If you going into meetings with your GP partners and the practice accountant and feel overwhelmed when reviewing the accounts, you’re not alone.
There is very limited, if any financial awareness and education as part of clinical training. Our helpful guide will get you up to speed and feeling more confident to deal with the job at hand.
What Are The GP Practice Accounts?
Making sense of the practice accounts doesn’t need to be dauting. First you need to gain an understanding of the basics of accounting and then how they apply to General Practice.
The practice annual accounts covers the financial transactions the GP practice has made over the year. It may differ from practice to practice but most will fix their accounting to start on 1st April to coincide with the tax year. It’s worth noting however that there isn’t a requirement to have a fixed date in place. (Please note; if you ever consider changing your year-end ensure you seek advice from a true medical accountancy expert!)
The annual accounts will include details of the below:
- Income
- Expenses
- Summary of profit share between the partners
What Else Can GP Practice Accounts Be Used For?
In addition to summarizing the financial position of the practice and all the individual partners on the last day of the accounting year, the practice accounts can also be used for the purposes below.
To understand the practice business – for example, where is the main source of income coming from, where can savings be made, how much is being spent on staff and if you should be investing elsewhere.
- The practice accounts can also help to calculate the partners’ tax liabilities and pension contributions.
- Provide financial evidence of earnings to support applications to the bank to borrow funds.
- The accounts will also enable you to project and plan ahead for the next financial year. This helps you to evaluate how much the partners should draw each month and if a new member of the team can be justified for example.
- You can also use the GP practice accounts to calculate how much is due to a partner that is retiring and help showcase how much a potential new partner’s potential earnings are likely to be.
If you have a specialist medical accountant who is a member of AISMA such as BW Medical Accountants then the GP practice accounts also help you to benchmark your practice’s financial performance against both regional and national averages. It gives an invaluable insight into topics such as if your practice is spending more on locums than others in your locality or if your earnings are significantly lower than the average practice.
Medical Accounting Glossary
Medical accounting is different from standard business accounting in that GP practices are usually partnerships rather than limited companies. Because of this certain accounting terms can mean different things in relation to GP accounts. We have included the most common terms and their definitions below.
Accruals Basis
Accruals basis is the basis that accountants and HMRC access the income and expenditure of your practice. This relates to income earned or expenses incurred rather than the amount received or paid out.
Balance Sheet
The balance sheet details all the assets and liabilities of the practice at the end of the financial year. This will include a number of elements including the amount owed to the practice for work carried out and also amounts owed by the practice for both services and goods brought in.
Drawings
Drawings refers to money that has been withdrawn from the practice by partners or paid by the practice on the behalf of the partners.
Partners’ Capital Accounts
Partners' capital accounts represents the money that has been invested long-term by the practice partners. This includes money tied up in any partnership properties minus loans and can also include other assets such as fixtures, equipment and drug stocks.
Partners’ Current Accounts
Partners' current accounts represents any unwithdrawn profits not retained for long-term investment in the GP practice that is available to be withdrawn by the partners when funds permit.
Profit and Loss Account
A profit and loss account shows the difference between the practice income and expenditure.
Working Capital
Working capital refers to the amount of money the partners need to invest in the GP practice in order to keep it running and to finance any gaps between monies earned and when it is received.
Get In Touch
Speak to our team of specialist medical accountants today to discuss your GP practice accounts in more detail.
