Here’s Why Your Money Is Only As Well Managed As Your Processes

By PRETTY BOOKS ON December 5, 2022
HERE'S WHY is a collection of simple explanations for the things in your business that just don't make sense. There are a lot of moving parts in your business, and not all of them are obvious. Here's Why gets right to the point in identifying what's happening, why, and what you can do to improve your operations. Here's the deal, you need clarity in your finances to make data driven decisions for your company.

You opened your own dental practice a few years ago. You have an administrator who manages customer payments and a CPA who does your taxes and bookkeeping at the end of the year. It’s been a couple of years, and you’re starting to think about expanding into a second office. You run a report from your practice management system to check last year’s revenue, and notice something questionable. Your system said you made one number, but your Profit and Loss statement from your CPA said something totally different. It looks like the money collected in your practice management system is very different than what is in your bank. You’re starting to wonder if there is a glitch in your system. Here’s the deal, your money is only as well managed as your processes.

Why? you don’t have a proper chain of commands

When your business is small, it’s easy to keep track of the way your money moves. But as you grow, there are more people, more transactions, and a lot more going on. Setting up a chain of commands helps flag errors and prevents surprises while giving you more awareness of the money coming in and out of your business.

Imagine this. You see that $5,000 is wired from your bank account. That’s alarming. Your typical vendor bill is less than $500. You’re wondering if this is a mistake, if you’ve been hacked, or if your credit card was stolen. Now you have to investigate what happened.

Now imagine this. You received a notice from your accounts payable person that an insurance bill needs to be wired on this day, that just happens to be that $5,000. Not only did you receive notification of that $5,000 transaction, but you personally paid it out. That’s because according to your chain of commands, any transactions over $2,000 have to be sent by you because it’s larger than normal.

Setting up a chain of commands will provide you with clarity on what is happening with your money, as well as prevent any potential transactional error that you did not intend. You don’t need to go investigate anymore, because you already know about the transaction before it happened.

Why? You need to be engaged with the bookkeeping of your company.

Here’s the story. You started out as a small practice with a few patients and a few bills. You’re able to keep track of the money you spend by looking in your bank account and budgeting in your head. Now your business has grown so much that you’re considering opening a second location. This growth brought an increase in the number of patients you see, the employees you pay, and your transactions. There is so much going on that you aren’t always clear on your financial position.

You need to have a system in place to track your practice management system and bookkeeping. Start doing your bookkeeping monthly instead of once a year. Start looking at transactions and numbers so you can get a clear understanding of how much money is coming in and going out of your business each month. Bookkeeping is your fountain of truth. With quality, monthly accounting, you’ll always have up to date numbers, which means you’ll be able to manage your budget and business better overall.

Why? You haven’t made it a big deal to reconcile your record keeping systems

You have two data systems in place to track your money- your practice management system and your bookkeeping process. Your bookkeeper is recording the money coming into your bank, and the practice management system is recording the money coming in from your customers every day. You would assume that they would be the same, but it seems like the numbers aren’t matching. These systems are recording different numbers and you’re not sure which is true and which is incorrect.

If these systems are managed in isolation from each other, there is no way to identify if there are any issues. You need to create a process to reconcile and verify the numbers between the systems. Frequently reconciliations of the systems will help you flag any numbers that don’t match, and will help you investigate whether it was a human error, glitch, or even theft. It will also give you the clarity you need to make decisions about your future. As you grow, your accounting process needs to become more sophisticated so it captures more accurate data across all areas of your business.

Here are some things to consider

Tracking your money is an important part of your business. It’s not enough to set up a system to collect payment and not look at it again. Here are some things to keep in mind when you’re addressing your processes.

  1. Audit your existing processes. If you have existing processes, seriously review them for leaks. Is there something this process doesn’t account for that could be losing you money? Are there at least two eyes on this process that can act as a check and balance? Am I confident that this process covers everything that could go wrong with my money?
  2. Work backwards. Start with your goal for the process. If your goal is for you to authorize all payments over $2,000, then that is the final step of your process. Break the rest down into smaller steps. Do you want your teammates to come directly to you for smaller bills, or do you want to include their managers? After you’re done setting up the process, look back through it to make sure it makes sense and doesn’t have any gaps. You should audit these processes once every couple of months to make sure they are working the way you planned on them to.
  3. Involve your financial advisor. When it comes to money, the best people to involve are your financial advisors. Ask them to look into integrations for your systems or places your money could be leaking. If their specialty is in processes, ask them to help you audit or create a process to ensure that money can’t sneak out through any cracks.

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The information provided in this post is for general informational and educational purposes only and is not a substitute for professional advice. Consult your financial, business, or tax advisor with respect to matters referenced in this post. Pretty Books assumes no liability for actions taken in reliance upon this information.
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