Basic tips on keeping your checkbook balanced - By Jordan Levin
No matter the size of your practice, you must have a clear picture of your financial position, this means at the very least, balancing your checkbook. Sure, if you have a larger practice you may have an office manager or an accounting team that does that for you, but you need to know it’s done and what it says. And for the smaller practice you might rely on your spouse or kids, or you do it yourself, but is it right. Knowing your financial position can be the difference between paying everyone and every bill on time or being embarrassed when a check bounces – it sends a bad message to everyone. Below are some basic tips on keeping your checkbook balanced.
Step 1. If you have a recent bank statement write down the balance in your check register, if you don’t, call the bank and ask them what your balance is. Knowing where you are starting from is like knowing a patient’s LDL before they start on a statin, it gives you a reference point for every transaction going forward.
Step 2. Look through your old statements or receipts for your FIXED costs. These are the costs you MUST pay every month or whatever time period they are due. Make sure you know what they are, how much they cost, and what day they are due.
Step 3. As in step 2, identify your variable costs. These are things that vary in price, may not be due every month, and can sometimes be put off in a pinch.
Step 4. Check your income for every month. Is it the same month after month or does it change? You can even use this to figure out an average reimbursement per patient visit if you have visit totals that match your income period.
Step 5. Cushion – You need to make sure you have an cushion in case you have a down month that you can meet your FIXED costs. I know you don’t think you will have a down month, but don’t be a fool, prepare for the worst and hopefully it won’t come. If the worst happens you can at least keep the lights on. Think of the cushion as a soft bottom line.
Step 6. Take the starting balance and subtract the expenses on the day the payment is ISSUED electronically or check WRITTEN. Similarly, add the deposits made in order of when they are Actually brought to the bank. Please note, most banks will not deposit the money into your account for 48 hours.
Step 7. If you receive a lot of electronic funds transfers from insurance companies into your account it is understandable that these may be hard to track. Don’t try. If you have online access to your bank you can add the amounts together and add to the paper checkbook register. I know, if you have online access what’s the point of doing this, it’s don’t for you. If you think that I have a bridge to sell you. If you don’t have online access take the paper statement you get from the bank and add the electronic deposits at the end of the month to your running balance.
Step 8. Look up and down your new balance sheet, are you always above the cushion you set for your self in step 5? If so good job, you are be keeping your bank balance in the black. If at any point you see the balance is below your cushion you are running the risk of running in the red, bouncing a check, missing a payment, and feeling embarrassed. Don’t, it happens to a lot of people, the good thing is that you now have a basic tool to help you avoid that in the future.
Step 9. If you are under your cushion put enough money in the bank to make sure you bring yourself above that amount.