Use your accounts astutely
Your practice accounts indicate the financial health of your practice, and the earlier you interpret the signs and take action the better, says Dr John Couch
Being proactive or reactive can make the difference between being a good business or a great one. An excellent example is the way annual accounts are used.
Over the next couple of months the majority of practices with a 31 March year-end will be receiving their draft accounts. There are, roughly speaking, three possible ways of dealing with these. The first is to wait until the full accounts are agreed, probably in the autumn. You will simply make sure you are earning a reasonable amount and then get back to your busy GP work.The second is also to wait for agreed accounts but take the trouble to gather as much useful information from them as possible to improve business performance.The third and smartest approach is to use the draft accounts to gather useful information to improve the business's performance. In this way you can take action as early in the business year as possible. This should increase the chances of maximising net profit.The following tips, while not exhaustive, should help to keep a sharp focus.Do not feel guilty about checking overall profit and your own share first. We are human, after all! Next, get objective and study both total income and the individual components in the notes to the accounts. If total income has risen or fallen, investigate which areas have contributed the most. Remember that it is just as important to maintain good performance as it is to improve bad. If you detect a large difference in any area then ensure that claims have not been missed or forgotten. This applies to both NHS and private income.
The same applies to expenses. If expenses have risen more than income you will still experience falling net profit. Equally, if income falls but expenses fall more, net profit increases. Check all expense categories, looking for large increases or falls. Once again it is just as important to recognise and keep systems that work well as it is to improve those that do not.
Check the balance sheet. With luck this will show that your business is still viable! Check the cash in hand at the bank. If this has risen for no apparent reason, decide if you are running an excessive balance. If so a distribution may be in order. Check also that drug stocks are not excessive.Study individual partners' profit allocations. In particular check that 'prior shares' and share of pooled income are accurate and reflect the partnership agreement. Practice harmony depends on all partners feeling they are being remunerated equitably.The section detailing each partner's 'current account balance' displays the individual credits and debits with a final balancing figure. This represents the amount partners should be able to withdraw, but it will not take into account QOF balancing payments or extra cash requirements for the new financial year. Check with your accountants before booking a world cruise.Ensure that superannuation payments are accurate and also that any credits or debits are actioned.If your accounts include statistics or comparison with other practices, do study these carefully. You will often get clues to how more successful practices are working.Finally do meet, make your decisions, and take action quickly. GPs can be very god at dithering and the slickest organisations never sit still.Dr John Couch is a GP in Ashford, Middlesex