Understanding Practice Accounts

1
Understanding Practice Accounts

• Jenny Stone, ACA
• Ramsay Brown and Partners
• Ramsay House
• 18 Vera Avenue
• London
• N21 1RB
• Tel [phone]
• E-mail Jenny_at_ramsaybrown.co.uk

2
What are Practice Accounts?

• Historic record of the financial performance of
  the practice
• Accounts will be prepared from the books
  records the practice maintain throughout the year
• Consist of Profit Loss account Balance Sheet
• Profit Loss Record of practice income
  Expenses
• Balance Sheet Provides practice with a value of
  their assets and each partners share of those
  assets.
• The accounts will include notes to support the
  profit and loss and balance sheet

3
Purpose of Accounts

• Purpose of accounts
• Calculate profits to declare to tax man
• Useful tool in making financial decisions
• Calculating projection of drawings
• Bank may require for lending purposes
• Accounts will usually be prepared annually to the
  practice year end
• Accounts will include comparative figures, this
  will be the results for the previous accounting
  period
• Figures in brackets means they are deducted from
  another figure in the accounts

4
How are GPs Paid

• GP practices have a contract with the PCT, this
  will be a GMS, PMS or APMS
• GMS Practices
• Receive a global sum payment calculated based on
  number of patients
• MPIG Correction factor
• Quality Outcomes framework
• Enhanced Services
• Seniority income to reward experience within NHS
• Reimbursements of expenses e.g. Rent Rates,
  drugs purchased
• Other income from medical reports and other
  sources

5
How GPs are Paid

• PMS Practices
• Locally negotiated contract
• Can also include growth money towards cost of
  employing salaried GPs
• Quality Outcomes framework
• Enhanced Services above those included in
  baseline
• Seniority Income
• Reimbursements similar to GMS practices
• Other income similar to GMS practices

6
Profit and Loss Account

• Shows profitability of the practice
• GP nurse partners are running a business and
  the object is to make a profit
• New partners thinking about joining will be
  interest in the profitability of the practice
• Profits need to be calculated for the tax man
• Profit of the practice is allocated between
  partners according to profit sharing ratios
• Profit sharing ratios are usually based on number
  of sessions worked

7
Balance Sheet Current Accounts

• Balance sheet shows snapshot of the practice
  assets and liabilities
• Two halves to the balance sheet top half lists
  the assets liabilities, the bottom half shows
  each partners ownership of those assets both
  halves will equal
• Current accounts are very important as show the
  individual partners money left in the practice

8
Drawings

• Need to be set at a realistic level, take into
  account expected lost income and/or increased
  expenses
• Drawings need to be reduced to take account of
  changes to superannuation from 1st April 2008
• Employees superannuation increase
• Earnings cap removed
• Review throughout the year, if practice is
  getting into cash flow difficulty may need to
  reduce

9
Changes to income for 2008/09

• Global Sum will increase by 2.2, amount per
  patient increases from 54 to 56
• However, if practice in receipt of MPIG, the
  correction factor will be reduced by any increase
  in global sum and therefore will receive no
  increase
• QOF Removal of 58 QOF points to be put into
  extended hours
• Enhanced Services No inflation uplift

10
Maximising Profits

• Increase Income
• No Inflationary Increase global sum MPIG
• Increase practice list
• Practice Mergers
• No Inflation increase in QOF
• Aim to achieve maximum QOF points
• Ensure max enhanced services income and taking up
  new directed enhanced
• New Sources of non-nhs income

11
Maximising Profits

• Difficult to maximise income
• In addition need to control/reduce expenses
• Review all areas for potential savings
• Cheaper suppliers for telephone, gas, electricity
• Keep an eye on stationery expenditure, costs can
  escalate
• Review work carried out by staff
• Review use of locums
• Setting budgets for all areas of expenses for
  year, allows you to monitor and control expenses

12
Superannuation for GPs

• Superannuation based on GPs NHS pensionable
  profits
• GPs to complete end of year certificate to
  declare profits
• PCT make deductions each month based on an
  estimate of profits
• Once certificate submitted, PCT will collect any
  shortfall or refund of superannuation
• Ensure PCT deducting superannuation using up to
  date estimate of profits
• GP and non GP partners responsible for both
  employees and employers superannuation

13
Changes to Superannuation Contributions

• Employees Contribution increased from 1st April
  2008 (2008/09)
• Based on tiered contribution rate
• 0 to 19,682 5
• 19,683 - 65,002 6.5
• 65,003 - 102,499 7.5
• 102,500 8.5
• Rate for 2008/09 will be based on pensionable pay
  for 2006/07
• Earnings cap removed for ee er contributions
• Earnings cap will still apply to added years
  contract commenced before 1st April 2008, for
  those GPs who were previously capped