Medical assisting Administrative and clinical procedures (5e) Chapter 21 Financial management

The objectives of this chapter are: Summarize the importance of and how to establish good bookkeeping and banking practices; compare singleentry, doubleentry, and writeitonce bookkeeping systems; outline patient related financial transactions; identify negotiable instruments and the items that must be present for a check to be negotiable;...

Financial Management

21.1 Summarize the importance of and how to

establish good bookkeeping and banking practices.

21.2 Compare single-entry, double-entry, and

write-it-once bookkeeping systems

21.3 Outline patient related financial transactions.

21.4 Identify negotiable instruments and the items

that must be present for a check to be negotiable.

Learning Outcomes (cont.)

21.5 Describe the different types of check

endorsements and the steps in creating a bank deposit.

21.6 Carry out the process of reconciling the

office bank statement

21.7 List several advantages to electronic

banking.

21.8 Implement setting up, classifying, and

recording disbursements in a disbursement

journal.

• Employees must understand financial management

procedures

The Medical Practice as a Business

• To succeed - income must exceed expenses

• Accounting

• Responsibilities of medical assistant

– Bookkeeping ~ a systematic record of business

transactions– Banking

– Strive for 100%

– Records form a chain of information

– Errors can result in

• Double billing

• Omitting bank deposits

• Improper payments to suppliers

ANSWER: Errors can result in billing a patient twice

for same service, omitting bank deposits, and

making improper payments to suppliers.

What can be the result of errors in billing?

Medical Office Accounting Methods

– Performs same tasks as manual method

– Saves time

• Performs repetitive tasks

• Performs math calculations

• Has built-in tax tables

Manual Bookkeeping Systems

– Transactions are listed twice

– Assets = Capital + Liabilities

– As payments are made on the asset both side of the

equation continue to balance

Example:

Asset - $15,000 ECG machine Capital = amount of total cost paid Liability = the amount still owed

$15,000 = $5000 + $10,000

Manual Bookkeeping Systems (cont.)

• Write-it-once ( pegboard ) system

• Entry written one time

– Daily log sheet

– Patient ledger card

– Charge slip

– Chronological list of charges, payments, and

adjustments– Journalizing

– Post from the log to patient

ledger

Manual Bookkeeping Systems (cont.)

• Patient ledger card

– Total owed to the practice

– Total on accounts receivable = balances on patient

ledger cards

• Accounts payable

– Amount owed to vendors

– Keep accurate records

Manual Bookkeeping Systems (cont.)

• Record of office disbursements

– List of payments made

– Comparison of income and expenses

Apply Your Knowledge

What types of bookkeeping methods might you use

in a medical office?

ANSWER: You might use these bookkeeping

systems in a medical office:

Single-entry

Double- entry

Pegboard

– Set up peg board with daily log sheet

– Layer superbills

• Patient Process – ledger card under next superbill

• Attach the Superbill to the Patient Chart

In Office Patient Transactions (cont.)

• Patient Checkout – place superbill and ledger card on

appropriate space of daily log

• Payments After the Patient Visit

– Record payments appropriately

– Make adjustments as required

– Add back to patient balance

– Add bank fees

• Overpayments

• End of day

– Total columns

– Correct errors

Apply Your Knowledge

Mr Adams check does not clear because of

non-sufficient funds What adjustments do you make to

his account?

ANSWER: The amount of the check is added back

to the patient’s balance A fee for the returned

check as well as any fees incurred as a result of the

NSF check may also be added to the patient’s

balance.

• Certified check – money certified available

• Voucher check – stub for record keeping

• Limited check – time limited

Checks (cont.)

• Counter check – withdrawals

• Traveler’s check – established denominations

• Money order – guaranteed payment

– ABA number

• Fraction on upper edge

• Geographic area and bank

– Magnetic ink character (MICR) code

• Numbers and characters

• Read by computer

– Interest-earning ~ for special

expenses

ANSWER: A negotiable instrument is a check that

is legally transferable from one person to another

A check must:

• Be signed by the payer

• Include the amount of money to be paid

• Be made payable to the payee or bearer

• Be made payable on demand or on a specific date

• Include the name of the bank that is directed to

make payment.

Preparing a Bank Deposit

attorneys

– Endorse immediately

– Endorse in appropriate place

– Endorse in ink or use

stamp

Completing the Deposit Slip

• Post the payment to

the patient ledger card

• Put the check with

• Obtain deposit receipt

• Electronic Deposits – Electronic funds

transfers (EFTs)

Apply Your Knowledge

What are the types of check endorsements?

ANSWER: There are four principal types of

endorsement:

 Blank endorsement - simply the payee’s signature

 Restrictive endorsement – specifies how the check

may be redeemed

 Special endorsement – a third-party endorsement

 Qualified endorsement – used by attorneys, who

may accept a check on behalf of their client,

– Comparing the office financial records with the bank

statement– Ensure that they are consistent and accurate

– Performed once a month

Reconciling Bank Statements

How do you reconcile a bank statement?

ANSWER: You compare the office financial records (checkbook

or disbursements journal) with the bank statement to be sure

they are accurate In the checkbook, you should mark all items

that have cleared the bank to be sure all are accounted for Once

outstanding checks are subtracted from the bank’s balance it

should match the checkbook balance.

Electronic Banking

Advantages - improves productivity, cash flow, and

accuracy

Traditional Banking Electronic Banking

You record each check and

determine new balance Computer calculates new balance

You reconcile office bank

statement

Computer reconciles the statement automaticallyYou lock up banking

materials at end of day You use computer password for security

Electronic Banking (cont.)

• Record Deposits

– Enter each deposit

– Print deposit slip

– Check balance

– Program displays checks and deposits

– Mark those appearing on the statement

– Enter balance from statement

– Program performs the reconciliation

Apply Your Knowledge

What are the advantages of electronic banking?

ANSWER: Electronic banking improves productivity,

cash flow, and accuracy Computerized banking

programs facilitate recording deposits, paying bills,

displaying the checkbook and reconciliation of the

account.

– Payments for supplies, equipment, and

practice-related products and services– Payroll

– Taxes

• Payments for goods or services

• Recording disbursements

1 Set up disbursement journal

2 Enter check information and amount

3 Determine expense category

5 Split amount if necessary and enter total in check

amount column

Writing Checks

• Account balance must cover the check

• Enter on disbursement log then write check

• Have the doctor sign the check

• Mark invoice with date, check number, and amount paid;

place copy in file

• Mail check

– Total and track expenses by category

– Check calculations

– Tracking

• Look for changes

• Helps control expenses

Understanding Financial Summaries

• Statement of income and expense

available to cover expenses

• Trial balance

– Check periodically

– Expenses should match

amount in check column

ANSWER: To record disbursements:

1 Enter check information and amount

2 Determine expense category

4 Record check amount under appropriate

category

5 Split amount if necessary and enter total in

check amount column

In Summary

21.1 Procedures to be established to help maintain

consistency in financial practices include being

organized and consistent

Write clearly and use markers to keep track of your current location

Check your work frequently and correct any errors using the approved All entries must be kept

readable at all times

Finally, keep all figure columns straight so that decimal points line up

Following through on these procedures can help ensure that your work will be concise and accurate

is written once on the patient ledger, on the daily log, and in the checkbook, contains no checks and

balances for accuracy

The double-entry system, based on assets = capital

& liabilities, has checks and balances, but can be cumbersome and complicated

The write-it-once system allows all transactions to

be recorded in one procedure, using carbonless forms on all necessary documents

Many computerized office management software packages are based on the write-it-once concept

In Summary (cont.)

21.3 Patient related financial transactions include

starting the day, patient process, attaching the superbill to the patient chart, patient check out, after visit payments, returned

checks, refunds, uncollectable accounts, and

end of day procedures.

transferable from one person to another

To be negotiable a check

• must be written and signed by the payer or maker,

• include the amount of money to be paid,

• be made payable to the payee or bearer,

• be made payable on demand or on a specific date,

• include the name of the bank that is directed to make payment

In Summary (cont.)

21.5 The types of check endorsements are blank,

restrictive, special, and qualified To make a bank deposit, follow the steps outlined in

Procedure 21-5.

21.6 Following the guidelines outlined in

Procedure 21-6, the student should

successfully be able to reconcile a mock

bank statement with a mock office checkbook.

balance, reconciles the monthly bank statement

automatically and a computer password and security

system is used to keep the information safe and

confidential

21.8 Following Procedure 21-7, the student should set up

a mock disbursements journal consisting of several columns of expenses

Once set up, given a list of several “bills” to be paid, the student should document the check information and record the disbursement amount in the correct column(s) of the journal

End of Chapter 21

Never spend your money before you have earned

it

~ Thomas Jefferson