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How to... read practice accounts

If you're looking to join a new practice as a partner, you will need to look at its accounts before coming to a final decision. Dr Stefan Cembrowicz offers advice on what to look for

If you're looking to join a new practice as a partner, you will need to look at its accounts before coming to a final decision. Dr Stefan Cembrowicz offers advice on what to look for

Double entry bookkeeping – still the basis of today's accounts – was invented by the Venetians in the 14th century to run the complex debits and credits of their empire. Today's GP finances, though less exotic, can still seem cryptic to the uninitiated.

And registrars may get little experience of GP accounts during their training year. Having come from salaried posts, the implications of being self-employed will be new to you, as will working with partners who share workload, practice expenses, income and hence profits equally. (Your own personal expenses will also need to be recorded in separate accounts.) When you are seriously considering joining a partnership – preferably when on a final shortlist – you need to see the accounts. They may be as well guarded as the Hoard of the Nibelung but you do need to know what your likely income is.

What they look like

A good set of GP accounts will start with three to four pages of the accounts proper followed by eight pages of notes to the accounts.

The first page will simply show income and expenditure, with the all-important bottom line – the practice's net income after deduction of all expenses, which partners then divide into shares. The previous year's income is included for comparison.The next page shows how profit is allocated between partners. Any income not pooled (such as seniority payments) will be visible here. Part-timers, those on fixed shares or those not yet on parity, taking a lower share of the profits, will be evident on this page.

The last page of the accounts proper is the balance sheet: fixed assets, such as property (if owned) and equipment, current assets including drugs in stock, cash in the bank account, debtors and current liabilities including creditors and tax liabilities will be recorded here. The size of the capital accounts (see below) will also be apparent. If the practice owns the premises, there will be a separate section for the property capital account.

Next come half a dozen pages of Notes to the Accounts, with fuller breakdowns of income and expenditure. These will be most meaningful in comparison with other practices, or with averages that are sometimes published in the GP press. The final page shows each partner's actual drawings in the previous year. Equal partners may not all take identical income. Some may make extra superannuation payments (known as added years) or may pay different amounts for sickness insurance for example.

Questions to consider

  • Do partners save for tax inside the practice accounts, or make their own arrangements?
  • Are any loans internal or external?
  • How is non-NHS income regarded?
  • What is and isn't pooled?

Some partnerships share all NHS and non-NHS income earned during the practice day, others choose to keep the results of their individual efforts. These points will all be apparent from the accounts. Any difference between a partner's income and drawings (there is usually something) is reflected in their capital account – a source of possible confusion. This is the sum remaining in the practice to keep the bank balance solvent. This varies widely, but could be £6,000 per partner. It may be a minus figure at times – a partner leaving would then need to pay this back into the practice.

Financially healthy?

Practice accounts paint an important black and white snapshot of the practice. They underpin the impressions you perceived in interviews and your background researches.

GP incomes have just had a major boost, but remember income can fall as well as rise. Prolonged staff or partner sickness or maternity leave, falling patient numbers due to a new health centre just down the road, or loss of that fantastic nurse-practitioner who sorted all the diabetes and CHD patients can depress a practice's income.

Read the financial pages of the popular medical press to get an idea of the current spectrum of GP income. Decide beforehand what sort of practice you want to join. Most practices I have recently appraised have scored more than 1,000 QOF points. If your practice is not achieving such figures, ask why not.

Finally, find an accountant who specialises in GP accounts. For a fee he or she will review your potential partnership's accounts critically, and comment on how efficiently the practice is run, what areas could be improved, and, most crucially, how well the practice is doing in comparison with other similar practices locally. Your local BMA office may advise a suitable firm. Money well spent!

Dr Stefan Cembrowicz is a GP in Bristol

Registrars may get little experience of GP accounts during their training year practice accounts

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