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GP accounts – how to get your financial act together

Accurate and informative accounts are crucial as GPs get to grips with the new contract, says Dr John Couch

Partnerships' year-end accounts will assume extra importance under the new contract. NHS income and pensions are now calculated in a very different way. While all practices should attempt to monitor their finances regularly from month to month, the mists of the new contract will only start to clear as the 2004/5 accounts are analysed for a variety of reasons.

New GP pension scheme

As of April 1 there is no longer a prescribed month-to-month superannuation figure applied by the PCO to each practice's income. Each GP's employee superannuation will be 6 per cent of their NHS profit (total NHS income minus total NHS expenses).

This means those practices that maximise their NHS income and minimise their NHS expenditure will be able to achieve higher NHS pensions.

As the NHS profit figure can only be calculated from the year-end accounts, this will leave the previous year's contributions open until several months into the following year. Practices are being advised to make monthly in-year superannuation payments based on the previous year uprated for the 1.47 per cent Review Body increase.

Once the year-end accounts have been agreed there is likely to then be a balancing payment – assuming, as predicted, net NHS profits are greater than the figure already superannuated. It will be very important to get this calculation accurate.

Planning for increased drawings

Since we voted, every aspect of the new contract has been the subject of negative speculation or alteration.

Nevertheless it is still likely that most practices will be better off, although we will all want to confirm this! It is only when the whole-year accounts are studied – and compared with other practices – that we will be able to be certain.

Most practices are only making modest increases in partner drawings for 2004/5. Once 2004/5 accounts are available it should then be possible to be more liberal.

Identifying non-recurrent monies

There will still be NHS payments that are non-recurring. It will be important to identify these in the accounts. Non-recurrent money should not be earmarked for recurrent expenditure for obvious reasons.

Monitoring staff costs

For GMS practices, staff costs are included in the global sum/MPIG. All practices received only 1.47 per cent uplift in staff costs for 2004/5. There may be no uplift in 2005/6! To retain staff, most practices will need to offer a bigger pay increase, especially if Whitley awards are higher. Once again in-year review is important but the year-end accounts will provide much food for thought. It has never been so important to get the balance right between efficiency and profitability.

Partners' current account balances

The year-end accounts show the partners' individual current account balances. This is the money available for each partner to draw once the accounts are agreed. Practices must be very careful to decide how much money they need to carry over as debtors into the new financial year to invest in their

business. Enhanced services and the quality framework are likely to need some expenditure.

Failure to allow for this could embarrass your partnership bank balance later in the year.


As well as increased staff costs, payments under quality framework will account for between a quarter and a third of practices' NHS income. The largest proportion (two-thirds) will not be paid until just into the new financial year. This will have an adverse affect on cash-flow.

Practices would be wise to use their most recent set of accounts, along with a projection of income and expenditure, to produce a cash-flow forecast.

It would be a mistake to spend all the Q&O money in advance.

Get your accountants onside

For all the above reasons it is vital to ensure your accountants incorporate the changes into your accounts for 2004/5. Most of the specialised medical accountants are gearing up for this, but you should check the following points anyway, especially if you are using a general accountant.

lAre your accountants aware of all the changes? Can they produce your accounts quickly? (By quickly I mean a maximum of six months after the year-end.) Are you confident they will be able to produce the all-important 'NHS profit' figure for your superannuation?

lAre they aware of the need to produce some comprehensive 'new contract' income and expenditure statistics with the accounts (so you can compare your performance with other practices)?

lWhat are their plans to deal with the final Q&O payment?

In light of the above, you should also ask them whether you need to make any bookkeeping changes for 2004/5.

Reviewing your bookkeeping

Your accountants can only work with the figures you give them. To put yourself in the best position to benefit from the new contract changes you should look at the following.

lYou should review your bookkeeping and make comprehensive, clearly marked, entries of all NHS income and expenditure.

lYou should be conservative with drawings increases for 2004/5. You should draw up a cash-flow forecast for 2004/5. You should monitor new contract income carefully.

You should monitor expenses too, especially staff costs.

lYou should review your 2003/4 accounts carefully to ensure your debtors are adequate. Finally, don't forget to review private income. Practices should never rely on the NHS alone!

John Couch is a GP in Ashford, Middlesex

Things to check with your accountants

lAre they aware of all the new contract changes relating to pensions and income?

lCan they produce your accounts quickly? (a maximum of six months after the year end)

lWill they be able to produce the all important 'NHS profit' figure for your superannuation

lAre they prepared to produce some comprehensive 'new contract' income and expenditure statistics with the accounts, so you can compare your performance with other practices?

lHow will they deal with the final Q&O payment?

lWhat advice do they have on practice bookkeeping changes for 2004/5?

Putting yourself in a strong position to

benefit from new contract changes

lReview your bookkeeping and make comprehensive, clearly marked, entries of all NHS income and expenditure

lBe conservative with drawings increases for 2004/5

lDraw up a cash-flow forecast for 2004/5

lMonitor new contract income carefully

lMonitor expenses, especially staff costs

lReview your 2003/4 accounts carefully to ensure your debtors are adequate

lDon't forget to review private income – practices should never rely on the NHS alone!

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