If you’re willing to invest in an office or clinic, you ought to be willing to invest in a healthcare accountant. They’re both key components of a successful healthcare organizations, and should be key components of your practice.

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Don’t let accounting issues derail your practice. Invest in a specialized healthcare accounting solution to handle payroll complexities, avoid IRS troubles, and ensure optimal financial management, so you can focus on what you do best—providing exceptional care.

In Part 5, the final part of our series, we’ll dive into the pros and cons of DIY accounting versus hiring a healthcare accountant versus using comprehensive software solutions like Flychain. We hope this series will help you make an informed choice for your practice!