Setting up a new medical practice without taking the time to structure your medical accounting systems is like performing an open heart surgery on yourself. Without a proper plan – and the right advice from a trusted medical accounting expert – you’re almost certainly heading for disaster.
If you’re anything like our clients in the healthcare industry, you’re no doubt very good at what you do. Which means you don’t have a lot of time to devote to the accounting and administrative tasks which are equally vital to successful transition from paid employee to practice owner.
Here are some basic but extremely important dental and medical accounting questions to consider during your planning phase:
Strategic plan, road map, vision – call it what you will. It doesn’t have to be hugely long and complicated, but a clearly articulated plan for your new practice is crucial. It should include everything from your location and patients through to start up costs and ongoing cash flow requirements.
If you formulate your plan in writing right from the start, you’ll be so much better prepared for any stumbling blocks and nasty surprises you may encounter along the way. It will also prove extremely helpful in maintaining clear communication with your key stakeholders such as staff, financiers, banks etc.
It’s important to include any likely challenges, and strategies to mitigate these.
You should of course think very carefully about which legal entity you choose for your practice. Each of the following will have an
affect impact on your tax position:
To adopt a one size fits all approach is a rookie error, what works for your colleague may not work for you. A common structure is to trade via a company, combined with a service trust. The latter comprises just that – a trust which provides services to the main trading company. This includes everything from your secretarial staff to cleaners, accountants and equipment leasing.
A key element to assessing the most appropriate structure is identifying the end game, whilst keeping the structure efficient and simple for now. For example, if you plan on bringing in a future practice partner(s), establishing a structure that facilitates this, without triggering unnecessary taxation events makes sense. As you continue through the business life the structure should be reviewed regularly to ensure it meets your requirements.
It’s important to clearly establish upfront whether your projected income will be classified as a business or personal services income (PSI). Getting this wrong will result in major tax ramifications. Read more about taxation and your medical practice.
Preparing a suitable cash flow report forms the basis of any good business plan. It’s generally a good idea to maintain this exercise even when your practice is up and running. It’s great for providing assurance that you’re on the right track, and can afford to keep your doors open or expand!
If you plan to buy an existing practice, there are finance options available to purchase 100% of the business, without requiring you to use other assets as security.
To make your practice run as smoothly as possible you of course need the necessary medical software and tools. Not forgetting, on the administrative side, practice management, billing, patient files, room allocation and accounting systems, plus bookkeeping and other add-ons.
Every business involves some degree of risk, so it’s important to make sure you take out the most appropriate insurance policies. The most common insurance products you’ll need as a dental or medical practitioner include indemnity insurance, public liability insurance and business owner’s insurance, among other options. You should also consider income protection, life insurance and other personal insurances.
The big question – whether to buy a current practice, or start one from scratch. There are, of course, benefits and disadvantages to both.
Buying or setting up a new medical practice can be daunting, so it’s best to get help from highly experienced professionals. Nobel Thomas Melbourne Accountants has been assisting medical professions plan, fund, structure and grow their practice. Contact us today.
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