In our last post, we discussed the hazards of not knowing where your revenue comes from, as well as having a poor grasp of your expenses. Now that you know some common pitfalls and warning signs, let’s talk about how to improve your books and get back on track!
Your accounting file and accounting reports should be very neat and organized. Whether you use the cash (deposits as income, expenses are recognized when you pay them) or the accrual (you recognize income as services are provided to patients (A/R) and expenses are recognized as incurred and then paid (A/P)) method, pick one and make sure your numbers are correct. Most hospices are using a blend of the cash and accrual method due to software limitations or, in more cases than there should be, issues with that trusty bookkeeper who watched YouTube and bought a copy of QuickBooks at Staples.
Within these reports, your chart of accounts detail and complexity will depend on your agency size. For agencies with one location and similar to the example agency above, a detail account layout that has separate accounts for wages by type (RNs, aides, social workers, administrative, etc.), a payroll tax expense account for clinical and administrative, and a benefits account for health insurance based on department is a good place to start.
Think about your cost report – all that information that gets requested each year should be at your fingertips every month. When you are asked to fill out the checklist, a copy of your P & L should have all that data already there. We aren’t just looking to create more work for you – we want you to be able to see where your money goes – where your expenses come from and where your revenue is derived.
For some hospices that provide more than one line of business under the same tax ID (homemaking and personal care or private pay), you will want to separate that income and the related expenses from your certified income and expense. While this might sound like overkill and way too much work, if you want to be sure where your money is going and where it is coming from – you need to do this. You need to have a firm grip on your financials, so you can make informed, sound decisions. If your bookkeeper can’t do this or figure it out, then it might be time for you to upgrade your services. The introduction of new hospice compliance measures is going to really put pressure on providers to perform well. If you can’t perform as an owner or leader and make informed decisions with concrete data, you could be in trouble. Having the best clinical documentation and coding is critical, but so is running a sound business and having solid accounting information!