Financial Management

1. 21 Financial Management

2. Learning Outcomes (cont.) 21.1 Summarize the importance of and how to establish good bookkeeping and banking practices. 21.2Compare single-entry, double-entry, and write-it-once bookkeeping systems. 21.3 Outline patient related financial transactions. 21.4 Identify negotiable instruments and the items that must be present for a check to be negotiable.

3. Learning Outcomes (cont.) 21.5Describe the different types of check endorsements and the steps in creating a bank deposit. 21.6Carry out the process of reconciling the office bank statement. 21.7List several advantages to electronic banking. 21.8Implement setting up, classifying, and recording disbursements in a disbursement journal.

4. Introduction • Medical practices require sound financial management • Employees must understand financial management procedures

5. The Medical Practice as a Business • To succeed - income must exceed expenses. • Accounting • Responsibilities of medical assistant • Bookkeeping ~ a systematic record of business transactions • Banking

6. The Medical Practice as a Business (cont.) • Accuracy • Strive for 100% • Records form a chain of information • Errors can result in • Double billing • Omitting bank deposits • Improper payments to suppliers

7. Establishing Procedures • Be organized • Be consistent • Use markers • Write clearly • Check your work

8. Apply Your Knowledge What can be the result of errors in billing? ANSWER: Errors can result in billing a patient twice for same service, omitting bank deposits, and making improper payments to suppliers. Good Answer!

9. Computerized – most common Manual Systems Single-entry Double-entry Pegboard All methods record Income Charges Disbursements Other financial information Medical Office Accounting Methods $$$$

10. Electronic Bookkeeping • Bookkeeping on the computer • Performs same tasks as manual method • Saves time • Performs repetitive tasks • Performs math calculations • Has built-in tax tables

11. Manual Bookkeeping Systems • Single-entry • Transaction listed once each to • Patient ledger • Daily log • Checkbook • Disadvantages • Not self-balancing • Does not detect errors as readily

12. Manual Bookkeeping Systems (cont.) • Double-entry • Transactions are listed twice • Assets = Capital + Liabilities • As payments are made on the asset both side of the equation continue to balance • Example: • Asset - $15,000 ECG machine • Capital = amount of total cost paid • Liability = the amount still owed • $15,000 = $5000 + $10,000

13. Manual Bookkeeping Systems (cont.) • Write-it-once (pegboard) system • Entry written one time • Daily log sheet • Patient ledger card • Charge slip

14. Manual Bookkeeping Systems (cont.) • Daily log • Chronological list of charges, payments, and adjustments • Journalizing • Post from the log to patient ledger

15. Manual Bookkeeping Systems (cont.) • Patient ledger card • Patient information • Financial transactions of patient account • Payments • Adjustments • Balance owed • Information from daily log

16. Manual Bookkeeping Systems (cont.) • Accounts receivable • Total owed to the practice • Total on accounts receivable = balances on patient ledger cards • Accounts payable • Amount owed to vendors • Keep accurate records $$$

17. Manual Bookkeeping Systems (cont.) • Record of office disbursements • List of payments made • Information on record • Payee • Date • Check number • Amount paid • Type of expense

18. Manual Bookkeeping Systems (cont.) • Summary of charges, receipts, and disbursements • Comparison of income and expenses • Analyzing summaries • Areas of profitability • Amount charged and payments received • Cost of running the office • Categories of expenses $$$

19. Apply Your Knowledge What types of bookkeeping methods might you use in a medical office? ANSWER: You might use these bookkeeping systems in a medical office: Single-entry Double- entry Pegboard Right!

20. In Office Patient Transactions • Starting the Business Day • Set up peg board with daily log sheet • Layer superbills • Patient Process – ledger card under next superbill • Attach the Superbill to the Patient Chart

21. In Office Patient Transactions (cont.) • Patient Checkout – place superbill and ledger card on appropriate space of daily log • Payments After the Patient Visit • Record payments appropriately • Make adjustments as required

22. In Office Patient Transactions (cont.) • Returned Checks • Add back to patient balance • Add bank fees • Overpayments • End of day • Total columns • Correct errors

23. Apply Your Knowledge Mr. Adams check does not clear because of non-sufficient funds. What adjustments do you make to his account? ANSWER: The amount of the check is added back to the patient’s balance. A fee for the returned check as well as any fees incurred as a result of the NSF check may also be added to the patient’s balance. Right!

24. Banking and Negotiable Instruments • Banking tasks • Writing checks • Accepting checks • Endorsing checks • Making deposits • Reconciling bank statements

25. Checks • Bank draft or order for payment • Negotiable • Signed by payer • Amount to be paid • Payable to payee • Dated • Name of bank

26. Checks (cont.) • Cashier’s check – issued by bank • Certified check – money certified available • Voucher check – stub for record keeping • Limited check – time limited

27. Checks (cont.) • Counter check – withdrawals • Traveler’s check – established denominations • Money order – guaranteed payment

28. Checks (cont.) • Check codes • ABAnumber • Fraction on upper edge • Geographic area and bank • Magnetic ink character (MICR) code • Numbers and characters • Read by computer

29. Checks (cont.) • Payer • Date line • Check number • ABA number • Payee • Amount box • Amount line

30. Checks (cont.) • Bank information • Memo line • Payer signature line • Routing number • Account number • Check number • MICR recording area

31. Accepting checks Review check before accepting it Third-party checks Checks marked “payment in full” Power of attorney Checking Accounts Personal Business ~ office expenses Interest-earning ~ for special expenses Checks (cont.)

32. Apply Your Knowledge What is a negotiable instrument? • ANSWER:A negotiable instrument is a check that is legally transferable from one person to another. A check must: • Be signed by the payer • Include the amount of money to be paid • Be made payable to the payee or bearer • Be made payable on demand or on a specific date • Include the name of the bank that is directed to make payment. Excellent!

33. Preparing a Bank Deposit • Endorsement • Blank ~ payee’s signature • Restrictive ~ specifies “for deposit only” • Special ~ third-party endorsement • Qualified ~ used byattorneys

34. Preparing a Bank Deposit • Endorsement • Endorse immediately • Endorse in appropriate place • Endorse in ink or use stamp

35. Completing the Deposit Slip • Postthe payment to the patient ledger card • Put the check with others to be deposited • Fill out a deposit slip BWW Medical Associates, PC 305 Main St. Port Snead YZ, 12345-9876 xx

36. Making the Deposit • Make deposits in person • Obtain deposit receipt • Electronic Deposits – Electronic funds transfers (EFTs)

37. Apply Your Knowledge What are the types of check endorsements? • ANSWER:There are four principal types of endorsement: • Blank endorsement - simply the payee’s signature. • Restrictive endorsement– specifies how the check may be redeemed. • Special endorsement – a third-party endorsement • Qualified endorsement – used by attorneys, who may accept a check on behalf of their client, Correct!

38. Reconciling Bank Statements • Reconciliation • Comparing the office financial records with the bank statement • Ensure that they are consistent and accurate • Performed once a month

39. Reconciling Bank Statements  

40. Apply Your Knowledge Gold Star Answer! How do you reconcile a bank statement? ANSWER: You compare the office financial records (checkbook or disbursements journal) with the bank statement to be sure they are accurate. In the checkbook, you should mark all items that have cleared the bank to be sure all are accounted for. Once outstanding checks are subtracted from the bank’s balance it should match the checkbook balance.

41. Electronic Banking Advantages - improves productivity, cash flow, and accuracy

42. Electronic Banking (cont.) • Computer software will • Record deposits • Pay bills • Display checkbook • Reconcile the bank statement • Check bank’s safeguards

43. Electronic Banking (cont.) • Record Deposits   • Enter each deposit • Print deposit slip • Pay bills • Log checks • Electronic bill pay • Display checkbook • Verify checks • Check withdrawals and deposits • Check balance

44. Electronic Banking (cont.) • Balance checkbook • Program displays checks and deposits • Mark those appearing on the statement • Enter balance from statement • Program performs the reconciliation

45. Apply Your Knowledge What are the advantages of electronic banking? ANSWER: Electronic banking improves productivity, cash flow, and accuracy. Computerized banking programs facilitate recording deposits, paying bills, displaying the checkbook and reconciliation of the account. Good job!

46. Accounts Payable and Managing Disbursements • Three types: • Payments for supplies, equipment, and practice-related products and services • Payroll • Taxes

47. Disbursements • Payments for goods or services • Recording disbursements • Set up disbursement journal • Enter check information and amount • Determine expense category

48. Disbursements • Record check amount under appropriate category • Split amount if necessary and enter total in check amount column

49. Writing Checks • Account balance must cover the check • Enter on disbursement log then write check • Have the doctor sign the check • Mark invoice with date, check number, and amount paid; place copy in file • Mail check

50. Writing Checks (cont.) • Disbursement log • Total and track expenses by category • Check calculations • Tracking • Look for changes • Helps control expenses