Many new healthcare organizations struggle because they don’t hire an accountant or incorporate an effective accounting solution early on. Early successes are short-lived. As soon as they hit a bump in the road, require funding, or seek to expand operations, they lack the financial records and insights they need to grow.
Whether you take the DIY accounting approach, use a healthcare accounting software solution like Flychain or hire an accountant for your practice depends on your particular situation. Here’s how to decide which solution to use.
DIY accounting
What is DIY accounting?
While you can achieve accurate accounting with spreadsheets, most private practice owners use a DIY app like QuickBooks.
With DIY accounting software, it’s up to you to make sure all transactions are imported accurately into the ledger so you can generate financial and accounting reports. You'll use those financial reports to study your practice’s performance, strategize, and file accurate tax returns — so, accuracy matters.
How much does it cost?
Some healthcare accounting software is available for free, but for a comprehensive solution (one that isn’t limited by free plan limits), expect to pay anywhere from $15 to $45 per month. But remember, that monthly fee does not account for the cost of your time spent each week tackling healthcare accounting tasks and admin. Your time is valuable, so carefully consider the true cost of DIY before committing.
How does DIY accounting work?
Most accounting software automatically imports transactions from your business bank account to the general ledger, the main document tracking all expenses and revenue. Then it’s up to you to categorize each transaction and ensure it’s accurate.
Sound simple? Sure, but remember that healthcare accounting tasks like these are not to be taken lightly. Miscategorizing a transaction—labeling an operating expense as part of your cost of goods sold (COGS), for instance—results in inaccurate financial statements and, eventually, inaccurate financial projections and tax filings. That can be a big headache down the road.
With all DIY healthcare accounting methods and software, the responsibility for accurate bookkeeping and accounting ultimately lands on your shoulders.
What are the benefits of DIY accounting?
- Relatively inexpensive. So long as you don’t make any costly mistakes, accounting software is cheaper than fees associated with hiring a professional with previous accounting experience.
- Hands-on learning. If you want to gain experience in accounting about learn how it works for your business, software gives you the chance to learn more by doing.
- Upgradeability. So long as your books are accurate, you’re typically able to pass on your DIY, software-based accounting info to a professional accountant once you’re ready to make the upgrade.
What are the drawbacks of DIY accounting?
- Time cost. As a business owner, every minute of your time has the potential to be invested in expanding your business. Since you probably lack specific experience in accounting, DIY accounting can disproportionately eat into your time.
- Errors are expensive. Miscategorizing a transaction or losing track of records can have a serious impact once it’s time to file taxes.
- Upgrade costs. While most accountants will accept past accounting data from your software, they typically charge a fee to go back and retroactively make sure everything is accurate. That fee increases if your books are disorganized or include errors.
- It all rides on you. It’s up to you to make sure your accounting is accurate—there’s no outside help to draw on. Many business owners find that responsibility creates unnecessary stress — especially when healthcare accounting professionals can shoulder that burden for you.
Who is DIY accounting best for?
If your healthcare practice is brand new and you’re just beginning to earn revenue, software gives you the tools to keep track of your finances and eventually upgrade to a professional solution. Hiring healthcare accounting professionals might be out of budget in early days, so it's an understandable solution for many healthcare providers.
Healthcare Accountant
What is a healthcare accountant?
A healthcare accountant is a professional trained in bookkeeping (tracking day-to-day transactions) and accounting (generating financial reports, creating financial projections, and filing taxes) who typically has some experience working with healthcare practices and medical facilities.
How much does it cost?
A typical fee for a professional in the field of healthcare accounting is roughly around $40 per hour. Note that costs can absolutely exceed $40 when hiring an accountant or accounting practice highly experienced in healthcare practices, medical facilities, and medical terminology.
The total cost per month depends on which services you need, and how complex your bookkeeping and accounting are. If you hire an accountant solely to prepare your tax return, expect to pay a one-time fee of $375 to $500.
How does hiring a healthcare accountant work?
Your accountant may be a freelancer or an employee at a firm. They may handle both your bookkeeping and your accounting, or only your accounting. In the latter case, expect to hire a separate bookkeeper who will keep your books up to date and deliver your financial information directly to your accountant.
Most accountants and bookkeepers use commercially available accounting software. To submit transactions or import information (like retroactive bookkeeping information) for the benefit of your accountant, you may need to use the same software. That will mean signing up and possibly paying for the software, as well as learning how to use it.
Bookkeepers typically import your transactions directly from your bank accounts, and accountants take that information from bookkeepers and use it to generate financial statements and file taxes. An accounting firm may also offer payroll services if you have employees.
What are the benefits of hiring a healthcare accountant?
- Protection from errors. A certified accountant with experience in medical organizations will ensure your financial information is correct and help you file accurate tax returns.
- Projections, planning, and advice. Accountants can provide accurate records and insight into your healthcare practice and challenges it faces that you would not be able to access on your own. That’s good for long-term planning and growth.
- Less time cost. With one or more professionals handling all your bookkeeping and accounting, you have more time to invest in your practice.
- The information you need. Accurate and up-to-date financial reports guarantee you have the information you need to make smart financial decisions and file your taxes accurately.
What are the drawbacks of hiring a healthcare accountant?
- Potential for communication errors. While most professionals in the field of healthcare accounting are qualified to handle your finances, they don’t always excel at communication. When you rely on one individual to handle all your financial information, they may become a bottleneck if they’re hard to reach. On top of that, it's not unusual for accountants from a firm to switch jobs semi-frequently. That could mean having to onboard a new accountant more often than you'd like.
- Inflexible reporting schedules. Monthly financial reports give you the insights you need to understand your business broadly, but if you want up-to-the-minute information, you may have trouble accessing it. Most traditional accountants don’t offer a dashboard with real-time financial metrics.
- Multiple freelancers. Your accountant may not offer bookkeeping services, and your bookkeeper may not be qualified to handle your accounting tasks. That could mean a lot of running around coordinating between different individuals.
Who is a healthcare accountant best for?
A medical accountant is essential for any practice that wants a professional solution for their financial services and freedom from the burden of hands-on, DIY accounting. For a one-stop solution with real-time financial insights, consider a cloud-based solution like Flychain.
Flychain
What is Flychain?
Flychain is a complete financial operating system for healthcare providers. That includes a full-service healthcare accounting, access to capital, valuation services, and more. When you have Flychain handling your accounting, all your transactions are automatically imported, and a team of in-house accountants categorizes them for you.
You access Flychain from a dashboard featuring real time financial metrics. Besides typical financial reports, you can access tools to help you plan and scale your practice.
Flychain is specifically designed for healthcare businesses. Using Flychain, you can access financing options that give your business more access to working capital.
How much does it cost?
Flychain pricing entirely depends on the scope and scale of your business. For pricing details, book a call with us!
How does Flychain accounting work?
Every time your business spends or earns money, the transaction is automatically imported and categorized in your general ledger. That information is used to generate real-time financial reports and metrics in your Flychain dashboard.
What are the benefits of Flychain accounting?
- A healthcare-specific solution. Flychain gives your practice healthcare-specific financial tools—backed by a team of accounting professionals—you won’t find anywhere else.
- Virtually hands-free accounting. Transaction categorization and reports are handled by professionals versed in accounting principles who ensure their accuracy.
- More time, less stress. You put less time and energy into accounting, so you have more to invest in your business.
- Information you can act on. Real time metrics like cash flow give you advanced billing cycle information most accountants can’t provide.
What are the drawbacks of Flychain?
- Not for early, early stage providers. If you still haven’t launched your practice, it’s too early to start using Flychain. Once you’re ready to open your doors to patients, Flychain is the fastest way to get your finances up and running.
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Evaluate your accounting needs and consider whether DIY solutions, professional accountants, or an all-in-one platform like Flychain will best support your practice’s financial health and growth. Make the switch when you’re ready for seamless, accurate, and efficient financial management.
Thank you for following our Healthcare Accounting Series. Stay tuned for more insights and updates on optimizing the financial health of your practice!