This site is intended for health professionals only
Monday 18 December 2017
Share |

Keeping good financial records

It’s worth keeping a close eye on practice finances, and with the software packages now available it’s easier than ever, writes Mark Dempsey.
Keeping good financial records

It’s worth keeping a close eye on practice finances, and with the software packages now available it’s easier than ever, writes Mark Dempsey

There is more pressure than ever before on GP practices to keep good financial records, meaning they need to be up to date, accurate and easily accessible. The slowdown in funding growth is making it increasingly difficult for practices to live within their means and places them under tremendous pressure to get their finances in order.

It is surprising that in this digital age, there are still practices that keep paper records of their finances. As well as taking up valuable office space, this can make it difficult to complete financial admin tasks like filling in forms and passing information to your accountant or between appropriate members of staff. 

Keeping up-to-date digital records of the practice finances also makes it easier for practice managers and partners to be able to see how their practice is performing financially on a regular basis, by providing clear and uncomplicated data.

As well as providing an insight into the cash flow and profitability of the practice, good records also help to prevent nasty surprises such as unexpected tax bills or interest and penalties for the late filing of tax returns or superannuation
certificates.

Good records are even more essential for dispensing practices, which are required to submit VAT returns on a monthly or quarterly
basis.

Being able to easily access digital records of the practice finances can give you reassurance that everything is going to plan and will make it clear if the practice is continuing to operate profitably. 

They will also highlight if there is a problem and allow you to see if there are funds available to meet any liabilities when they fall due. 

Keeping a digital record of the practice finances means that you can easily track financial performance on a day-to-day basis, and also compare the profitability to previous financial years. This will help you to identify any significant increases in your expenses and make efficiency savings where needed.

And if you aren’t able to access the financial details of the practice, money problems can snowball before you have time to take appropriate action. This can include meeting the payment dates of invoices from suppliers and chasing late payments of income that your practice might be owed. You also might miss incorrect, duplicated or missing transactions that over time could prove costly. 

As a practice manager, it will usually fall to you to organise the practice finances and make sure they are kept up to date. Unless you have experience in accountancy, this can seem like a daunting task, but there is software available to help you. 

Sage

If you have been in a management position before, you’ve probably heard of Sage accounting software. Sage offers multiple ways for businesses to track their finances and payroll. Its most recent development is Sage Live, a cloud-based program that can monitor practice finances in real time, integrate with other business apps and allow collaboration with other members of your team.

Possibly the most clear benefit of cloud accounting over desktop accounting is real-time banking reconciliation, which gives you a real time snapshot of the cash flow of your bank accounts. Hosting everything online also means that you can access the practice’s financial information from anywhere at any time, instead of the one computer the software is installed on. This means that you can easily share and receive financial data from any device while you’re away from the office.

The collaboration option means that instead of limiting access to just the practice manager, the information can also be viewed by partners in the practice and your accountant. 

So everyone who has a financial interest in the practice will have access to the same information updated in real time. Partners can be involved in the overall operation of the practice, the accountant can get the figures needed for any paperwork and can offer up-to-date guidance, and you can make decisions on the day-to-day running of the practice. 

As well as the new cloud-based software, Sage also offers traditional desktop programs, such as Sage 50, to monitor your practice’s financial position, although these don’t have the features of collaboration or real-time updates. Sage also integrates with its own separate payroll package Sage Payroll, to help you keep track of payroll expenses.

One of the downsides of Sage is that it can be time consuming to learn if you’re not from an accounting background. Accounting can seem bewildering to a non-specialist. This means investing additional time and money in training on top of the product’s initial cost.

Although some Sage packages offer the option of calculating your VAT returns, this won’t apply to GP practices because the calculations are a lot more complex than traditional businesses. Sage also doesn’t offer a GP-specific package. Sage Live is aimed at small businesses of between one and 200 staff. Although it will do everything you need it to, you will need to weigh up whether investing the extra time and money in implementing or upgrading your current system to Sage is going to be the best option for your practice.

IRIS

IRIS GP Accounts is designed for GP practices by GPs.

Unlike Sage, IRIS is practice specific and can use your information to work out complex partial-exemption VAT returns and can integrate with NHS payment statements. 

IRIS also includes unique NHS income facilities that allow you to easily deal with GMS contract payments.

As IRIS was designed for GPs and practice managers, you do not need an accountancy background or complex training to use it effectively. However, you will need to spend time familiarising yourself with the program, which you can do through the tutorials, which are available free online.

Like Sage, IRIS integrates with its own payroll package. 

Even though IRIS has the additional GP specific functionalities such as integration with NHS payment statements, NHS income cashbook facilities and unique provisions for dispensing VAT practices, it doesn’t yet have the benefits of cloud-based software.

So even though you will be able to update and monitor practice finances digitally, you will be tied to the computer on which the software is installed. 

This places greater responsibility on the person in the practice who is in charge of updating the practice’s finance records as they will need to organise sharing the information with partners and the accountants upon completion, which can be time consuming.

Xero

Xero is the middle ground of accountancy software. 

Although it doesn’t have practice-specific functionality like IRIS, Xero is more user friendly than Sage and doesn’t require previous accountancy experience. 

Xero has the benefit of being cloud based, which means that all of your practice’s financial information is stored online and is easily accessible by those who need it. 

It also boasts similar features to Sage Live with real-time banking reconciliation, payroll integration and third-party app connections. 

In due course, cloud accounting will become the norm, especially because the complicated finance issues of GP practices make it important to have as much real-time data as possible. Currently HMRC is consulting on the Making Tax Digital initiative, and discussing the introduction of quarterly online data returns at some point in the future. 

If you already have a cloud-based system it will make the transition
more efficient for your practice and means that your accountant can log into your accounts directly without having to ask the practice manager
or partners for the financial information. If you’re considering upgrading or implementing a new financial monitoring system in your practice, most software providers will offer a free no-obligation trial period. 

To ensure you get the most out of any service it is important to research the field thoroughly as you will still need to invest time and energy in learning how to work the new system, even on a trial basis.

Which approach is right for your practice?

As a practice manager, you should take the time to appraise your systems, processes and resources to determine what is right for your practice. This includes taking a close look at software you already have, who is going to be responsible for updating the records, and how often they are reviewed.

Ultimately, the decision on how
best to organise the practice’s finances will rest with the practice manager and it’s important to consider all the pros and cons of your digital finance software before you commit to a subscription or shell out hundreds of pounds for state-of-the-art software.

Aside from the initial cost of the systems, you will also need to look at who currently manages the practice finances (if it isn’t the practice manager) and whether they would be confident using an accountancy-specific software like Sage, or if they would be more comfortable with an easier program like Xero or IRIS.

You will also need to consider if you would be better off with a GP-specific software package like IRIS that will help you calculate dispensing VAT returns. On the other hand, if you have an accountant who already does this for you, you might be fine with a basic cash-flow and bookkeeping service like Xero or Sage.