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Taking respite in the payroll comfort zone?

by in Accounting

Are you still undertaking the payroll or book keeping yourself to save a few pounds of outsourcing costs? AISMA accountant Michael Ogilvie* explains why this can be a false economy.

In our experience, some practice managers explain that doing the payroll and book keeping themselves gives them some respite from the pressure of managing a GP practice.

But this can leave practice managers little time for doing the rest of the job effectively. They can end up chasing their tails, leaving work incomplete – including the payroll and book keeping – which carries the risk of expensive errors being made. In trying to save the surgery money, they can end up costing the surgery more.

Increasingly, like many other AISMA accountants, we are being asked to take over the complete finance function for surgeries because it ends up being the least important priority on the practice manager’s to-do list.

While we recommend outsourcing the payroll to a specialist bureau who understand the complexities of GP pay, tax and pensions, outsourcing the complete finance function is not the solution.

Finance should be number one on the six-point priority list for practice managers:

The six priorities for practice managers

  1. Understanding the surgery finances and being able to prepare plans for maximising income and controlling costs.
  2. Producing the right management information at the right time, to allow the partners to make the right management decisions at the right time.
  3. Supporting the partners to allow them to do their work as effectively as possible.
  4. Managing and supporting the team to allow them to work as effectively as possible.
  5. Making sure that communication with the patients of the practice is as effective as possible.
  6. Making sure that all risk management is correctly done to comply with legislation, CQC guidelines etc.

Planning is the key

When planning to implement these six priorities, it will soon become apparent that practice managers cannot do everything themselves. If the work is to be done effectively some roles need to be outsourced, delegated or carried out in a different way.

Understanding the practice finances

Here are three areas for practice managers to focus on:

  1. Understand income streams – agree with the partners what income streams the practice will be working to generate in the year ahead, then make sure you understand how the claims work and the timescales within which the claims need to be made; summarise these income streams into forecasts for the partners.
  2. Understand and control costs – know and summarise your fixed costs, such as rent and insurance, that you cannot control, but more importantly understand the variable costs that you can control, like locum costs and increased overtime, and then summarise these costs into forecasts for the partners to approve.
  3. Understand your cash flow – if you have summarised your income and costs into forecasts, you will then easily be able to forecast cash flow and drawings including tax payments where necessary for your partners to approve. In our experience this is rarely done, unless we are asked to do it for the partners.

Using cloud accounting and apps

We encourage practices to allow us to help them to embrace technology which makes the production of management information and forecasts so much easier.

Why post invoices when you can pay a few pounds a month for an automated book keeping service do it for you?

Why reconcile bank accounts, when there are cloud accounting solutions that can do it for you with the bank feed direct from the bank?

Why try to understand spreadsheets for forecasts – which in reality means the forecasts rarely get done – when you can use an online forecasting tool. After the initial set-up time and costs, this can integrate with your cloud accounting system and do the forecasting for you?

All of these systems will save the practice money, compared with the cost of undertaking the tasks in-house.

Producing management information

Once you have implemented these systems, management information will be readily available. Your practice accountant can then help interpret the information and submit a report to the GP partners – quarterly or monthly depending on their requirements.

A crucial part of your management work is complete, leaving you much-needed time for

other priorities like managing risk, submitting claims, making sure doctors and team are coding their work carefully, dealing with doctor and team rotas, and so the list goes on.

Outsourcing the payroll and taking advantage of new finance and accounting technologies will allow you to support your GP partners so that the practice can flourish in challenging times.

*Michael Ogilvie is a member of the Association of Independent Specialist Medical Accountants

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