The medical industry in the UK has progressed drastically over the past few years and the role of finance in the healthcare industry has never been more critical than as of right now. Although the National Health System (NHS) takes care of the medical needs of the entirety of the UK, 12% of the population has still opted to seek out private healthcare that has helped the infant healthcare industry experience a sudden lift in the market.
But a sudden increase in the demand for specialist medical services isn’t always a good thing as most hospitals or clinics are not equipped to deal with the increased inflow of patients and financial liabilities. This, however, can be taken care of by implementing proper accounting services and financial support in the healthcare industry and allowing professional medical accountants to take care of your business accounts.
If you are looking to incorporate a proper financial management system into your healthcare business, there are few essential principles that you need to consider.
You need to follow four essential elements when implementing an accounting system in any business, especially healthcare.
Be aware of what you expect from the business and plan accordingly to attain the desired goals. As an ever-evolving industry, healthcare requires a specialised accounting department that can help you around the industry’s continuously changing environment, including expenses on medication, medical equipment, and doctor’s fees. It would be the job of your accounting department to help you have a constant cash flow, eventually leading to enough finances to expand the organisation effectively.
Control is an integral part of your accounts management system as the healthcare industry requires absolute scrutiny and control in its financial aspects. Therefore, a medical business must keep a keen eye on its cash flows to avoid any discrepancies. However, if there are any errors, your accounts and finance departments need to showcase their ability to keep the situation under control and employ countermeasures to rectify the mistakes before they have any diverse effect on your organisation.
Accurate accountancy is impossible without data management and systematic organisation. As mentioned before, medical accounting can be very time consuming because of multiple departments and factors involved. So It is imperative to switch to a cloud accounting software where your accounting team can easily organise and manage all the information to derive manageable results and accurate cash flow reports.
All the above elements come together to facilitate the last and most crucial factor, the decision-making process. Business decision making is where all your research, data, and analytics are set into motion to drive utility out of them. Making the right business decisions drives it towards success while providing business owners with maximum growth, and the healthcare industry is not an exception.
Finance and accounts departments are considered the backbone of any industry as they take care of the cash flows, in and out, of the business.
The Healthcare industry strives with the promise of providing specialist medical services to their patients. These services require the purchase of medical instruments and expertise in order to administer proper care to the patient. The hospital pays for the medical instruments and equipment purchased, along with the remuneration of doctors and GP practices after keeping a cut as profit. This is where the accounting department comes into play, as someone needs to keep track of the cash flow statement to avoid any possible discrepancies and ensure that every penny is accounted for.
It is essential to ensure that your medical business achieves cost efficiency, as health insurance agencies demand that you provide the patient with cost-effective treatments and medicine as they are the ones who would be paying for the patient therefore, you must have a robust and effective accounting management system set into place.
The same is the case with the administration of drugs and medicines, as some of them can cost a lot to the business just to keep handy. Therefore, to ensure that you keep the appropriate inventory levels for medications, you need to have an effective accounting system that tells you about your monthly inflow and outflow of money and the perfect amounts of medicines to buy.
This allows you to always have appropriate inventory levels while also minimising the wastage caused by over-stocking and ultimately minimising the total costs of running your healthcare business.
To Maximise Flexibility
Accounting involves planning, flexibility, and adaptability, especially in the healthcare industry, as it is one of the most volatile industries in the world. For example, with the spread of the recent Covid-19 pandemic, the demand for specific medical instruments and equipment skyrocketed. However, the businesses that were vigilant in their account maintenance and had contingency funds in place could procure the required equipment and medications and take on most of the market share.
However, the importance of an accounting system in the healthcare industry is often overlooked resulting in multiple businesses losing their standings in the industry in the last decade. Hence, to survive, you must be aware of the techniques and procedures like Revenue Cycle Management (RCM) to implement proper accounting systems.
Revenue Cycle Management or RCM refers to the financial process involved in a healthcare organisation. It begins when a patient books an appointment with the health organisation and ends when their final payments are made with all records cleared.
Revenue cycle management takes care of revenue generation, payments, and claims of A business and its stakeholders. In a medical context, the RCM determines and deals with multiple factors including:
- Determining the eligibility status of a patient.
- Translating the medical services to be provided into billable charges.
- Submitting a claim of billable fees to their respective insurance provider if applicable.
- Ensuring the correct coding of diagnoses, procedures, and their respective charges to be applied.
- Collecting the patient’s co-pay at the time of diagnosis.
- Ensuring that all payments are collected.
- Setting up a registered account in the name of the patient and contact information, such as phone number and email address to keep track of their medical history, and to meet various regulatory and clinical requirements.
- To apply or deny payments that have been made through remittance on behalf of the patient.
- Collection of the payments that are to be made by the patient’s insurance providers.
- Ensuring that there is a necessity for the procedures diagnosed to the patients and they are in need of the medical services prescribed.
Now, suppose you are already active in the medical industry; in that case, you must be working with a few professional accountants that have made promises about taking your business to the next level. But how can you be sure that they will be able to deliver on that promise?
To find out if your accountant is as good as they claim to be, ask yourself the following questions,
Are They Capable Of Thinking Critically?
The Healthcare industry is exceedingly volatile hence your accountant needs to assess the circumstances quickly, analyse the situation critically and help stakeholders make effective decisions with the funds available. You cannot be prepared for everything, and there will be certain situations beyond your control where contingency plans need to be implemented before the problem spirals out of control. Especially when it comes to your financial statements, if a problem arises, your accountant needs to quickly take care of the issues at hand and mitigate the effects on the organisation.
Are They A People’s Person?
The healthcare industry requires your accountants to be exposed to a plethora of different people. Therefore, if their social skills are not up to par, they might not perform adequately. This is why it is essential that the accountants you have hired know their way around people and sufficiently deal with social situations.
Can They Adapt To Change Efficiently?
The medical industry evolves every day with the introduction of newer legislations and laws that govern the working of a healthcare organisation. Your accountants need to be flexible enough to expect possible changes in tax rules, such as VAT applicability, rise and fall in your income tax return, or any new allowances or reliefs that might be applicable to your business. They need to adapt to such changes efficiently while providing the maximum benefit to the organisation.
Medical institutions work on the same principles as any other business organisation. Therefore, they require a robust accounting team to establish a smooth and steady payment system. It is imperative to have a healthy and robust accounting department that puts a special focus on your organisation’s smooth operations and effective handlings of available funds for future expansion.