It amazes me at how much trust we put on monthly financial reports without really knowing how accurate that data is. Through my career, I have seen plenty of mistakes that have distorted financials and negatively impacted the decision making of a practice.
There was this one time where bank reconciliations were consistently done, but the unreconciled items grew each month and were never addressed. It turns out, those unreconciled items were duplicate deposits overstating profit. The practice was only looking at the Profit and Loss and distributed the profit shown. By the end of the year, the practice was making decisions on inflated revenue numbers and overcommitting to the next year’s staffing needs. Expenses went up with a lot less reserves in the bank.
There was another time where bills sometimes got paid correctly within the system and other times paid via credit card. There were duplicate expenses being recorded that inflated expenses and created a panic situation where costs appeared to be rising. Decisions were made to reduce other expenses. This resulted in substandard operational support; negatively impacting the practice.
As we near the end of another year, it’s a great time to think about processes and controls surrounding your accounting. Creating a sound month-end close process for your accounting is key to ensuring accurate financials.
When building or reviewing your month-end close process, getting outside help is something to consider. Having an impartial set of eyes look over your financial processes can be a great way to improve and build trust over your financials. Once a process is created, I generally see two paths that are taken: have it done in house or outsource it. Outsourcing this on a monthly basis is a one way to build even more trust with the financials. This process generally takes 5-10 hours a month and can really add some accounting depth to a clinic.
If gaining more trust over your numbers is something that appeals to you, let us know and we can provide more information on how this process will look for you.