Five Steps to a Financial Recordkeeping System that Works
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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
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,
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
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.
About the Author
Copyright 2007-2008 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.
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Article Published/Sorted/Amended on Scopulus 2008-06-12 09:25:45 in Business Articles