How a finance partner can make your practice feel more secure
Dr Jeremy Gray feels his role as finance partner is central and essential to his partnership
here he describes what the job entails and how every modern practice can benefit from it
When I was looking for a partnership
I knew I had
to be able to understand the practice accounts. I hadn't been taught any practice finance at medical school but I wanted to know how the practice earned and spent its money.
After five years with the practice I took over responsibility for the accounts. I work closely with our practice manager and we both liaise with our accountants. Confidence in a clearly understood accounts system allows for firmer decision making. Confusion about 'can we afford this' leads to delayed decisions and probable loss of income.
I see the finance partner position as central and essential in every partnership. It doesn't have to be the senior partner's job. The most suited partner should do the job, although in my practice all roles are up for rotation, preventing entrenchment.
The finance partner's role is to inform the partnership how the practice is performing financially and to suggest potential changes that would have a beneficial effect. Much of the basic work is done by the practice manager. My role is often to decide how figures should be presented so that the detail the partners will want to see is accessible. In addition there are several key areas of activity.
Prevention of fraud
There have been many publicised cases of practice fraud this is probably just the tip of the iceberg. Luckily most staff and partners are scrupulously honest, but are you prepared to take the risk?
When our current practice manager was appointed she told us how our petty cash withdrawals had gone up from £100 to £500 a month in the two months before our last manager left. We had no checks in place. The new manager also showed us five simple ways she could remove money from the practice without us knowing. Since then we have instigated a system of checks. A different partner is responsible for carrying out each one.
Monthly autopay system
Unlike large cheques, the bank allows this to go forward on the say-so of the practice manager. There is nothing to stop her upping her salary one month and lowering it again the next, so one of the partners reviews each month's statement.
Credit card use
The practice needs one so vital goods can be ordered over the phone, but as a south London school found recently, a credit card can be used to buy clothes and meals out. Another partner therefore checks the statement monthly.
This can be removed by the member of staff who takes it over the counter before it is entered into the receipt book. If the practice did not know it came in then it would not be missed. This fraud is more difficult to prevent, but a third partner checks the monthly statement for variation.
Patients often send in cheques for private insurance work with no payee name written in. All a member of staff has to do is to write their own name in and remove the cheque from the system. Again this can go undetected, but a fourth partner checks the monthly statements and invoices as well as tracking these payments back through the system.
Monthly direct debits and standing orders
We are in the process of setting up a system of checking all direct debits regularly.
Presentation of the accounts
The accounts hold the key to business performance. Previously our practice expenses always kept abreast of our profit increases, resulting in very little extra drawings. The last two years have been more profitable.
We changed accountants four years ago because they were unable to produce accounts within six months of the end of the financial year. Our current accountants meet us within six weeks. Also, by using an accounts package, our practice manger is right up to date with our financial position and can accurately estimate our year-end profits by the end of the third quarter. This brings more certainty about drawings and a greater feeling of financial security.
This year we are meeting our accountants to clear up obvious queries before the annual accountants' meeting. We also want a more detailed analysis of NHS and private income and a breakdown of individual external income generation by partner as well as by activity.
Taking responsibility for money
A confident finance partner reduces partnership worry by presenting clear financial options and carrying these out. We recently finished an extension to our surgery. We had to raise money from the bank and PCO. Inevitably there was a shortfall from the PCO and the partnership bore the risk of cost overruns. Short-term this is painful but I was able to point out the long-term potential of owning a larger building and attracting rent for years to come. The partners were reassured that the overall plan made sense.
We all know that the way to make most money is to have a large list size with as few partners as possible, but none of our partners wants more patients because they would not like to see a consequential fall in service quality. The finance partner has to understand the underlying partnership philosophy to suggest moves that fit in with this.
In our case that means attracting additional income in other ways such as allowing partners sessions out to do research, training and teaching. All these 'deals' have to be hammered out so that both profits and patient services stay right. The finance partner has a crucial role here. General practice is challenging in the flexibility for partnerships to decide how they are going to provide patient services and, with new GMS or PMS, who will provide them.
The finance partner is not a finance expert in the outside world. Some decisions can have long-term effects on practice income. For instance, property loans can last more than 20 years with some fixed rates carrying large penalties for changing your mind. It is therefore important to know when to seek external financial advice.
We have recently rethought how we should treat our partnership-owned premises. Having always planned for new partners to buy out old ones, we became aware that new partners were not always as keen as we were. We changed the philosophy so that retiring partners could remain as property holders. In effect this made them commercial landlords, earning an income after retirement.
We are also beginning to look at how much money the practice should keep in its partners' capital account and how much should be taken as profits. Also, whether there are any investment opportunities for spare money that would provide an income stream in the future. For example, this might be in developing services for PMS Plus-type activity. This money would then be unavailable for drawings, a new test for our practice philosophy.
Jeremy Gray is a GP in Battersea, south London