GPs must never collude in dishonesty over insurance
For the 2004/5 financial year practices should get their accounts back from the accountant as quickly as possible, says Dr John Couch
Traditionally many practices wait more than six months from the financial year-end to get their accounts back from the accountants. For the 2004/5 financial year, however, there are compelling reasons to try to bring the timetable forward.
The most important reason relates to the 2004/5 balancing superannuation payment. Now that GP principal NHS superannuable income is calculated from NHS profit, it is no longer possible to pay an accurate quarterly amount, as used to be the case under old GMS. Previously the PCT would calculate the superannuation from that quarter's fees and allowances, deduct the 6 per cent GP contribution and add to this the employer's contribution.
Now practices have to estimate how much to pay, usually based on the previous year's profits plus a 'guesstimate' of increased profits, including both Q&O and enhanced services. The calculation is even more complicated as extra income and expenditure categories now fall under the 'NHS' umbrella. Even accountants have had a struggle in getting to grips with the new scheme! Therefore few practices will get anywhere near an accurate figure until the accounts are drawn up.
Profits for 2004/5 are forecast to be up to 30 per cent higher than 2003/4. Since practices will have to pay both the employee (6 per cent) and employer's (14 per cent) superannuation on the balance, 20 per cent in all, the potential payment could be very large. For instance if an average practice has been paying based on the 2003/4 profit figure and profits increase 25 per cent, this could mean a superannuation top-up bill of around £4,000 per partner, payable towards the end of 2005.
Most practices will be setting aside some of their Q&O balancing payment to cover this, so the sooner this figure is known the better for cash-flow and drawings.
Another important, pension-linked, reason for getting quicker accounts is that national figures will be used to calculate an updated set of dynamising factors. All of our pensions will be increased as a result. Individual pension planning will be made more difficult if there are long delays.
Accurate income tax figures
Tax returns must be returned to the Inland Revenue by the end of January 2006. These cannot be completed without accurate accounts. The balancing payment for 2004/5 is also due by the same date and may be the largest one we have ever paid, due to the high profit levels.
The figures must be accurate to avoid overpayment. Any balancing superannuation payment will attract tax relief so once again speedy accounts will be essential.
And if there is the possibility of extra drawings, you will want to take them as soon as possible. The faster the accounts are done the sooner this can happen.
It will be difficult to have a clear idea of cash-flow until the variables discussed above have been resolved. For a business this is like sailing without a compass. Once we can fill in all the boxes on our spreadsheets we can plan for 2005/6 more accurately.
Why accounts can be delayed
There are a number of steps involved in achieving signed accounts, and delays can occur at all stages. Practices must close the books (usually electronic) on the financial year, list debtors and creditors, stock-take and gather all records ready for the accountants. The date the accountants visit to check the figures is usually fixed in advance, with the time taken directly proportional to the clarity, accuracy and comprehensiveness of the practice book- and record-keeping.
Once this is done the accountants take the figures away and work through them, assimilating then into the 2004/5 accounts. It is common for there to be queries back to the practice at this stage. Once the draft accounts are sent to the practice they need to be checked and discussed by all relevant parties, usually the partners, practice manager and bookkeeper.
Queries and errors that arise need to be conveyed back to the accountants. Alterations have to be agreed. Lastly, the finalised accounts have to be signed by all those who were partners in the 2004/5 financial year. Each partner will then receive a copy with one for the practice records.
It therefore follows that in order to get faster accounts this year you will need to address each area to eliminate delays. The steps outlined in the box below should help.
The accounts should show your superannuation balance and income tax due for January 2006. Make sure you have the necessary funds arranged. You should also now be able to complete the gaps in your cash-flow and concentrate on making subsequent years just as successful.
John Couch is a GP in Ashford, Middlesex
The following steps should help
1. Arrange for your accountants to visit sooner this year The date should be made to suit you not them. You are the client. Clearly you will need a certain amount of time to complete the year-end work, but two-three weeks should be ample provided you are well organised. A visit four-six weeks after your year-end should be perfectly feasible.
2. Keep organised throughout the year Devise a meticulous system to complete and reconcile the books and file receipts at the end of every month. This will result in there being less to do at the end of the financial year.
3. Make dedicated time Your practice manager and/or bookkeeper must be given dedicated time leading up to and just after the year-end to get the accounts organised. Remember that you will reduce the time your accountants spend on your accounts by having clear, accurate records. If you are not sure what they need, ask them now.
4. Have an action plan Work closely to this. In particular draw up a list of out of the ordinary occurrences such as partner changes, drawings variations (with reasons) and superannuation allocation. If you use a variety of financial spreadsheets, print these off. Have a disk as well as a paper copies of the accounts ready.
5. Make the accountant's visit short and sweet Allocate a quiet room with computer access to your accounts. Have all paperwork to hand, labelled and in date order. Make sure your bookkeeper or practice manager is easily accessible on the day to deal with queries.
6. Agree a deadline for the draft accounts Your accountant may come early but has many other clients. Make your voice louder. Chase hard if your accounts have not arrived by your deadline.
7. Respond promptly to further queries There are always a few, once the accounts are analysed more closely.
8. Discuss the draft accounts promptly When the draft accounts arrive, arrange a partners' meeting quickly and circulate copies of the accounts in advance. Aim to discuss only accuracy at this first meeting. Statistics and business points can be dealt with separately and need not delay the accounts. List any queries and errors for the accountants and return them promptly with a named practice member for liaison.
9. Sign off the accounts quickly Once completed get all partners to sign and return by registered post to your accountants. All partners should then receive a copy.