Five Steps to a Financial Recordkeeping System that Works
As you start your new professional practice, you have lots
to think about, including getting paying clients or
patients, and making sure everything and everyone is
working properly. But don't neglect the financial part of
your new practice; if it isn't working properly, you can't
be successful in your business.
If you want to succeed, you'll need to create a financial
system that clears out the garbage and gives you accurate
and useful information to see how you are doing and so you
know when to act on this information. Here are five easy
steps in creating a simple financial recordkeeping system:
Capture, Check, Record, Review, Act:
First, CAPTURE the information. If it isn't there, it
doesn't exist. As you start your practice, get in the
habit of capturing everything, so it becomes automatic.
"Capture" is the most difficult, and the most important
part of the process; it's a matter of forming the habit of
collecting information. Keep track of every amount you
spend for your practice and every amount you take in to
your practice as sales. If you think you'll remember
because it was significant at the time, I guarantee you
won't!
1. Don't worry at this point about doing anything with the
information. Just be sure everything you capture includes
(a) a description of the item, (b) the amount, and (c) the
date.
Second, CHECK. Every two weeks, spend an hour going
through everything and checking it. Check to see that all
the information you have is ready for recording. Be sure
you have included the date and amount, and enough detail on
what the expense was for, so you can record it accurately.
For example, a note for "paper, $3.55, 7/12" may not be
enough information. What was the paper for? Was this a
newspaper you bought for the office? Or did you buy a ream
of paper for the computer?
Set up a specific time for an appointment with yourself at
the end of alternate weeks to check everything. Don't wait
too long; the longer you wait to do this, the more
difficult it will be to remember and collect information.
Third, RECORD. Recording means putting your financial
information into useable form. After everything is
checked, turn it over to your bookkeeper to record, or
record it yourself. Do this monthly. Input the
information into a spreadsheet or accounting software. You
might also find that online software works for you, so you
and your bookkeeper can both see the information and
discuss it. Just be sure you get everything recorded each
month, so you can review it.
Fourth, REVIEW. After your financial information has been
recorded each month, print out four reports. For each
report, include a comparison with the same report
information from last month. Pay special attention to
specific information within these reports:
1. Balance sheet, to show assets and liabilities and
changes in your equity (ownership) in the business.
Income Statement, showing your income and expenses for the
month.
2. Accounts Receivable Aging Report. This report shows you
the amounts owed by patients and how long the amount has
been due. Use the report to show you which clients have
owed you the longest.
3. Accounts Payable Report. This report shows what you
owe, to whom you owe it, and how long it's been owed.
1. Finally, ACT. In most cases, "ACT" can mean doing
nothing. In other cases, it might mean making a change.
Create "trigger points" where the information compels you
to act.
Even if you're not familiar with financial systems, you
should be able to set this one in motion and keep it
running. As I said above, the most difficult part is
collecting the information. Once you have formed the
"collection habit," you'll find the rest will come along
with it.
Remember, CCRRA- Capture financial information for your
practice, Check it every other week, Record and Review the
information monthly, then Act as necessary to keep your
financial situation moving smoothly. If you follow this
simple five-step system, you'll minimize the "garbage" and
the problems that come with it and you will maximize your
financial situation.
A well-organized financial system will keep your practice
financially viable for many years to come, so you can get
back to your practice.
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Copyright 2007 Jean Wilson Murray, MBA, PhD.
Dr. Jean Murray has been advising small business owners
since 1974. As the founder of Planning for Practice
Success, she specializes in assisting health care
professionals with business plan construction and startup
details. She can help you gain the knowledge to act and the
confidence to begin. Learn more at
