There are a lot of things that go into running a business. From marketing and sales to employee benefits and human resources, there are a lot of different aspects that need to be considered. One of the most important – but often least understood – is how accounting works in healthcare. What is it? How does it work? Why is it important?
In this blog post, we will answer all those questions and more! So please sit back, relax, and let us teach you about the ABCs of accounting in healthcare, compensation, and benefits consulting, and health and employee benefits.
At its most basic, accounting is the process of recording, categorizing, and summarizing financial transactions to provide information about an organization’s finances. Decision-makers then use this information to make informed decisions about allocating resources.
In healthcare, accounting is used to track and report on revenue and expenses and assess the financial performance of individual providers, departments, and facilities. It is also used to monitor compliance with regulations and policies.
How Does Accounting Work in Healthcare?
Accounting in healthcare works similarly to accounting in other industries. However, a few key differences need to be taken into account when working in this field.
First of all, healthcare organizations are typically much larger and more complex than other businesses. This means that there is more data to track and report on. Secondly, the regulations and policies that govern healthcare are much more stringent than those in other industries. This means that compliance is of the utmost importance.
Finally, the reimbursements received by healthcare providers are often based on the services provided rather than on the actual costs incurred. This means that accounting must consider both revenue and expenses when assessing financial performance.
What’s Compensation & Benefits Consulting?
Compensation and benefits consulting is a field that deals with the design and implementation of employee compensation and benefits programs. This can include everything from developing salary structures to designing retirement plans.
Compensation & benefits consultants work with employers to identify their needs and then create custom solutions that meet those needs. In many cases, they also work with employees to help them understand and maximize their benefits.
How Does Compensation & Benefits Consulting Work?
Compensation & benefits consulting typically starts with assessing an employer’s needs. Once those needs have been identified, the consultant will develop a custom solution that meets them. In many cases, the consultant will also work with employees to help them understand and maximize the benefits available to them.
Why Is Compensation & Benefits Consulting Important?
Compensation & benefits consulting is important because it helps:
- Employers design and implement employee compensation and benefits programs that are fair, equitable, and compliant with all applicable laws and regulations.
- Employees understand and maximize the benefits available to them.
- Organizations attract and retain the best talent by offering competitive compensation and benefits packages.
What are Health & Employee Benefits?
Health and employee benefits is a field that deals with the design and implementation of employee health and welfare programs. This can include everything from developing health insurance plans to designing wellness programs.
Health and employee benefits consultants work with employers to identify their needs and then create custom solutions that meet those needs. In many cases, they also work with employees to help them understand and maximize their benefits.
How Does Health & Employee Benefits Work?
Health and employee benefits typically start with assessing an employer’s needs. Once those needs have been identified, the consultant will develop a custom solution that meets those needs. In many cases, the consultant will also work with employees to help them understand and maximize the benefits available to them.
Why Is Health & Employee Benefits Important?
Health & employee benefits are important because:
- They help attract more talent to your organization.
- They help retain talent. Studies reveal that 78% of employees would stay in a job if the position offered a good benefits package.
- Motivates employees to work hard by showing them they are valued within the company.
Differences Between Accounting, Compensation & Benefits Consulting, and Health & Employee Benefits?
The main difference between accounting, compensation & benefits consulting, and health & employee benefits are each field’s focus.
Accounting focuses on financial transactions, compensation & benefits consulting focuses on employee compensation and benefits, and health & employee benefits focus on employee health and welfare.
How Do They Work Together?
Accounting, compensation & benefits consulting, and health & employee benefits often work together to provide a complete solution for employers. For example, an employer may use accounting to assess their financial needs, Compensation & Benefits Consulting to design a custom salary structure, and Health & Employee Benefits to develop a health insurance plan.
Why Do They Matter?
Accounting, compensation & benefits consulting, and health & employee benefits matter because they help employers design and implement employee compensation and benefits programs that are:
- Compliant with all applicable laws and regulations.
- Help employees understand and maximize the benefits available to them.
- Help organizations attract and retain the best talent by offering competitive compensation and benefits packages.
There are a lot of different moving parts when it comes to running a business. There’s a lot to keep track of, from financial transactions to employee health and welfare. That’s where accounting, compensation & benefits consulting, and health & employee benefits come in. These fields help businesses design and implement employee compensation and benefits programs that are fair, equitable, and compliant with all applicable laws and regulations.
Accounting For Health Care Organizations
Health care organizations have a unique set of accounting needs. In addition to the traditional financial statements, health care organizations must maintain compliance with governmental regulations and third-party payers. They also must manage their inventory of drugs and medical supplies.
Accrual and Cash Accounting
The two methods of accounting used by businesses are accrual and cash accounting.
Accrual accounting: recognizes revenue when earned, regardless of when the money is received. Most businesses use this method to provide a more accurate picture of their financial health. Health care organizations, on the other hand, generally use cash accounting.
Cash accounting: revenue is only recognized when the money is received. Health care organizations use this method because they often have to wait for reimbursement from insurance companies and other third-party payers.
In accrual accounting, revenue must be matched with the expenses incurred in earning that revenue. For example, if a company sells a product on credit, the revenue from the sale is not recognized until the product is delivered. This matching of revenue and expenses is called the revenue recognition principle.
The revenue recognition principle is especially important in health care because of how health insurance works. When a patient receives treatment, the health care provider incurs the expense immediately. However, the provider does not receive payment from the insurance company until sometime later.
Health care organizations must report their financial information to various government agencies and third-party payers. These reports must comply with generally accepted accounting principles (GAAP). Most health care organizations use computerized accounting systems to track their financial information. These systems generate the necessary reports automatically.
These systems generate customized reports to meet the organization’s specific needs. For example, a hospital might need a report that shows how much it spends on drugs and medical supplies for each patient. An accountant can create this type of report by customizing the software to include the necessary information.
Depreciation is a method of accounting for the wear and tear on equipment and buildings. In health care, depreciation is often used to account for the cost of medical equipment.
When a piece of medical equipment is purchased, it is recorded as an asset on the balance sheet. The cost of the asset is then spread out over its useful life. This process is called depreciation.
At the end of each year, the amount of depreciation expense that has been incurred is reported on the income statement. Depreciation expense reduces the net income of the organization.
The total amount of depreciation expense that has been incurred over time is called accumulated depreciation. Accumulated depreciation is reported on the balance sheet as a contra asset.
Contra Asset: is an asset that offsets another asset. In this case, the contra asset is depreciation expense. Depreciation expense offsets the cost of the equipment.
The accumulated depreciation reported on the balance sheet is subtracted from the cost of the equipment to get the book value of the equipment. The book value is the amount received if the equipment was sold today.
Several methods can be used to calculate depreciation expenses. The most common methods include:
Straight-Line Depreciation: Under this method, equal amounts of depreciation expense are recognized over the asset’s life.
Accelerated Depreciation: Under this method, more depreciation expense is recognized in the early years of the asset’s life. This method is often used for tax purposes.
The choice of depreciation method can have a significant impact on an organization’s financial statements. Organizations should consult with accounting services to determine which method is best for them.
Taking Care Of Your Accounting Needs
At Nesso Accounting, we believe that accounting services need to be taken with care. We offer a wide variety of accounting services, from bookkeeping and payroll to tax preparation and filing. We also provide Compensation and Benefits Consulting Services. These services are important for any business, but they’re especially important for small businesses.
Our Nesso Group team works hard to ensure that we will meet your ever-changing needs and that your company will always have the most up-to-date information. We’ll work with you to develop a comprehensive plan tailored to your business. Don’t hesitate to reach out now to learn more about what we can do for you.