GP practices are busy places, with constantly evolving business processes, staff turnover and compliance issues to navigate. And like all busy businesses at some point errors or omissions unknowingly slip through the cracks. Over the last few months though, we have seen several recurring compliance issues in GP practices. And while often these overlooked issues are small, they do need attention now to ensure they don’t snowball into costly problems as your practice grows. 1. Overstated practice income GP practices typically engage doctors who are running their own business as a consulting GP.  They will then agree with the doctor on a service fee (paid as a percentage of the GP’s billings) for the use of the practice’s rooms, staff and systems. The key concept in this arrangement is that the GP is running their own business and they are providing services directly to patients via their own Medicare provider number. Practices may receive the GP’s patient income as collection agent under the services agreement – however, this does not mean that these patient fees should be declared and shown as income of the practice. The revenue of the practice from these GPs is the Service or Management Fee collected. To most practice owners and managers, this is no surprise and falls into accounting 101 for medical practices. However, we have been alarmed over recent months to have seen a number of practices reporting all GP (including non-employee GPs) income as sales and revenue of the practice. Presenting financial data in this way may risk the practice exposing themselves to additional taxation and obligations such as payroll tax, superannuation and employee entitlements. This may also trigger issues with incorrect Business Activity Statement reporting, reporting misleading practice income to lenders and ruling out access to small business tax relief in the future. 2. “Forgetting” the GST collected In most cases, GP income is GST free. However, some services such as the provision of medical reports, and supplementary or cosmetic services will attract GST. The GST on these services provided by a GP to the patient should be reported as GST collected by that particular (non-employee) doctor – not by the practice. We have seen many practices who don’t report  GST collected correctly when providing billings reconciliations and paperwork to GPs. In turn, GPs are not correctly accounting and remitting GST in their own business BAS. On a per doctor, per fortnight basis the GST impact is likely to be small (which is why many practices do not account for it correctly!) however over a period of months to years and with many GPs this GST this mistake could be sizeable. On a compliance level for the practice, if GST is not disclosed correctly to GPs, it is also possible that applicable GST is not being recorded at all. In this case, the practice is running the risk of retaining GST receipts which should have been remitted to the ATO. 3. Slack billing, receipting and bank reconciliation processes Medicare billing and reporting of correct income and GST amounts is ultimately the provider GP’s responsibility. Although the practice may provide the administration in these areas under an agreement, this does not take away from the GP being the ultimate supplier and provider of services. Therefore, it is imperative that practices deal with recording and reconciliation of patient fees billed and cash collected to a high standard – not only for their own benefit but for that of their GPs. Many GPs take little interest in the accuracy or processes around billing and receipt collection at the practice level – trusting that the practice has a methodical and accurate system in place for this. In reality, many practices are using generic accounts and lump sum clearing entries to manage their collections and align their bank account and accounting system to the practice management system. Often individual receipts or amounts due from Medicare or Health Funds cannot be traced should the need arise. Unexplained variances at the end of each month or quarter are the norm. In the worst cases, cash collected from patients on behalf of a supplying GP has been used in the practice to fund practice expenses (such as petty cash, maintenance or staff amenities) and is never actually banked or accounted for correctly. With no check and balance in place, internal fraud is, unfortunately, a common business risk, leaving both GPs and practice owners unaware and out of pocket. 4. Nurses and support staff allowances missed GP practices or their advisers need to be on top of the relevant awards for employees. In most cases, the Nurses Award and the Health Professional and Support Services Award 2010 will be relevant. Navigating through the levels and pay points for employees can be a challenge, and by the time the practice has completed this exercise, allowances are often forgotten. Mandatory allowances are frequently overlooked – such as uniform allowances, on-call allowances, telephone allowances and meal allowances. Disgruntled employees not in receipt of their correct allowance payments have often been the cause of a workplace and payroll audit. Needless to say, disgruntled employees and audits are not a pleasurable experience for the practice or the wider team and should be avoided at all costs. 5. Missing records This issue is not specific to medical practices, however, we do see that many practices do not have a systemised and streamlined system for maintaining evidence of expenditure. This can partly be because of the rise of cloud-based systems where bank accounts are directly linked to accounting software and often expenses are recorded form the bank account data rather than an invoice. Additionally, it is quite common that the practice owner is the bill payer for the practice and the administration staff and practice managers may never actually see some of the bills or invoices coming through the practice. A reminder that in general records need to be kept for 5 years and can be kept in electronic format. Address issues now. If you suspect your practice could be lacking in one of these areas take steps to rectify this situation now. With modern accounting tools and automated technology, systems can be put in place to accurately reconcile and account for billings and GST collected on behalf of practice GPs – saving time and ensuring the integrity of the practice’s processes.  If record keeping systems or employee entitlements need reviewing, take the time to talk to your adviser about getting up to date with best practice methods.

Assuming that all medical and dental practice owners want the same thing for their practice, and their career reminds of the old saying “all men prefer blondes”, it just isn’t the case. As a practice owner in 2019 you undoubtedly have well-meaning financial information and advice firing at you from all directions. Daily you read and hear information from a range of sources regarding practice growth strategies, tax minimisation, ATO and billing compliance, passive income stream building, practice valuation goals, reducing costs and implementing automation and technology changes. This well-meaning information overload can be exhausting without even considering the information exposed to clinical and patient-related matters. Of course, it is great to be informed and to position your practice for success. But sometimes it is time to stop and focus on the things that matter, to you as an individual, to your personal goals and your unique practice. My client: Knowing when to shift the goal posts Last week I met with one of my successful multi-site owner clients for our regular quarterly strategy meeting. In previous meetings we focused quite heavily on financial KPIs – profit results, billing and consult data, new patient numbers, growth projections, break-even points etc. All things successful practices “should” be monitoring and tracking. By mid-meeting I could tell that this data wasn’t cutting it. These financial metrics, while necessary, are not linking back to the priorities and direction of the client right now. While in the previous quarter, the client’s family and personal circumstances had been running smoothly. This quarter a change started to occur, and it became apparent that the balance of financial versus home life focus was out of whack. This quarter the success factors were not about dollars. They were about life – managing time, family and life stresses. So, we switched up the conversation and the KPIs accordingly. Now alongside the profitability figures, there exists KPIs focused on leave taken and planned, self-gauged stress rating and presence at school pickups/events. The focus on fee revenue has been expanded to monitor and grow non-owner reliant revenue. The emphasis on expenditure has shifted to cost v benefit and time saving rather than just reduction. Success is not only financial I love financial KPIs and metrics (I am an accountant after all) and can’t stress how important it is to know your business results and to know how to use this data to make smarter decisions. As a rule, though, financial goals alone will not deliver success. Achieving your financial goals enables your personal, family and lifestyle goals. Sometimes the financial goals may have to be put on hold or adjusted so that you don’t lose sight of the personal goals. While hard to do when you are responsible for a busy practice and the people employed and working from within it – which is why you need to be aware. Think long-term There are times when financial metrics are crucial and will be the critical KPIs to monitor – for example when setting up a new practice or planning for a practice sale. However, if you are looking for long-term success, your accountant and advisers should be encouraging you to focus on the key drivers in your individual success story – understanding what family and lifestyle goals are important to you right now and in the future and weaving this into a financial and business strategy that will last the distance. A great accountant or adviser will be relatable and “get” the direction that you want for your practice and your life. They will be personable, realistic and hold strong personal and business experience. Success for your practice is not about achieving someone else’s vision. It is not just about the numbers – it is about weighing and analysing the numbers – and then using them to enable you to achieve what matters most to you.

Single Touch Payroll will apply to small employers (less than 20 employees) from 1 July 2019 - what do you need to do to be ready?

Yes, I'm in Japan, for work, of course, speaking at the Business for Doctors conference in Niseko. So what better location to talk about travel allowances and deductions.

The Small Business Instant Asset Write-Off has been in the news this last week. I discuss practical tips on how to take advantage of the write-off.

Proud to be one of the judges for the Practice Ignition. Top 50 Women in Accounting of 2018 along with Lielette Calleja and Kylie Parker. Enter your nomination here.

“Advisory” has been the buzz word in accounting for the last few years. Accountants are clamouring to productise and package their advisory offering for both new and old clients. But with all of this focus on "giving" advice, have accountants lost or abandoned the skill of just sitting with and actively listening to clients? Many would say that listening to clients and understanding their business, personal life and goals are part of delivering advice – and I totally agree with this organic form of advisory. The problem is that many advisers aren’t doing it. With the rise of tech products that facilitate advisory (amazing tools if used correctly) it seems to me that the cookie cutter approach to providing advice is winning out with many. This approach focuses only on traditional goals one would expect business owners to have – increased revenues, profit, saving tax. All very important metrics but only part of the picture. If we sit down and really listen to our clients maybe the traditional financials goals aren’t what we need to be focusing on. In fact maybe this focus is counter productive right now. Often the important goals are more specific to that individual or family group: time with kids and family, managing financial stress, juggling health concerns while running the business, resolving partnership issues, redefining the business offering, preparing the business for a child to takeover. And these are the things that can only ever be discovered by listening. When I work with clients, I make it my number one priority to listen. Listening comes first – advice comes second.

Think you have your Medical Practice’s Xero or MYOB file mastered? Check out our top tips for setting up and maintaining a file and Chart of Accounts specific to Medical Practices. 1. Be specific to Medical Setting up a Chart of Accounts that enables you to accurately classify income and expenses and report on profitability is key. Medical practices have specific income, expenses and liabilities which need to be classified correctly. And you won’t find these accounts in the standard Chart that comes with your software. 2. Who owns income? When devising the Chart of Accounts you will need to consider how to account for income of the practice. Too often patient fees are reported in the incorrect manner and shown as top line income of the practice. Patient fees should (generally) be reported in two account types: Revenue Accounts (Sales) – showing patient fees and income of employees or owner doctors who do not operate through another legal entity Liability Accounts (Clearing Accounts) – showing fees collected on behalf of practitioners running their own business under service agreement with the practice (sometimes referred to as “contractor doctors” by those working in the industry). Some have the view that it is “no big deal” to report income of all practitioners (including non-employees or owners) in top line revenue. The rationale is that the inclusion of a corresponding expense taken up when net billings are physically paid essentially arrives at the same final profit result. We do not support this view, as reporting income that does not belong to the practice as revenue has the potential to cause issues around payroll tax, GST, superannuation, small business concessions and employment entitlements. 3. Clear the clearing account Income collected under agreement on behalf of practitioners but not yet paid needs to be quarantined to a clearing account (or multiple clearing accounts) until payment is made to the doctor. Be vigilant with these accounts and ensure they are: Reconciled regularly Keep these accounts for the sole use of parking patient fees that have been collected by you on behalf of practitioners. Don’t mix other transactions, loans or adjustments in this account! Even better, investigate using a tool such as Surgical Partners which will integrate with your Xero file and PMS to automate this process. 4. Cash vs accruals accounting Is your practice accounting on an accruals method or cash method? Is your GST reporting method (as required by the ATO), via the cash or accruals system? The way in which you report for accounting and GST purposes is going to impact on how the Chart of Accounts is set up. 5. Don’t neglect other sources of income Many practices sell goods – skincare products, medical aids, educational materials and even food. Therefore, your file needs to be set up to account for the purchase, and in some cases, the tracking of these goods. Just because these sales may not be your main income source does not mean that you do not need to actively account and report for these goods with any less care. At the very least you need to easily identify the profit these lines are generating at any point in time. 6. Keep it clean Having your Chart of Accounts set up correctly won’t help you if your data is not clean and maintained. Regular reconciliations as well as reviewing Profit and Loss and Balance Sheets to ensure quality and consistency of input is key. Ensure old accounts are archived to avoid accidental miscoding and lock dates are utilised to limit access to prior periods. Always remember the old saying ‘rubbish in – rubbish out’. Take the time to set up and review your file and Chart of Accounts for successful and accurate reporting in your practice.