A checklist for practices and practitioners.
Tax returns are being prepared, practices are working through the figures, and practitioners are signing a return based on income the practice has calculated for them.
If the basis is wrong, someone is paying tax on money they have not received, or not paying tax on money they are holding. Both are expensive to unwind later.
Nearly every week, including this week, someone asks me for a cheat sheet for the same problem, and I see it constantly on the practice manager social media networks. It is always some version of the same sentence: I cannot get my bank to reconcile so I can pay my doctors correctly.
It is a more serious problem than it first appears. A growing number of payment apps and services do not integrate directly into the practice management system. Telehealth platforms, script and prescription services, and after hours arrangements are the common ones.
The money arrives in the bank, but it never lands against a practitioner in the billing system, so it is never picked up in the pay run. Unaccounted income owed to practitioners quietly accumulates, month after month, and in most cases the practitioners themselves have no idea they are owed it.
What should concern us more is how many practices are quietly confident they have this right. Very few have tested it. The approach is often inherited, or based on hearsay about what the clinic down the road does, which is not a standard and certainly not evidence. Nobody has checked whether the way the practice pays its doctors matches what the service agreements say, or whether either matches what the bank can prove.
Your 10 question checklist
Answer yes or no. Each yes is one point.
1. Can the practice prove, from its bank statement, that every payment made to a practitioner last fortnight was money the practice actually received?
2. Does the way the practice actually pays its practitioners match what the service agreements say?
3. Is the practice’s reconciliation done daily, rather than in a rush before the pay run?
4. Can the practice explain its current trust account surplus, line by line?
5. Are all provider numbers complete in whatever system calculates the practice’s service fees?
6. If a practitioner queries a payment from three months ago, can the practice evidence it within the hour?
7. Is income from telehealth, scripts and after hours services being captured and attributed to the right practitioner?
8. Are batched settlements broken down to individual patient payments before anyone is paid?
9. Can someone independent verify your last pay run without help?
10. Does the person who reconciles take extended leave each year, with someone else covering the work?
Related
What your score means
8 to 10: a strong position. The practice should keep doing what it’s doing, and keep the evidence.
5 to 7: real gaps worth closing. The most common weak points are the unexplained surplus and the payment channels that do not integrate.
0 to 4: the practice probably cannot currently evidence how practitioners are paid.
There is a fraud dimension to this, and it is worth stating carefully. Unreconciled money that nobody can explain is opportunity in its purest form. A practice that cannot reconcile also cannot demonstrate that nothing has gone missing. A rigorous reconciliation protects honest staff more than it protects anyone else, because every transaction has an owner and a trail, and nobody is left exposed to a question that cannot be answered.
David Dahm is a chartered accountant and registered tax agent specialising in medical and allied health practice advisory since 1992. This checklist is drawn from a longer article, “First principles: paying practitioners on receipts (it is a little more complicated than you think)” on the Health and Life website. This article is general in nature and does not constitute legal, tax, or financial advice. Every practice should obtain tailored advice from a qualified lawyer and a registered tax agent before acting on the matters discussed.
