Managing the Financial Aspect of Home Care

I have met many kinds of people with home health agencies. It is very interesting to see what draws them to this field. Many are motivated by the desire to provide care to those who need it. Some see it as a good mixture of both service and a reliable source of income. Whatever your motivation, there are definitely two areas that have to be given adequate attention if an agency is going to succeed. The first is obviously the clinical. An agency needs clients and caregivers to make a business. The second part is the financial aspect. Without managing the business finances well, an agency won’t last long.  Balance between providing the best care and managing the finances can be the most challenging aspect of a home health agencies.

This is the area I want to explore today. Managing such things as billing and payroll is critical to an agency’s operation. Making mistakes in billing can be extremely costly by draining cash liquidity and/or losing revenue completely. Low liquidity might make it difficult for an employer to pay their bills and employees on time.  It may also cause them to draw on their line of credit and force an agency to pay interest on this temporary loan.  Mistakes might also be interpreted as fraud if not found and adjusted properly. Payroll errors can lead to employee dissatisfaction and high turnover. A disgruntled employee can be very damaging to an agency. Being a “nice” employer doesn’t count for much if the employer neglects to pay the employee’s insurance premiums after withholding it from their check.

Accounting doesn’t only involve paying the bills and collecting revenue. It involves analyzing and reviewing revenue as well as expenditures.  It also involves knowing what taxes to pay and when to pay them (this can change from state to state).  Recording and capturing all the data in an automated system is a valuable tool to monitoring the finances of a business.  Generating useful reports from an automated system will help an agency make informative decisions and will assist them in planning for the future.

There are several options when it comes to managing your business finances. You may need to consider a couple before you know which way suits you best.

1. Hire an outside accounting service.  They can provide an array of accounting services such as invoicing, A/R billing, entering and paying bills, processing payroll, preparing and paying payroll taxes, reviewing and preparing financial statements, processing and paying quarterly taxes, and providing financial consulting. An agency can usually pick and choose what services they would need from an outside accounting service.

Pros: Free time to focus on providing care to clients.

Fewer office staff (lower employee related costs – medical insurance and retirement benefits).

Assurance that financial work is being done properly.

Cons: Can be a more expensive option.

They are only as good as the data they receive.

You don’t have as much control/oversight of your agency’s finances.

You may only get the reports they choose to provide.

Must meet their deadlines on submitting bills and employee timesheets or won’t be paid on time.

May take longer to get a hold of an accounting service representative.

2. An in-house accounting department gives an agency more control over their financial data. This is what many agencies strive for. Usually in combination with a good software program such as QuickBooks, Peachtree, Great Plains or others.

Pros: Your financial data stays in-house.

You have an employee on-site to ask questions regarding your current financial status.

You can monitor and QA through the entire process.

Billing/ Payroll can be done according to your schedule.

Cons: May be difficult to find or afford an experienced/ trained employee(s) as a start-up agency.

You are responsible for ongoing training regarding new regulations and billing issues.

3.  A combination of the best practices. With Visit Wizard, you have a third option. Your information can be managed by our accounting experts who specialize in home health billing. When you are starting out you have the benefit of an experienced billing department with less expense and the ability to transition to your own staff when you are ready. Our staff is current on Medicare requirements so you can be assured of accuracy whether you are Private Duty, Medicare Certified or Hospice. You have access to hundreds of reports for managing your agency. For more information on this option, go to http://www.myhhsystem.com/accounting.htm.