You got into healthcare to help people, but running a private practice means wearing two hats: healthcare provider and business owner. While you've mastered caring for patients, the business side, juggling profit margins, insurance claims, and cash flow projections, might feel like you're practicing outside your specialty.

The good news is that strong financial habits don't require an MBA; they simply require consistent attention to a few key areas. Below are six key bookkeeping tips to help keep your operations running smoothly and your finances on track.

1. Keep Business and Personal Finances Separate

Mixing personal and business transactions can create confusion, cash flow issues, and IRS scrutiny. Once your practice is established, it should operate as its own legal and financial entity.

Start by opening a dedicated bank account and credit card for business use only. If personal expenses need to be addressed, consider handling them through formal partner distributions or bonuses.

2. Review Financial Performance Regularly

Your monthly income statement and balance sheet offer visibility into how your practice is performing over time. Think of them as your diagnostic tools as they reveal patterns, growth opportunities, and potential concerns.

Key questions to consider:

• Is your revenue trending up or down?
• Are expenses aligning with expectations?
• How are debt levels and cash reserves changing?

3. Actively Manage Cash Flow and Collections

Even if your financial statements look healthy, cash flow problems can happen quickly, especially in a practice that relies on third-party reimbursements. Billing doesn’t always guarantee collection, which is why it’s so important to review your accounts receivable each month to make sure the revenue you’re earning is actually coming in.

Focus on:

• Aging reports by payer - Review outstanding balances by payer to identify which ones are consistently slow to reimburse. This can help you prioritize follow-up efforts and uncover trends that might cause delays.
• Collection timelines and write-off patterns - Track how long it typically takes to collect from each payer and how much ends up being written off. A rise in write-offs or extended collection times could point to inefficiencies or payer-specific issues.
• Bottlenecks in billing or claim submission - Look for patterns in delayed claim submissions or rejections. Recurring problems in the billing process, such as missing documentation or coding errors, can slow down payments and hurt cash flow.

4. Use Internal Production Reports

Internal production reports are internal tracking tools used by medical practices to measure provider activity and productivity. They show the volume and types of services performed, such as patient visits, procedures, and diagnostics, and then tie that activity to revenue.

• Which services or providers are most efficient - Identifying top-performing services or providers helps you focus resources where they’re most effective.
• How insurance mix affects reimbursement - Understanding how payer types impact revenue allows you to anticipate cash flow patterns and evaluate whether your payer mix supports financial sustainability.
• Whether daily volumes are aligned with staffing - If patient volume regularly outpaces or falls short of staffing levels, it can lead to burnout or inefficiencies. Knowing this helps you adjust schedules, redistribute workloads, and optimize provider time.

5. Align Income Distribution with Practice Goals

Compensation structures are a common source of tension in group practices. Having a transparent income distribution model ensures fairness and supports your long-term goals, while also driving the behaviors you want to see.

• If your goal is growth, consider tying bonuses to new patient acquisition or referral generation.
• If you're focused on efficiency, you can reward providers who maintain strong patient volumes while keeping overhead costs in check.
• If you want to improve patient satisfaction, you can incorporate quality metrics or patient retention rates into your compensation plan.

The right model should boost morale, support recruitment, and align your team around shared objectives.

6. Don’t Do It Alone

We commonly hear practice owners say, “I know something’s not right with my finances, but I can’t figure out what.” If you feel like you’re missing something, you probably are. The right financial partner can make all the difference.

• You'll spot the expensive problems hiding in plain sight, like billing processes that delay collections by weeks or payer mix shifts that quietly erode your margins.
• You'll get straight answers to the questions that keep you up at night: "Can I afford another provider?" "Is this lease worth renewing?" "Why is my overhead creeping up?"
• You'll focus more on patients and less on paperwork. Tax deadlines, payroll compliance, and insurance audits can be handled by professionals, so nothing falls through the cracks.

Build and Maintain a Thriving Practice with Lutz

At Lutz, our private practice services help medical practices build smart, scalable accounting solutions. Whether you need help cleaning up your books, refining compensation models, or planning for the future, we’re here to support your organization’s growth. Contact us with any questions.