PROFESSIONAL BOOKKEEPING

1. PROFESSIONAL BOOKKEEPING Professional men are desirous of keeping their records down to a bare minimum. The nature of an optometrist practice typically makes it necessary for the optometrist to do his own bookkeeping and accounting, particularly during the early practice building years when the establishment of an adequate and proper office system is of greatest immediate importance.

2. The purpose of record keeping are many and varied. It should provide information necessary for the computation of the gross and net income and income tax, the determination of one's net worth, the determination of proper service and material fees, the determination of losses through credit accounts, the analysis of financial trends by month, year etc., the budgeting of personal expenses, etc. It should provide information easily accessible to government representatives, credit agencies and others, so that the financial soundness of the practice and its conformity to proper and approved methods may be demonstrated.

3. For the purpose of discussion the details of record keeping may be classified into several units, each of which may be identified by a printed forms, as follows: 1.Fee memorandum 2.Material order blank 3.Receipt blank 4.Cash disbursement memorandum 5.Check disbursement memorandum (check stub) 6.Bank deposit record book 7.Patient account sheet 8.Statement blank 9.Record of summarized daily income 10 .Disbursement register 11. Inventory form 12. Income and expenditure account

4. Aside from the above units, there are certain categories of office material to be filed which may be represented as follows: (1) accounts payable (2) account paid (3) accounts receivable (4) accounts receipted and (5) "bad debt" accounts FEE MEMORANDUM This item has the function of the sales slip usually employed in places of business, but differs in the duplicate for the patient is not considered necessary in professional offices. Essentially the fee memorandum is a substitute for memory. It should be made out either while the patient is still in the office or immediately after he leaves, before any other task is undertaken. It should contain notations relative to all of the arrangements with respect to the payment of the account that may have been made between the patient and the optometrist. The minimum information on this memorandum should be the patient's name, the date, the fees and material charges incurred by the visit, and the amount received in payment, unless the amount received is credited separately by a receipt.

5. At the end of each day the items on the fee memorandum are copied (posted) in the patient account sheet. When each memorandum is posted, it should be checked or with an appropriate symbol such as a large P. A sample memorandum slip is illustrated in Fig. 4 . The fee memorandum of cash transactions, etc., of fees paid in full at the time the service or material was provided need not be copied into the patient account sheets unless the patient already has an unpaid account in such cases all transactions should be recorded in full on the account so that the patient may know on the cash payment of an isolation item with a payment on the balance of an old account

6. NAME : Frank Baetiong DATE : 01-18-99 Address: MCU, Caloocan City Tel.No. 3641077 Particulars of transaction: Refraction P 150.00 Rx 1 pr. Lenses 700.00 ophthalmic frame 1200.00 Measurements 50.00 Dispensing 50.00 _______ P 2150.00 Amount paid : P 1075.00 Balance due: P 1075.00 Will pay on : 01-25-99 _______________________________________ Fig. 4. Sample of fee memorandum

7. Occasionally, the optometrist may adjust on the account, through a discount agreement as a gesture of good will, or as a correction of an error. In such cases a credit memorandum may be made on a regular fee memorandum slip and later posted in the patient account record. The total of such adjustments should be entered in the record of summarized daily income in the column headed, "discounts, bad debts etc. When the posting has been completed for the day, the total of all unpaid balances on the fee memoranda is entered in the record of summarized daily income in the column headed, credit income". The total of all of the amounts paid and recorded on the fee memoranda is entered in the record of summarized daily income in the column headed, "cash income".

8. B. THE MATERIAL ORDER BLANK The material order blanks are customarily supplied fee of charge by the patronis of ophthalmic supply companies. A few optometrists have their own printed, especially those optometrist who operate or supervise their own laboratories, These forms are usually bound in convenient sized volumes and with alternately explored and perforated to permit an original and a carbon copy of each order. The original and a carbon copy for each order. The carbon copy is retained in the binding as a permanent record of the order. When supplies are ordered by telephone, the order should be written out just the same, but the original copy may be thrown away when the order has been placed.

9. At the time the material is received, it should be checked against the carbon copy of the corresponding order; and, if the order has been properly filed, the copy should be marked with an appropriate symbol, such as the abbreviation "Red". Finally, when the invoice for the material is received, usually at the same time, it should be compared with the order, and, if correct, both the invoice and the carbon copy should be marked with a appropriate symbol, such as the letters, "O. K." The invoice may then be entered in the record of accounts payable and filed in the accounts payable file. As each volume or book of orders is completely utilized, it should be shelved with the dates showing its period of use marked on the back for easy location and reference.

10. C. RECEIPT BLANK A receipt is made out for every payment unless the notation of the amount received is more conveniently included in the fee memorandum. Care must be taken not to record the same payments on both the fee memorandum and at the receipt blank.

11. Receipt blanks may be purchased in ready to use book form or they may be ordered with the optometrist's name printed on the from. Some receipt books are made up with stubs for entering the information The receipt should show the name of the person from whom the money is received , the name of the person to who's account the payment is to apply, the date and amount of payment, occasionally the balance due is included on the receipt as a convenience to the payer. The sum of the receipt entered in the record of summarized daily income in the daily income column headed, "cash received on account". When a receipt book is completely utilized, the period of time during which it was used should be marked on the back and shelved for easy reference.

12. D. THE CASH DISBURSEMENT MEMORANDUM Paid out" memoranda can be written on the pads of small note papers. Typical disbursements that are to be recorded in this manner are certain small purchases, postage expenditures, C. O. D. payment personal cash withdrawals, refunds, etc. In certain instances these should be signed by the one receiving the payment. Receipts obtained in connection with the disbursement should be attached to the memorandum. The disbursement memorandum should include the name of the recipient, the nature or purpose of the disbursement, or other identifications such as "postage donation," the date, and the amount. At the end of each day these are posted in the disbursement register and marked with an appropriate symbol, as such the letter P, and filed in the accounts paid file.

13. E. THE CHECK DISBURSEMENT MEMORANDUM This item is represented by the check stub which is filled out whenever a check is written. Methods for recording check disbursement vary only slightly and are uniform for any given banking company. Instruction for proper recording in the stub should be obtained from the bank at which deposits are made and at which a checking account is maintained. The check stub should show the name of the party to whom the check is written, the date, the amount of the check; and if the nature or purpose of the disbursement is not obvious, an adequate notation should be included such as "for July acct., "rent", etc. Each bank deposit should also be entered on the last used stub and the balance in the account computed after each disbursement or deposit.

14. The stubs should be entered periodically, or daily, in the disbursement registered and marked with an appropriate symbol, such as the letter E to show that this has been done. When the monthly bank checks should be matched with the stub and another appropriate mark should be made on the stub to show that the transaction has been accurately completed. The monthly charges made by the bank should be recorded on an additional stub as though a check had been written for the amount and cancelled. If all computations are correct, the sum of outstanding, i. e. uncancelled, checks added to the balance shown in the last stub should equal the balance shown on the bank statement.

16. F. THE DEPOSIT RECORD BOOK Most banking companies provide each of their depositors with a small book which the depositor carries with whom at the time the deposit is made. The bank cashier enters the amount of the deposit is made. The bank cashier enters the amount deposited in turn fills out a deposit slip which the bank provides and which is then by the cashier as his records. If deposit books are not provided the depositor makes two copies of the deposit slip, one of which is endorsed by the cashier as proof of the deposit and returned to the depositor. The amount recorded in the deposit book or on the duplicate of the deposit slip is then entered in the most recently used check stub. Next a cash disbursement. If a cash disbursement memorandum is not made out, the book, or the duplicate of the deposit slip should be placed with the other cash disbursement memoranda for entry in the disbursement register at the end of the day. If the method of banking involves the retention of duplicate deposit slips instead of a deposit both each slip be clipped to the corresponding cash disbursement memorandum and filed there in the manner described for other receipts for cash disbursement.

18. G. THE PATIENT ACCOUNT SHEET There is a variety of methods and forms for keeping a continous record of an individual patient's account. Some prefer a printed form on filing cards of the same size as the clinic records so that when the account is balanced it may be filed with the patient's clinic record. A popular type of patient account sheet is one which can be inserted in a loose binder. Fig. 5. If the balance due is computed every time an entry is made and shown in the "balance" column, a check for correctness can be made at any time by subtracting the sum of the charges and comparing to the currently indicated balance.

19. NAME : DATE : EXPLANATION : CHARGE : CREDIT : BALANCE : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : Fig. 5 PATIENT ACCOUNTING SHEET. THE SPACE UNDER SIGN NAME IS USEFUL FOR NOTATIONS AS TO ARRANGEMENTS FOR PAYMENTS, ADDRESS, ETC.

20. The entries for the patient account sheet are obtained from the fee memoranda and the receipts. If the account is carried through a long period of time or through many payment installments, it may be necessary to continue the accounts, as for example, a school, an industry or a familiar. The added sheet in these cases is inserted in front of the old one and the "balance" of the column of the new sheet and identified as "balance forwarded". The same notation, is made at the bottom of the old sheet, so that it will not be mistaken as a separate account. When an account is completely settled, the sheet, or sheets, should be removed and filed

21. H. THE STATEMENT BLANK A monthly statement is sent to each person owing a balance on his account. The statement is copied directly from the patient account record. It should contain the optometrist's name, address, telephone and office hours, the name and address of the person owing the accounts, the date of mailing the unpaid balance forwarded from the previous months, the date or dates on which charges or credits were made during the month, the amount of the charge or credit corresponding each date, and the balance due. Fig. 6

22. J. DE VEGA O. D. 115 Rizal Ave. Manila Tel. : 3-36-36 July 1, 1990 Hrs.: (Date) 9-12 a.m. 1-5 pm Mr. Sixto Buko 1995 Asturias St. Sampaloc, Manila _____________________________________________________ 6-7-90 P 25.00 6-7-90 Cash - P 5.00 Balance due : P 20.00 Fig. 6 Sample Monthly Statement

23. The statement is the patient's record amount should be retained by him. If the patient's mailed a payment to the optometrist and includes the statement with the payment, the receipt should be clipped or stapled to the statement and both should be returned for the patient's file. If an account is not settled, the mailing of the statement of the account should be repeated monthly until paid, or until it becomes obvious that there is no hope of collecting the payment. In the latter case the patient case the patient account sheet is removed from the accounts receivable file and placed in the "bad debt" account file. The amount of the balance of the account so removed should be entered in the record summarized daily income in the column headed "bad debts".

24. I.THE RECORD OF SUMMARIZED DAILY INCOME This record represents an account of the gross income provided by the increase. This record, together with the disbursement register provided all of the essential data for an income and expenditure study for a given period of time. Certain systems provide a single sheet for both the record of summarized daily income and the disbursement register, thus providing the convenience of a "one book" system. The two forms can be obtained to fit the same binder.

25. A source of confusion is the meaning of the word "cash". It is sometimes used to describe all monies other than checks; in this sense a check is not cash. On the other hand "cash" may represent all payments received in immediate payment of an indebtedness, as distinct from money received in payment on an existing account. Thus one may say that a certain percent of his practice is on a "cash basis" the balance being on a "credit" basis. Another source of confusion is the meaning of the word "cash". It is sometimes used to describe all monies other than checks; in this sense a check is not cash. On the other hand "cash" may represent all payments received in immediate payment of an indebtedness, as distinct from money received in payment on an existing account. Thus one may say that a certain percent of his practice is on "cash" basis.

26. Another source of confusion is the meaning of the word "receipt". It may refer to the memorandum showing the amount paid on account, or it may represent an amount of money received regardless of its function. Hence the phrase or column heading "daily receipts" at a complete loss to appreciate the heard combination expression, "cash receipts". Not much easier to understand is the word "income". Strictly speaking, the payment receive on a patient's account does not represent "income". Nevertheless the payments on such accounts must certainly "come in" to keep the practice going. So far as income taxes are concerned the establishment of an accounts by a patient is "income" for the practitioner at the account by a patient is established, rather than at the time the account is paid. In this sense the credit accounts on the optometrist's records are considered the equivalent of "cash".

27. Therefore in order to make use of any of the presently available systems the optometrist usually has to decide what item goes in each column by analogy with a series of examples given by publishers of this or that system. It is not proposed here to solve these problems. Rather, one method is described with assumption that the familiarity thereby establishment aid in learning how to use any one of the accepted system. A sample form for the record of summarized daily income is shown in Fig. 7

28. Record of summarized daily income month of ______________ Cash receipts Credit Acc't Distrib. Of Income Source Days of week Date Cash income Cash rcd on acct. & Misc. & special Credit income Disct. Bad debts Ophthal. materials Fees Mon Tue Wed Thu Fri Sat Mon Tue Wed Fig. 7 - SAMPLE RECORD OF SUMMARIZED DAILY INCOME

29. Day of week - these may be written in as daily entries or printed into the form. If they are written in 32 spaces up and down will be adequate to account for all the days of the longest month and the monthly total. This number would leave spaces for Sundays too. Since the Sunday spaces are ordinarily not used, the resultant empty spaces would show the weekly divisions in the month, or may be used to insert weekly subtotal if such information is deed. Date - in this column should be entered the day of the month. Cash income - the daily total received in payments on debts or payments on debts charges incurred or established on the same date. This total is obtained by adding the amounts received and recorded on the day fee memoranda.

30. Cash received on accounts - the daily total received in payment on previously posted accounts. Payments or deposits received in advance of the charges should also be included in this figure. Miscellaneous and special- all other categories of cash receipts such as refunds for overpayments of association dues or suppliers, accounts, interest or dividends of association received on investment or interest bearing accounts, monies received in insurance companies in payment for losses against which insurance was maintained bank withdrawals, borrowed money, the sale of equipment etc., prizes, rewards and all other extra practice monies received. Credit income - this represents the total of the "balance due" items recorded on the fee memorandum.

31. Discounts, bad debts, etc. - in this column should be entered the amount of any deduction made on an existing account for any reason whatsoever. Also the amount of any or all accounts removed from the accounts receivable file to be classified as a "bad debt" should be included in the figure entered here. Ophthalmic material - this is the first heading of a series of columns that are not essential to the accounting system as such, but which are useful in making an analysis of the sources of ones income. These headings are often varied to suit the type of practice. For example, if one wished to determine the income from the replacement of a desired period of time. Similarly one might employ separate column for the various types of services rendered. The sample record in Fig. 7 shows several columns without headings, to facilitate analysis of this nature.

32. As set up the figure, the entry under "ophthalmic material" would represent the daily total of charges for lenses, frames, temples, major repairs, etc. This total can be obtained by the separate addition of all charges for materials recorded on the fee memoranda whether they have been paid for or not. When all of the entries have been made, the total amount of money taken is represented by the sum of the three columns order the general heading of "cash receipts". The gross of income equal to the sum of the items in the column headed "cash income", "misc. and special, and credit income" minus the items in the columns under the general heading of "distribution of income sources" should equal the sum of the entries under "cash received on accounts" and "discounts, bad debts etc." will indicate the increase or decrease of the total accounts receivable

33. DISBURSEMENT REGISTER D I s t r I b u t I o n Date Check # Paid to or for Amount paid by check Amount paid in cash Ophthal. Material Current oper.Exp. Prof. Exp. Taxes Payroll Prof.salry & w/drawals Depreciable purch. Bank dep. Loans I. THE DISBURSEMENT REGISTER This record represent an accounting for all monies paid out. As in the case of the recordsummarized daily income, the disbursement register has a variety of forms. One of the types that is useful in an optometrist practice is shown in Fig. 8.

34. DATE - in this column is inserted the date of each entry. Since there may be several entries on a given date, the same date may be repeated in several space. Check number - the purpose of inserting the check number in a record system is to prevent the inadvertant omission of the entry of a check. Paid to or for - the purpose of the entry in this column is to identify the disbursement. It may be sufficient to enter very brief notations such as "rent", postage, "acme co.", etc. Amount paid by check - this amount is copied directly from the check stub. All amounts catered in this column should have a sequence number in the "check number" column. Amount paid in cash - the amounts entered in this column are copied directly from the individual cash disbursement memoranda.

35. Distribution - in this column are represented several categories of expenditures. The heading listed are suggestive only, but are suitable for the usual purposes of an optometric practice. Each disbursement is entered twice in the register, once in either the "check" or "cash" column, and again in the proper "distribution" column. The sum of all the entries in the columns under the general heading of "distribution" should equal the sum of the entries in the two columns headed "amount paid by check" and amount paid in cash". Ophthalmic materials - this includes all disbursement for lenses, frames, mounting, screws, pads, temples, cases, etc. Current operating expenses - this includes rent, light, water, telephone postage, regularly consumed supplies such as pencils, etc. ; soap, light bulbs, batteries, cleaning cloth, etc. minor service, repairs, and maintenance expenses ; premiums for insurance against malpractice, liability, fire, and other casualties, advertising, reception room magazines and papers; transportation for out-of office calls; interest on loans obtained in connection with the establishment, improvement, and maintenance of practice facilities, checking account fees, etc.

36. Professional expenses - in this column should be included traveling and other expenses in connection with optometric conventions, educational meetings, etc. In the same column may be includes donations and contributions, professional dues and memberships, professional journal subscriptions, books reprints, etc. Taxes - in this column may be included the annual license renewal fee, tax on real estate representing a part of the practice facilities, fees for licenses of any type that may be necessary to the practice, etc. Income taxes paid by the optometrist are not entered here as such taxes are not levied upon the optometrist himself. If such taxes are paid out of the practice account the disbursement should be entered in the Personal Salary and Withdrawals column instead of the taxes column.

37. Payroll - in this column should be entered all disbursements for wages and salary except the optometrist personal salary and withdrawals. Disbursements for secretarial help, assistants, janitor, etc. Personal salary and withdrawals - ordinarily the only entries made in this column are the regular withdrawals made by the practitioner as a personal salary and the periodic withdrawals based on the profits shown in the income and expenditure analysis. Many optometrist use the office checking account for their personal checks and pay for personal cash expenses from the office funds. For example, the optometrist may withdraw P50.00 per week for personal use in addition pay the monthly house rent, or buy new suit of clothes, such items should all be entered as personal withdrawals. On the other hand, if the office is the practitioner's house , a certain estimated percent of the house rent, and in fact a certain percent of all building upkeep costs should be entered under current operating expenses. For example, if the house rent is P75.00 per month and it is estimated that one-third of the home is utilized by the practice, the disbursement register should show P50.00 entered under "personal withdrawals" and P25.00 entered under "operating expenses".

38. Depreciable expenses - entries in this column represent purchase of items which are not directly consumed in the practice, but which depreciate in value over a period of several years. Included among such items would be most of the ophthalmic, clinical, and laboratory equipment, furniture, property purchases and building improvement which represent a part of the practice facilities, etc. If equipment is purchased on an installment basis, the individual payments should be entered in this column, less the share of the payment or the separate payment which represents interest or carrying charges. Interest and carrying charges should be entered under "current operating expenses".

39. Deposits - these are copied directly from the bank deposit book or from the duplicate deposit slips. If the monthly bank statement shows an additional deposit on the account from interest earnings or collections on assigned patient accounts, such as deposit should be treated as though it had been collected in the office and deposited, and therefore should be entered not only as a deposit in the disbursement register but also as an item of income in the record of summarized daily income. Loans - all disbursements pertaining to loans, whether they represent all disbursement made as a long to someone or a disbursement made in payment on a loan made to the optometrist.

40. INVENTORY SHEET NUMBER YEAR NUMBER ITEMS DESCRIPTION OR OTHER IDENTIFICATION TOTAL COST DEPRE CIATION NET VALUE THE INVENTORY FORM In general the greatest need for taking inventory is for purposes of computing net income. Hence it is usually done at the close of each fiscal year. INVENTORY SHEET

41. A variety of forms are available. Fig, 9 illustrates a useful type. In using this type it is convenient for the optometrist to examine account all items in the office and laboratory. Everything in the office and laboratory should be itemized. In general, stock items such as lenses, frames, and mountings are not depreciated, but are evaluated at current catalogue list. Only stock items which are damaged or out of use are depreciated by direct estimation.

42. Equipment is itemized piece by piece at invoice cost. The percent of depreciation is obtained by multiplying the age of the item in years by the annual percent depreciation rate estimated for the items. The annual depreciation percentage rate is most easily obtained by dividing the estimated number of years of usefulness of the instrument into 100. For example, if it is estimated that an ophthalmometer costing P250.00 will last 12 years it will have a depreciation rate of 8-1/3%. If the instrument is three years old at inventory time, it will be entered on the inventory sheet as follows: 1 - ophthalmometer P250.00 P250.00 25% P187.50

43. when the inventory has been completed and all net values have been computed, the due items of all sheets are totaled. The figure so obtained is an essential item in the income and expenditure accounts because an increase in inventory is considered income while a decrease in inventory is treated as an expenditure.

44. J. THE INCOME AND EXPENDITURE ACCOUNT Many optometrist prefer to turn their account records over to certified public accountant for the analysis of net income. For this purpose the following records must be made available to the account : (1) the record of summarized daily income ; (2) the disbursement register. As a check against the correctness of the records, it is to the advantage of the accountant to know also ; (1) the cash on hand and in the checking accountant at the beginning and end of the fiscal year ; (2) the total of accounts receivable at the beginning and end of the fiscal year ; (3) the inventory total at the beginning and end of the fiscal year.

45. If the optometrist wishes to do his own computing he will find it convenient to use a form similar to the represention in Fig. 10. Monthly income and expenditure analysis may be made on the same form by using monthly instead of annual totals. Since inventories usually made annually rather than monthly, the net inventory values must be estimated from month to month beginning with the correct annual value for the first month of each fiscal year and making a monthly depreciation adjustment of depreciable material and equipment.

46. K. PAYABLE FILE MOST OPTOMETRIST THE BULK of their purchasing is on a credit basis. In general a special record for current accounts payable is not needed in an optometrist office. Because the number of payable accounts are relatively few in a professional practice, it usually suffice to keep the "memoranda" of payable accounts properly. The following are some items filed in the accounts payable file: (a)  1.purchase and delivery slips. These are the memoranda accompanying the purchase or delivery of supplies and material when the delivery or purchase is made prior to the preparation of an invoice by the office of the company from which the purchase is made.

47. 2. Invoices. The invoice contains the following information: Name and address of the company, Name and address of the optometrist, date and number of the order date and number of the delivery or sale, identification of item purchased, cost of items purchased and terms of payment.     3..Monthly statements. The monthly statement is issued on or about the first of each month to show the amount owed by the optometrist to the company. The arrival of the monthly statement constitutes a request for payment.

48. ANNUAL INCOME AND EXPENDITURE ACCOUNT YEAR _______ FROM RECOD OF SUMMARIZED DAILY INCOME I II Cash income ----------------------------------------------------------------------- Miscellaneous & special --------------------------------------------------------- Credit income ----------------------------------------------------------------------- Discounts, bad debts, etc.-------------------------------------------------------- FROM DISBURSEMENT REGISTER : Ophthalmic material -------------------------------------------------------------- Current operating expenses ---------------------------------------------------- Professional expenses ----------------------------------------------------------- Taxes --------------------------------------------------------------------------------- Payroll -------------------------------------------------------------------------------- Personal salary & withdrawals ------------------------------------------------- Depreciable purchases ---------------------------------------------------------- FROM INVENTORY FORMS : Total net inventory due end of previous year ---------------------------------------------------------------- Total net inventory value at end of current year ----------------------------------------------------------------- FROM ACCOUNTS PAYABLE FILE : Total accounts payable at end of previous year --------------------------------------------------------------- Total accounts payable at end of current year ----------------------------------------------------------------- COLUMN TOTAL --------------------------------------------------( 1 )( 2 ) Annual net income = total (1) - total (2) = ___________

49. Cash discounts - paying a bill within specified period usually entitles the optometrist to cash discount. Ordinarily the net amount issued in full within 30 days from the date of the statement, and a 2% discount is permitted if payment is made within 10 days of the date of the statement. Optometrist who fail to pay their bills on time are often penalized by the addition of a "credit charge", or are put on C. O. D. basis until the old account is settled. The importance of takings the 2% discount is settled. The importance of taking the 2% discount regularly cannot be over emphasized. It can be readily computed that the 2% annual interest. Of greater importance is the fact that optometrists regularly qualifying for the 2% discount soon build up a high credit rating and enjoy the advantages of being on a preferred credit list.

50. L. ACCOUNTS PAID The account paid and cash disbursement memoranda should be filed alphabetically according to the name of the company or person to whom paid. A folder should be inserted for each account dealt with regularly. Special binders may be inserted for "miscellaneous", "postage", etc. M. ACCOUNTS RECEIVABLE With few exceptions all of the accounts receivable will be represented by the patient account sheets. These may be kept in a loose leaf binder in a filling cabinet may be used for non-patient accounts receivable.