One of the most useful meetings each year between the practice partners and their accountants is the review of the annual accounts, which will have been prepared by the accountants.
There are a number of 'fundamental' statements in the accounts. The first is the profit and loss account, which as the name suggests shows how much profit (hopefully not loss) the practice has made over the accounting year.
This analysis should be broken down into both income and expense categories, usually accompanied by a comparative column which shows the previous year's performance.
Unlike the profit and loss, which shows the performance of the practice over a period of time, the balance sheet shows the position of the practice as at the last date of the financial year.
It is a 'snapshot' on that one day, showing what is owed to the practice (debtors) and who the practice owes (creditors), in addition to items such as the bank balance, and partners' current and capital accounts.
A good set of accounts will expand on the current and capital account summaries shown in the balance sheet and have a full analysis of those accounts, showing the movements in the year and split between the respective partners.
Going one step further from the usual explanation of the accounts, a good medical specialist accountant should also have a business strategy session, which will include 'benchmarking'. A benchmarking session is essentially a comparison of how your practice has performed compared with similar sized practices in the same PCT, regionally and nationally; so you can spot both local and nationwide trends.
In addition to benchmarking, a further element of a strategic review would be for the accountant to suggest ways of improving performance and profitability.
This could involve recommending new income streams that have been successfully implemented by other practices and also considering the cessation of the least profitable services, again usually determined by the accountant's experience in this sector.
A specialist medical accountant may act for at least several dozen medical practices and can draw from this knowledge and experience when advising in this strategic manner.
The meeting could also be used to discuss new tax planning ideas. However, it is often advisable to have a separate meeting with your accountant to discuss tax planning, because it is quite an involved topic.
- Simon Gray is a partner at Henton & Co LLP, specialist medical accountants www.hentons.com