Taking the Guesswork Out of The Chart of Accounts for Medical Practice

Taking the Guesswork Out of The Chart of Accounts for Medical Practices

Picture it – Tigard, Oregon, a young doctor, let’s call her Dr. Nala had a small but growing medical clinic where she treated patients with the utmost care and expertise. However, despite her medical prowess, Dr. Sarah found herself constantly tangled up in the confusing web of accounting and bookkeeping for her medical practice, which started with her over complicated chart of accounts (CoA).

Dr. Nala realized she spent more time figuring out her finances than with her patients. She knew that to run a successful clinic; she needed to understand where her money was coming from and where it was going. That’s where the chart of accounts comes into play: the cornerstone of accounting.

What is a Chart of Accounts?

The chart of accounts is a lot like a library’s catalog for finances. Think of it as a list that helps put all the financial transactions of a business into some kind of order so that business owners can make sense out of chaos.

So, Why Is a simple Chart of Accounts So Important?

The first meeting I had with Dr.Nala was enlightening, as I reviewed the chart of accounts, which was three pages and a laundry list, with every possible expense and income transaction listed separately within her medical practice. I quickly realized that her complicated chart of accounts was more of a handicap than a help, which was causing a lot of her confusion.

The importance of a simple chart of accounts is as follows:

Clarity: ensures that financial data and related information are easily understood at a glance.

Efficiency: it saves time and the probability of error in the recording of transactions.

Focus: enables business owners to focus more on the main areas of their financial activities without being distracted by those that will probably never affect their decisions.

Decision-Making: helps make a few hasty yet analytical decisions related to finance.

Why the Chart of Account Shouldn’t Be a Laundry List?

CoAs that resemble a laundry list is a recipe for disaster. Here’s why:

Complexity increases: The more detail added, the more clouded and out of proportion the bigger picture becomes regarding finances.

It is time-consuming : To record each transaction separately into accounts.

Increased errors: A more complex CoA increases the chance for errors.

Analysis paralysis: Information overload can lead to indecision and, ultimately, analysis paralysis.

As a health and wellness accountant, I knew Dr. Nala needed a CoA that was easy, simple, and clear. A decent CoA should resemble a toolbox kept in good order; every tool or account should be there, and each tool should have its correct place, though there should not be too many tools.

Here are some valuable tips for a simple Chart of Accounts:

Do Not Over-Itemize: Instead of listing each type of medical supply bought group them into one category—Medical Supplies.

Be Consistent: Consistency for detail in your categories over time leads to clarity.

Use a Reasonable Number of Accounts: An economy of accounts—use only as many accounts as you need to quickly tell your financial story. Too few results in vague information; too many results in needless complexity.

The story of Dr.Nala is a reminder that simplicity can be powerful. By creating a straightforward Chart of Accounts, any health and wellness owner can take control of their business finances and, more importantly, their peace of mind.

simple chart of accounts example — Click to download example of a simple chart of accounts

Now, Dr. Nala can spend less time crunching numbers and more time watching medical dramas…uh, we mean, treating patients!

So, if you’re running a medical clinic (or any health and wellness business), take a leaf out of Dr. Nala’s book. For your Chart of Accounts – keep it simple, keep it clear, and watch how it transforms the financial health of your health and wellness practice/spa/studio.

If you need any additional help, please reach out to us at Healthy Bodies of Finance for your health and wellness accounting, bookkeeping and financial management needs.

Fall Dangerously in love with your finances

Don’t let financial worries cloud your passion for patient care. Empower your medical practice with a clear Chart of Accounts and streamlined financial management.
Contact Lozelle today for a diagnostic review of your Chart of Accounts. Our expertise in medical practice accounting can help your practice flourish with improved cash flow, accurate reporting, and peace of mind. Focus on what matters most – providing excellent patient care – while Lozelle and the Healthy Bodies of Finance team handles the financial complexities.

Book A Free Consultation!

Do You Have A Question?

Our monthly newsletter column, ‘Dear Dangerously in Love with Your Finances,’ is here to address your most pressing financial queries. Submit your questions, and Lozelle will dish out advice in our newsletter! No question is too big or too small, so don’t be shy!

Dear Dangerously In Love With Your Finances….

This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax and accounting situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney or advisor regarding your particular facts and circumstances. Healthy Bodies of Finance is an accounting firm that specializes in working with health and wellness providers. We provide monthly accounting & bookkeeping services and financial education. For more information on our specialized services for health and wellness providers please contact us at [email protected]

Simplify Your Medical Practice Finances: Chart of Accounts Explained