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21. Financial Management. Learning Outcomes (cont.). 21.1 Summarize the importance of and how to establish good bookkeeping and banking practices. 21.2 Compare single-entry, double-entry, and write-it-once bookkeeping systems. 21.3 Outline patient related financial transactions.
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21 Financial Management
Learning Outcomes (cont.) 21.1 Summarize the importance of and how to establish good bookkeeping and banking practices. 21.2Compare single-entry, double-entry, and write-it-once bookkeeping systems. 21.3 Outline patient related financial transactions. 21.4 Identify negotiable instruments and the items that must be present for a check to be negotiable.
Learning Outcomes (cont.) 21.5Describe the different types of check endorsements and the steps in creating a bank deposit. 21.6Carry out the process of reconciling the office bank statement. 21.7List several advantages to electronic banking. 21.8Implement setting up, classifying, and recording disbursements in a disbursement journal.
Introduction • Medical practices require sound financial management • Employees must understand financial management procedures
The Medical Practice as a Business • To succeed - income must exceed expenses. • Accounting • Responsibilities of medical assistant • Bookkeeping ~ a systematic record of business transactions • Banking
The Medical Practice as a Business (cont.) • Accuracy • Strive for 100% • Records form a chain of information • Errors can result in • Double billing • Omitting bank deposits • Improper payments to suppliers
Establishing Procedures • Be organized • Be consistent • Use markers • Write clearly • Check your work
Apply Your Knowledge What can be the result of errors in billing? ANSWER: Errors can result in billing a patient twice for same service, omitting bank deposits, and making improper payments to suppliers. Good Answer!
Computerized – most common Manual Systems Single-entry Double-entry Pegboard All methods record Income Charges Disbursements Other financial information Medical Office Accounting Methods $$$$
Electronic Bookkeeping • Bookkeeping on the computer • Performs same tasks as manual method • Saves time • Performs repetitive tasks • Performs math calculations • Has built-in tax tables
Manual Bookkeeping Systems • Single-entry • Transaction listed once each to • Patient ledger • Daily log • Checkbook • Disadvantages • Not self-balancing • Does not detect errors as readily
Manual Bookkeeping Systems (cont.) • Double-entry • Transactions are listed twice • Assets = Capital + Liabilities • As payments are made on the asset both side of the equation continue to balance • Example: • Asset - $15,000 ECG machine • Capital = amount of total cost paid • Liability = the amount still owed • $15,000 = $5000 + $10,000
Manual Bookkeeping Systems (cont.) • Write-it-once (pegboard) system • Entry written one time • Daily log sheet • Patient ledger card • Charge slip
Manual Bookkeeping Systems (cont.) • Daily log • Chronological list of charges, payments, and adjustments • Journalizing • Post from the log to patient ledger
Manual Bookkeeping Systems (cont.) • Patient ledger card • Patient information • Financial transactions of patient account • Payments • Adjustments • Balance owed • Information from daily log
Manual Bookkeeping Systems (cont.) • Accounts receivable • Total owed to the practice • Total on accounts receivable = balances on patient ledger cards • Accounts payable • Amount owed to vendors • Keep accurate records $$$
Manual Bookkeeping Systems (cont.) • Record of office disbursements • List of payments made • Information on record • Payee • Date • Check number • Amount paid • Type of expense
Manual Bookkeeping Systems (cont.) • Summary of charges, receipts, and disbursements • Comparison of income and expenses • Analyzing summaries • Areas of profitability • Amount charged and payments received • Cost of running the office • Categories of expenses $$$
Apply Your Knowledge What types of bookkeeping methods might you use in a medical office? ANSWER: You might use these bookkeeping systems in a medical office: Single-entry Double- entry Pegboard Right!
In Office Patient Transactions • Starting the Business Day • Set up peg board with daily log sheet • Layer superbills • Patient Process – ledger card under next superbill • Attach the Superbill to the Patient Chart
In Office Patient Transactions (cont.) • Patient Checkout – place superbill and ledger card on appropriate space of daily log • Payments After the Patient Visit • Record payments appropriately • Make adjustments as required
In Office Patient Transactions (cont.) • Returned Checks • Add back to patient balance • Add bank fees • Overpayments • End of day • Total columns • Correct errors
Apply Your Knowledge Mr. Adams check does not clear because of non-sufficient funds. What adjustments do you make to his account? ANSWER: The amount of the check is added back to the patient’s balance. A fee for the returned check as well as any fees incurred as a result of the NSF check may also be added to the patient’s balance. Right!
Banking and Negotiable Instruments • Banking tasks • Writing checks • Accepting checks • Endorsing checks • Making deposits • Reconciling bank statements
Checks • Bank draft or order for payment • Negotiable • Signed by payer • Amount to be paid • Payable to payee • Dated • Name of bank
Checks (cont.) • Cashier’s check – issued by bank • Certified check – money certified available • Voucher check – stub for record keeping • Limited check – time limited
Checks (cont.) • Counter check – withdrawals • Traveler’s check – established denominations • Money order – guaranteed payment
Checks (cont.) • Check codes • ABAnumber • Fraction on upper edge • Geographic area and bank • Magnetic ink character (MICR) code • Numbers and characters • Read by computer
Checks (cont.) • Payer • Date line • Check number • ABA number • Payee • Amount box • Amount line
Checks (cont.) • Bank information • Memo line • Payer signature line • Routing number • Account number • Check number • MICR recording area
Accepting checks Review check before accepting it Third-party checks Checks marked “payment in full” Power of attorney Checking Accounts Personal Business ~ office expenses Interest-earning ~ for special expenses Checks (cont.)
Apply Your Knowledge What is a negotiable instrument? • ANSWER:A negotiable instrument is a check that is legally transferable from one person to another. A check must: • Be signed by the payer • Include the amount of money to be paid • Be made payable to the payee or bearer • Be made payable on demand or on a specific date • Include the name of the bank that is directed to make payment. Excellent!
Preparing a Bank Deposit • Endorsement • Blank ~ payee’s signature • Restrictive ~ specifies “for deposit only” • Special ~ third-party endorsement • Qualified ~ used byattorneys
Preparing a Bank Deposit • Endorsement • Endorse immediately • Endorse in appropriate place • Endorse in ink or use stamp
Completing the Deposit Slip • Postthe payment to the patient ledger card • Put the check with others to be deposited • Fill out a deposit slip BWW Medical Associates, PC 305 Main St. Port Snead YZ, 12345-9876 xx
Making the Deposit • Make deposits in person • Obtain deposit receipt • Electronic Deposits – Electronic funds transfers (EFTs)
Apply Your Knowledge What are the types of check endorsements? • ANSWER:There are four principal types of endorsement: • Blank endorsement - simply the payee’s signature. • Restrictive endorsement– specifies how the check may be redeemed. • Special endorsement – a third-party endorsement • Qualified endorsement – used by attorneys, who may accept a check on behalf of their client, Correct!
Reconciling Bank Statements • Reconciliation • Comparing the office financial records with the bank statement • Ensure that they are consistent and accurate • Performed once a month
Apply Your Knowledge Gold Star Answer! How do you reconcile a bank statement? ANSWER: You compare the office financial records (checkbook or disbursements journal) with the bank statement to be sure they are accurate. In the checkbook, you should mark all items that have cleared the bank to be sure all are accounted for. Once outstanding checks are subtracted from the bank’s balance it should match the checkbook balance.
Electronic Banking Advantages - improves productivity, cash flow, and accuracy
Electronic Banking (cont.) • Computer software will • Record deposits • Pay bills • Display checkbook • Reconcile the bank statement • Check bank’s safeguards
Electronic Banking (cont.) • Record Deposits • Enter each deposit • Print deposit slip • Pay bills • Log checks • Electronic bill pay • Display checkbook • Verify checks • Check withdrawals and deposits • Check balance
Electronic Banking (cont.) • Balance checkbook • Program displays checks and deposits • Mark those appearing on the statement • Enter balance from statement • Program performs the reconciliation
Apply Your Knowledge What are the advantages of electronic banking? ANSWER: Electronic banking improves productivity, cash flow, and accuracy. Computerized banking programs facilitate recording deposits, paying bills, displaying the checkbook and reconciliation of the account. Good job!
Accounts Payable and Managing Disbursements • Three types: • Payments for supplies, equipment, and practice-related products and services • Payroll • Taxes
Disbursements • Payments for goods or services • Recording disbursements • Set up disbursement journal • Enter check information and amount • Determine expense category
Disbursements • Record check amount under appropriate category • Split amount if necessary and enter total in check amount column
Writing Checks • Account balance must cover the check • Enter on disbursement log then write check • Have the doctor sign the check • Mark invoice with date, check number, and amount paid; place copy in file • Mail check
Writing Checks (cont.) • Disbursement log • Total and track expenses by category • Check calculations • Tracking • Look for changes • Helps control expenses