Are your financials in need of a checkup?

No one opens their own practice with the intention of getting buried in financial administration and paperwork. In an ideal world, healthcare providers focus on quality care rather than worrying about compensation structures, outstanding accounts receivable and tax deductions.

However, if you, as a practice owner, spend time shaping your organization with a focus on streamlining financial operations, you will save yourself from toiling over numbers.

Here are three tips on how you can reap real financial benefits from your business.

1) Limit liability and amplify compensation
The first consideration any practice owner should make is what compensation structure is best for his or her organization. To mitigate personal liability, many medical professionals have chosen to work through a limited partnership or to incorporate their practice. Medical corporations shield physicians from the liabilities of other healthcare providers within the practice and -- depending on the type of corporation chosen and where you incorporate your business -- can come with a number of financial benefits.

For example, “there are some tax advantages to setting up a subchapter S-corporation,” said Wray Rives, a certified personal accountant and member of the Wave Pro Network, a community of accountants & bookkeepers dedicated to helping Wave Accounting customers. While the initial cost of establishing your practice as an S-corporation may be high, it can have benefits such as “allowing the business to pay for personal medical insurance for the owners and their families and avoiding some of the self-employment tax that comes from sole proprietorships or general partnerships,” Rives explained.

Every owner should also consider the costs and benefits of the compensation structure he or she has chosen for their organization, as it will govern both the success of the practice and its members.

2) Streamline your accounts receivable
Without a doubt, the biggest problem healthcare practices face is managing their accounts receivable. “Unfortunately a large percentage of medical billing is to insurance companies and they are notorious for finding every excuse to delay payment,” noted Rives. Without a system in place for collecting outstanding bills, a practice may be operating non-productively while also hurting its bottom line.

A practice must have the tools to monitor, collect and analyze its accounts receivable. For some firms, the right medical billing software can help manage these accounts, but Rives suggests that the services of an experienced medical billing service can often help a practice keep outstanding accounts under control.

Once a system is in place, practice owners must regularly assess their accounts receivable to ensure the system is working and appropriate for their business needs. For instance, if a practice has selected a medical billing service, an owner must measure whether the cost of the service is appropriate for what is being collected and how it affects the relationship a healthcare practice has with its patients.

3) Maximize tax deductions for your practice
Along with administering your accounts receivable, practice owners cannot let the administration of their general business accounting get lost in the shuffle.

With an organized general ledger, a firm’s accountant (or any other financial professionals they choose to work with) can ensure a practice is taking advantage of all of the financial benefits available to them. These include business expense deductions, equipment depreciation and various other incentives that are offered to healthcare practices. Such a consultation is also helpful in assessing whether the chosen compensation structure is ideal for the practice.

A healthy overview of a firm’s finances makes it easier for an accountant to manage special tax programs like Section 179, which pays deprecation of equipment on an accelerated schedule, in a way that is most beneficial to a firm. Rives also pointed out that “many medical professionals qualify for a home office deduction if they do work that is integral to their practice and have an area of their home that is used exclusively for this work.”

With this simple three-step process, your practice will be well on its way to financial success.

Kirk Simpson is CEO of Wave Accounting, which provides free accounting software for medical practices and small businesses worldwide. Simpson has headed three startups and, between ventures, he has logged many accomplishments with large firms such as Quebecor and small firms such as Key Media. Connect with Wave on Twitter @WaveAccounting.