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At the heart of general practice since 1960

The art of good financial management

Now more than ever practices need to look to their performance on the business front – practice manager Lesley Mayo explains the basics

Good financial management in a practice depends on a number of key elements and your practice manager is central to this.

The manager will be the one who produces the protocols that members of the practice will follow in financial matters. Usually she will also be the one who has to investigate any irregularities.

A robust practice agreement is of prime importance. This should include profit shares, property shares, what happens if a partner leaves, maternity/paternity arrangements and many other areas of financial importance.

Finance has often been the cause of partner disagreements and a sound agreement can prevent this.

A good accounts software package is also essential. There are a number available, such as Maclean McNicholl or SAGE, the former specifically designed for practice use.

Such a system should enable financial reports to be produced and ensure that the information given to your accountant at year-end is in a compatible format.

But don't assume you can save accountancy fees by asking your manager to produce detailed accounts. A good accountant is vital, preferably one specialising in medical clients. Negotiate a fee package so that you are not paying for every telephone call or query you make. Remember also that if you are not happy you can change.

Fraud

GPs should have systems to prevent fraud. Obviously this covers theft of money or equipment, but what about personal telephone calls by staff, falsifying claims or

data? Policies should be agreed to cover all these eventualities. It is a sobering thought that on the thankfully rare occasions when serious theft has occurred the culprit is often the practice manager!

Managers are in a position of extreme trust and GPs must ensure that they protect themselves and their practice against a manager who is dishonest. One partner should be responsible for finance and should liaise closely with the manager on financial matters. All partners should ask for regular review of finances.

Safeguards are easy to apply. There should be two signatories for cheques and any communications with the bank. Don't sign cheques without covering documentation.

However, it is less straightforward if the practice uses internet banking. Many systems require one primary user and this may well have to be the practice manager. The finance partner must ensure they have internet access to the account and that transactions are checked regularly.

Ask for a monthly printout from the accounts software reconciled to the monthly bank statement. Check transactions carefully. Do you recognise all the suppliers? Are you confident you know what was purchased? Look at staff payments. Do you recognise all the staff on the payroll?

Ask for details of staff salaries so you can confirm that staff are being paid the correct amount. When you receive the monthly statement, log into the bank and check that everything agrees.

Everyone has a role to play in the financial management of the practice. Staff should be aware of the importance of controlling income and expenditure. All orders should be logged and deliveries and invoices carefully checked to ensure the practice is not paying for goods or services that have not been

received. Likewise any income due to the practice should be properly collected and recorded.

Make sure employees understand the importance of financial probity. The ultimate responsibility, however, lies with the partners. It is they who set the tone for the practice and the way it operates. Be open with staff about the way the practice is running. The more that is understood, the better staff will perform.

Make sure everyone in the practice understands their shared duty to use NHS funds wisely. If there are financial constraints to be made, share them with staff so they understand the reasons for your decisions. Never lose sight of the fact that although you are an NHS organisation you are also running a small business and you need to make sound business decisions about the way to operate.

Cash-flow forecasting

Cash-flow forecasting is an essential exercise which should be carried out at least once each year with ongoing reviews. It is not a difficult process and can be done with a simple spreadsheet, but you do need time to do the exercise accurately.

Start with the last year-end accounts; look at practice income and expenditure. Do you expect these to stay the same, increase or decrease? Both PMS and GMS practices now receive the bulk of their income in monthly instalments which aids cash-flow. But there are a number of income streams that are paid sporadically such as directed enhanced services, QOF payments and reimbursable items.

Compare the timing of income and expenditure. Are there months in the year when the practice has to make large payments which may affect cash-flow? If so, is it possible to delay or spread these payments? Ask your accountant for a schedule for partner drawings/potential tax liabilities for the new financial year. Decide on a minimum contingency fund necessary to keep the business running and do not let your bank account go below this amount.

Lesley Mayo is a practice manager in north London

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