As a physical therapist, you might not think about managing your finances as much as you need to. However, between managing cash flow, operational costs, and negotiating contracts, doing financial reporting each month can feel like just another thing on your list. And we haven’t even gotten to the patients yet.
But, end of month reporting is really important for every type of business. Especially those in the healthcare space. Since the Affordable Care Act took effect, the billing process has gotten increasingly complex. There’s the cost of overhead and handling reimbursements from insurers.
On top of that, practitioners must deal with Medicare’s coding system, and maintain compliance with online record keeping. Suffice to say, financial reporting matters, especially to businesses in the health industry.
Here’s a guide on why the end of month reporting is so important.
What is End of Month Reporting?
Ideally, you (or your accountant) should be closing the books each month. At the end of each calendar month, you’ll generate a report listing all transactions that took place within that month. The idea here is, you’ll get a snapshot that allows you to take stock of how well you’re doing on a month to month basis.
Additionally, closing the books each month will give you a look at depreciating fixed assets, any inventory discrepancies, as well as where you stand with accounts payable and receivable.
This practice is vital as; it allows you to spot problems as they come up, not at the end of the year when mistakes have lapsed several months over. Billing errors are a major issue in the healthcare field and can have an impact on both your reputation and your bank account.
Plus, no one wants to find out they’ve been misclassifying assets or marking pending invoices as paid, right?
End of year reporting breaks up the workload, so you’re not overwhelmed each time tax season rolls around.
How Does it Play in Determining Fiscal Year Earnings?
On a grander scale, end of month reporting gives you a glimpse of how you’ll fare at the end of the fiscal year.
The term, fiscal year refers to a company’s financial year. It’s the 12-month cycle a company uses for accounting–so, not necessarily January through December.
Typically, the fiscal year end falls on the last day of any given quarter. Though the IRS states that this means the last day of any quarter, excluding December 31.
The reason for this stipulation is, the IRS requires a distinction between the fiscal year and the tax year. And, of course, the tax year ends on December 31.
The fiscal year functions more like an internal reporting method. You’ll use this calendar to provide shareholders with a snapshot of how your business is doing. Or, you’ll use this as a means of keeping abreast of your financial situation.
The business tax year, on the other hand, refers to the 12 month period documented in your taxes.
Monthly Reporting Helps You Get a Salary Snapshot
Medical practices come with a lot of expenses. That’s the understatement of the year, to be sure. But, closing the books out each month can help you track how much you’ve made thus far, and how much you can expect to earn this fiscal year.
You’ll want to look at how many patients you’ve seen, and multiply that by the average reimbursement per visit. From there, you’ll need to look at how much you’re paying in rent, equipment, or other expenses–as well as how many patients or payers are past due.
Closing out each month allows management to make informed business decisions based on sales. If one month you’re not seeing too many patients, you may find its time to take a look at your marketing strategy, making tweaks as needed.
On the flip side, if profits are up over the course of a few months, maybe its time to hire a new staff member or upgrade aging equipment. The point is, getting an accurate financial snapshot enables you to make the choices that will carry your physical therapy business forward.
Do You Really Need to Do This Every Month?
We recommend that you do end of month reporting, well, at the end of every month, like clockwork. But, this all depends on your business. If you’re a really small practice, you might be able to get away with closing out the books on a bi-monthly or quarterly basis.
However, it’s easy to lose track of all the little things that add up. Checking in each month presents an opportunity to understand how your business is doing, and how you can use the resources you have to improve your business, streamline practices, and improve workflow.
Financial management is a vital part of any industry, but healthcare poses a number of unique challenges–whether you’re in physical therapy, dentistry, or cardiology. Because you’re dealing with sensitive patient data, it’s vital to keep things as organized as possible.
Healthcare is not like e-commerce where you’re primarily looking at inventory vs. sales. In healthcare, practices are subject to changing rules and regulations, deal with problems collecting payments and need to keep tabs on patient information. Long story short–there are several moving pieces here.
Need to Get Your Finances in Order? Rev-Ignition Can Help
At Rev-Ignition, we specialize in tailored solutions, designed to help physical therapists, physicians, and other healthcare businesses get their finances in order.
Our streamlined solutions allow clients to track things like insurance denials and incoming payments, as well as help improve marketing and negotiations with payers.
Ready to get started? Fill out the form for a free analysis, and we’ll show you how our revenue cycle management can help you take your practice to the next level.