Audiology Bookkeeping Basics

Bookkeeping is the first and most foundational step in creating professional, accurate, and reliable financial records. It’s essential for all businesses, regardless of size, and supports your financial health.

But 82% of small businesses fail because of poor cash-flow management.

Benefits of Bookkeeping

Informed Decisions

Sound financial records support sound decisions. Thinking of adding another team member? With up-to-date financials, that can be a data-driven strategy — not a gamble.

Healthy Cash Management

Strong bookkeeping lets you understand profitability trends, forecast expenses and earnings, and maintain a cash-flow budget — all key to healthy cash management.

Ready Compliance

Solid bookkeeping results in detailed records, which are imperative for maintaining compliance with tax laws and regulations, staying on top of tax filings, and being ready for any audits that may arise.

Common Difficulties

Poor Organization and Recordkeeping

Inaccurate, incomplete, or disorganized financial recordkeeping can impact your business in numerous ways.

• Cash-flow issues can result from not knowing whether patients owe you money or where you may be overspending.
• Missed tax deadlines mean paying penalties, which doesn’t help the cash-flow issues you might already have.
• Lack of financial-health awareness can result in, for example, insufficient payroll funds or missed bill payments.
• Invoicing mistakes could mean not invoicing a patient or overbilling them.
• Expense control issues can result from not tracking your expenses, so you might end up inadvertently overspending.

Lack of Standard Operating Procedures

Procedures that are unclear, undefined, or inconsistent can lead to transactions being mishandled — or missed altogether.

Just imagine the problems that could arise from missed or mishandled:

• Patient invoices
• Patient payments
• Bank deposits
• Bank reconciliation

Difficulties With Accounts Payable and Accounts Receivable

Without strong bookkeeping practices, you can have a difficult time keeping track of who owes you and what you owe your vendors — in other words, your AR and AP.

The impact to your business is anything but trivial:

• Lack of clarity
• Lack of cash flow
• Poor business relationships and reputation
• Limited business credibility

Unsure of Tax Compliance

Without sound bookkeeping, you’ll have a hard time understanding what your tax obligations and deadlines are. And there’s a trickle-down effect if you’re unprepared for taxes, with impacts such as:  

• Penalties
• Legal trouble
• Cash flow

With all that possibly going on, you can become distracted, which might even impact your patient care.

Bookkeeping Best Practices

Bookkeeping best practices can be summed up as “use accounting software, reconcile regularly, and standardize processes.”

But those last two encompass a lot. Let’s take a look!

Stay on Top of Tasks

Daily tasks might seem small, but they easily pile up if you skip a day — diligence is key! Monthly tasks are more time-consuming but can lead to hefty consequence if left undone — get those tasks on your calendar well in advance.

Create Standard Operating Procedures

Assess all your current processes. Ensure they include these steps, so you capture each patient invoice and payment.

Daily processes:

• Open the mail every day — if something is received that relates to bookkeeping, put it in its designated place.
• Enter all patient invoices and payments in the OMS.
• Run a sales report for the day and compare it to the schedule, ensuring there’s an invoice for every patient and a record of any returns, exchanges, order cancellations, and purchases by phone.
• Match all credit card receipts, cash, checks, merchant financing receipts, and EOBs against the report.
• Sign off on these reports and file them for your records.

Monthly processes:

• Track and categorize your expenses.
• Reconcile your checking, savings, and credit card accounts to the statements, and research any discrepancies.
• Review your P&L and balance sheets to ensure they all make sense, then compare them to the prior month to look for any anomalies.

Take Charge of Your Cash Flow

With just a little extra intentionality, you can whip your cash flow into shape in no time.

• Sync OMS daily and weekly.
• Enter all vendor invoices into your accounting software the same day.
• Collect fast, pay slow — keep AR under 60 days and maximize AP with credit cards.

Know Your Tax Obligations

Clearly understanding your tax obligations will eliminate potential financial roadblocks to your long-term goals.

Review your financial statements quarterly with your CPA to assess taxable income and deductible expenses. Set money aside for your anticipated tax obligation, reducing your risk of under- or overpaying taxes.

Implement Captainships

Reflect on your team’s strengths and financial interests. Is someone good at monitoring and collecting patient balances? Is someone else always on top of the vendor invoices?

Delegating these tasks to trusted team members gives them a sense of ownership and investment in practice success.

Delegating tasks to different team members lowers your risk of fraud by separating the duties and having more than one set of eyes on your financials.

Manage Petty Cash

Petty cash can be used for purchasing minor items such as tea and stationery, giving change to customers who pay cash, and holding smaller cash amounts paid by customers.

Treat petty cash like any other bank account: Keep a log and enter transactions in the bookkeeping system, and reconcile petty cash at the end of the month.

Navigate Insurance Takebacks

When an insurance provider withholds payment because of a previous overpayment or incorrect payment, it’s called a takeback. In this event:

• Don’t edit prior deposit information.
• Money needs to go back on the patient’s account — create a trail.
• Treat it like a refund for the takeback amount.
• Write it off or bill it to the patient.

With the right foundation and intentionality, you too can be a pro at cash-flow management.