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At the heart of general practice since 1960

Dealing with a frequent consulter

Meeting with your practice accountant

Dr Melanie Wynne-Jones gives practical advice on how to prepare your finances

As a GP registrar, finance is an important part of your education, and with luck your training practices will allow you full access to their accounts, which are of course, confidential.

How is general practice finance structured?

This has become a lot simpler with the new contract, although most practices will be cross-referencing this year's accounts with their old GMS/PMS accounts.

Before you meet the accountant try to get at least one session with the practice manager who can show you the day-to-day accounting systems – NHS/private income, practice expenses, monthly financial reports, partners' drawings, staff wages, PAYE and so on.

The financial year's paperwork is sent to the accountant who draws up a draft set of accounts for partners; most practices will then meet with the accountant.

The accounts analysis may include:

lNHS income and reimbursements.

lNon-NHS income.

lBreakdown of expenses.

lLoans and notional or cost-rent income relating to the premises (if owned by some or all of the partners).

lA balance sheet – this shows the practice's 'actual' value on the last day of the financial year. It includes cash in the bank account, how much the premises, contents, drug stocks and other assets are worth, bills yet to be paid, and money owed to the practice. It also shows how much money each partner currently has invested in the practice and premises.

lHow the profits have been shared between the partners, according to prior agreement This may be a simple split, but some income or expenses may be allocated individually (for example, seniority payments or premises-related items).

lHow superannuation deductions have been allocated between the partners.

lHow much each partner has drawn against their expected profits for the year. During the year partners have to estimate how much they can afford to 'pay' themselves each month; the accounts show whether they got the sums right. The aim is to end up with an undrawn 'bonus' rather than an unexpected deficit!

What factors help or hinder financial success?

Switched-on practices usually have a good understanding of these, but specialist medical accountants usually provide anonymised comparative information from other practices. There are also published national norms and ranges, so that practices see how their overheads and take-home pay compare.

The accountant may also identify where performance could be improved, for example:

lEmploying extra staff to generate more income or reduce stress

lProviding new services to boost practice income

lCost-efficiency savings that will cut expenses and boost profits.

Whether and how these expert suggestions are implemented is up to the partners, and will depend on how the practice weighs profitability against patient services and partners' work-life balance. Partners may not all share the same priorities, which can sometimes lead to conflict.

If you are intending to become a non-principal it is worth remembering that your prospective practices' attitudes to these issues can significantly influence the terms and conditions they offer to locums or salaried doctors.

What affects individual partner's bottom line?

lOverall profits.

lPartners' workloads and profit shares. With luck you will be told how these have been agreed; some practices have very complex rules or points systems, and how these are allocated can sometimes be cause for resentment.

lWhether the practice or the individual pays professional subscriptions, car expenses and so on (this has implications for profit levels, profit shares, tax and superannuation).

lOther expenses set against the partner's income – some partners may be making extra superannuation payments, or paying interest on surgery loans.

Should you employ an accountant yourself?

As a salaried employee, your tax affairs are likely to be relatively straightforward. Once you become a freelance or partner you will need to fill in your own tax return, and keep full records of income and expenses. An accountant can advise you on what records you need, keep you on track and by helping you to avoid (not evade) tax, may save, rather than cost, you money. Falling foul of the Inland Revenue is expensive in both time and money and not recommended.

It's well worth asking your accountant to scrutinise a prospective practice's accounts before you join. If you become a partner your finances will be interlaced with the practice's; switching to the same accountant keeps the paperwork simple and costs down. The practice accountant must treat all partners equitably and can act as an honest broker in disputes.

Melanie Wynne-Jones is a GP in Marple, Cheshire

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