Navigating medical accounting can be complicated. While good financial management is essential if you’re a healthcare professional, it does come with unique challenges.
Understanding the basics of medical accounting can help you tackle those challenges head on, whether you’re trying to get your head around your personal finances or taking on your medical practice’s accounts. Let’s dive in.
How to navigate medical accounting
Understand your accounting needs
You’ll need to adapt your approach to medical accounting depending on your profession and your personal circumstances.
Think about the challenges you face in your role. Maybe you pay for business expenses out of pocket and need to claim them back — or perhaps you’re struggling with your medical practice’s payroll and need help managing it.
High earners may need to pay closer attention to their personal finances, while NHS employees should understand how to manage and make the most of their NHS pension.
Your business structure will also affect your accounting needs. For example, many medical and dental practices are set up as business partnerships rather than limited companies. If you’re a nominated partner, you’ll need to submit a partnership tax return on top of your personal tax return.
Pick an accounting method
Choosing the right accounting method for your medical practice is essential. Self-employed sole traders and partners usually have two options at their disposal: accrual basis accounting or cash basis accounting.
If you choose accrual basis accounting (also known as traditional accounting), you’ll need to record income and expenses the moment you’re billed or send an invoice.
Meanwhile, if you use cash basis accounting, you only record your income or expenses after receiving funds or paying their bills.
There are pros and cons to each accounting method. The accrual basis often gives a more accurate picture of your finances, but it can be complicated — and your practice may have to pay tax on some income before actually receiving it.
The cash basis of accounting is generally more popular among medical professionals, and it’s clear to see why. While it may be less accurate, it’s also easier to use and allows you to keep a close eye on how much money you have on hand — all without taking away too much time from your patients.
Every practice is different, however, so you should weigh up your options carefully. Speaking to an accountant can help you make the right choice for your business. You’ll also need to follow different rules if you own a limited company.
Track your business transactions
Good bookkeeping won’t just help you stay compliant: it can save you money.
If you run your own practice, you’ll need to cover everything from rent, office supplies and staff wages to licences and specialist medical equipment. You can deduct allowable expenses to work out your taxable profit — and keeping detailed, up-to-date records can make this much easier.
Tracking expenses is also essential for many employees. If you’re a doctor and pay for business expenses out of your wages, for example, you may be able to claim a tax rebate from HMRC. Your allowable expenses could include everything from professional membership fees to travel expenses and laundry.
Use cloud accounting software
Many healthcare professionals don’t have time to keep up with all their bookkeeping and accounting tasks in between caring for their patients. Thankfully, cloud accounting software can make medical accounting much easier to navigate.
With all your financial data in one easy-to-access place, you’ll be able to draw up financial reports and insights with the click of a button. This can give you a greater understanding of your medical practice’s performance, helping you make well-informed business decisions.
Work with medical accountants
To ensure you get the support you need, we’d recommend working with financial experts who understand the healthcare industry and your place in it.
As tech-savvy accountants for medical professionals, we can help set you up for success. We can support you with everything from starting your medical practice and managing your payroll to finding the right accounting software and claiming expenses on your self-assessment return.
Get in touch with us today to find out more about how our medical accounting services can support you.