Session 8 Financial Part 1 Flashcards
(308 cards)
1
Q
What is a Chart of Accounts?
A
A systematic listing of all account names and numbers used by a company
It is recommended that practices include only accounts they will use in the normal course of business.
2
Q
What does the Profit and Loss Statement report?
A
It reports revenue minus expenses to show the net income during a specific period of time
Also known as the Income Statement.
3
Q
What is a Balance Sheet?
A
A statement of the financial condition of the practice listing its assets, liabilities, and owners’ equity at a specific point in time.
4
Q
What is the purpose of a Cash Flow Statement?
A
It shows where the cash in the practice comes from.
5
Q
How is Net Income calculated?
A
Net Income is determined by subtracting expenses from income.
6
Q
What is Intangible Property?
A
Non-physical property that has value, such as copyrights, goodwill, and non-compete agreements.
7
Q
Define Current Assets.
A
Items that will be consumed within a short period of time, often a year.
8
Q
What are Fixed or Long Term Assets?
A
Assets that are extended longer than a year.
9
Q
What are Liabilities?
A
Practice debts, including short term liabilities like accounts payable and long term liabilities like a mortgage.
10
Q
What does Equity represent?
A
Equity is the difference between assets and liabilities, showing the net worth of the practice.
11
Q
What is Cost of Goods Sold (COGS)?
A
The products used to produce a service for the client or products sold to clients.
12
Q
What are the four major areas of understanding financial statements?
A
- Theories
- Purpose
- Practicality
- Effect
13
Q
What is Cash-based accounting?
A
An accounting method that recognizes revenue when cash is received and expenses when they are paid.
14
Q
What is Accrual-based accounting?
A
An accounting method that recognizes revenue when it is earned and expenses when they are incurred.
15
Q
Why is it important to review financial statements regularly?
A
To understand past performance and use it as a basis for future trends.
16
Q
What is the significance of stating expenses as a percentage of revenue?
A
It provides a more accurate interpretation and comparison of historical performance.
17
Q
Differentiate between Fixed Expenses and Variable Expenses.
A
- Fixed Expenses: Set costs that do not fluctuate with practice activity
- Variable Expenses: Costs that change with the amount of business produced
18
Q
What are the three steps in analyzing unexpected figures in P&L?
A
- Compare percentages
- Ask questions of the percentages
- Implement change
19
Q
What is the basic accounting equation represented in a Balance Sheet?
A
Assets = Liabilities + Owner Equity.
20
Q
What does the Cash Flow Statement illustrate?
A
The cash generated by the business minus the cash that has flowed out of the business.
21
Q
What principles should be considered when analyzing finances?
A
- Safeguarding assets
- Pricing/fee structure
- Cost evaluation
- Procurement of capital
- Incremental performance
Accountability via departmentalization
Profitability analysis
Return on capital analysis
22
Q
What are Key Performance Indicators (KPIs)?
A
Basic statistics used to measure performance, compare benchmarks, and identify changes.
23
Q
What is the Net Profit Margin formula?
A
Net Profit Margin = practice profit/practice revenue.
24
Q
What are the two methods of Payroll processing?
A
- Manual payroll
- Automated in-house processing
25
What is a potential drawback of manual payroll?
It is the highest risk for errors.
Employers are always liable for payroll errors
26
What is manual payroll?
Involves totaling the amount of time worked; calculating gross wages; calculating and deducting all appropriate taxes, deferrals, and deductions; then writing the check.
## Footnote
Employers are always liable for payroll errors and this method is the highest risk for errors.
27
What are the advantages of automated in-house processing for payroll?
More efficient than manual payroll, reliable calculations, offers the option to schedule regular recurring deductions, and automatically creates and maintains legible payroll records.
28
What are third-party payroll services?
Offer convenience, expertise, and savings while remaining up to date with current regulations and tax tables that lower errors.
29
What is a payroll period?
Length of time covered by each payroll session, which can start on any day with no gaps between pay periods.
30
How often is weekly payroll issued?
52 times a year.
31
What is semi-monthly payroll?
Issued 24 times a year, typically on the 1st and 15th of each month. It evenly divides into six pay periods per quarter.
32
What is a shift differential?
A wage premium used in 24-hour facilities to make less desirable shifts more rewarding.
33
What are federal payroll taxes?
Includes federal income tax withheld by employers, FICA, and FUTA.
34
What is FICA?
A tax paid by both the employer and employee to fund Social Security and Medicare.
Federal insurance contribution act
35
What is FUTA?
A tax paid by employers only, on the first $7,000 of an employee's earnings.
Federal unemployment tax act
36
What are miscellaneous deductions?
Can include employee portion of medical/dental/insurance premiums and other state-specific taxes. The balance on the employees account with the practice and some states require school district tax state disability, insurance, tax city, income tax, and others.
37
What is required for wage and tax reporting?
Obtain an EIN, complete I-9 forms, confirm W-4 completion, calculate and deduct income tax, file forms 941 and 940, and prepare W-2 and W-3 forms. make required deposits of with health taxes as determined by the IRS.
38
What should a written payroll policy include?
-Definitions of full and part-time
-Define how and when paid time off is accrued and if it rolls over at your end, or it is paid out at termination
-Segregate the duties for updating person data from the duties of payroll accumulation, recording, and recording
-require management approval to any changes made to payroll records and or personal information
-restrict access to payroll and personnel files to a need to know basis
-Consider mandatory direct deposit to eliminate written payroll checks
-process new hires and terminated employees in a timely manner
-personnel records should include date of higher, PTO paid versus use, non-paid time off versus use, tardiness
-when using an outside company for payroll, internal record should be compared to the payroll companies records to catch discrepancies immediately. Also periodically review all payroll transactions.
-monitor the time clock to being sure employees are not clocking in and out for each other
-Track employees payroll advances very carefully and payback should be via payroll deduction
39
What is the responsibility of independent contractors regarding payroll taxes?
Contractors are responsible for their own payroll taxes and must be issued a 1099 form if they earn more than $600.
40
What is accounts payable (AP)?
Amounts owed to suppliers that are payable in the future.
41
What are key considerations for accounts payable?
Monitor monthly, detect overspending early, and have a plan to stop financial hemorrhage.
42
What is accounts receivable (AR)?
Monies owed to the practice for services rendered or products sold that have not been paid for at the time of service or when the product is dispensed
43
What should practices keep AR no higher than?
1.5% of gross revenue.
44
What are collection procedures for accounts receivable?
Accounts should be paid within 30 days; clients with overdue accounts should receive notifications and statements.
45
What does the Fair Debt Collection Practices Act regulate?
Collection procedures of past due accounts and protects debtors from unethical practices.
46
What should be documented during phone calls for overdue accounts?
Conversations and payment plan agreements.
47
What is the recommended action for checks returned for non-sufficient funds (NSF)?
Accept the loss, attempt to collect, or use a third-party collection agency.
48
What is the issue with holding checks for delayed payment?
It complicates tracking and storing checks, and there is no guarantee funds will be available when deposited.
49
What is the purpose of collection letters?
To inform clients of overdue accounts at 30, 60, and 90 days past due.
50
What should collection letters include?
A series of computer-generated letters can be sent at 30, 60, and 90 days past due, keeping them short and polite, with specific details.
## Footnote
Include correct date, amount, client information, response date, action date, and a thank you.
51
What is the best practice regarding employee accounts receivable?
Employees should not be allowed to charge; if allowed, the balance should not exceed $100 and mandatory monthly payments should be expected.
## Footnote
Practices may lose money if employees carry large balances.
52
What details should be provided to collection agencies?
Provide the following information:
* Client’s full name
* Client’s address
* Client’s telephone numbers
* Total balance due
* Client’s occupation
* Client’s employment address
* Client’s driver’s license number
* Copy of client information sheet and signature
## Footnote
Agencies typically charge between 40% and 60% of the balance collected.
53
How is average accounts receivable calculated?
Average Accounts Receivable = (Beginning AR + Ending AR) / 2.
## Footnote
This provides insight into the overall accounts receivable status.
54
What does accounts receivable turnover indicate?
It indicates how many times the accounts receivable balance is converted into cash.
## Footnote
Calculated as Credit Sales / Average Accounts Receivable.
55
What does a higher accounts receivable turnover ratio signify?
A higher value indicates that the AR balance is turned into cash more often.
## Footnote
A low number may require analysis of collection efforts.
56
How is 'Days in Accounts Receivable' calculated?
Days in AR = Number of Days in Period / AR Turnover.
## Footnote
This indicates how many days a client's account sits in AR before being collected.
57
What is the significance of a consistent days in AR number?
It means the practice would need 30 days of working capital to maintain cash flow needs.
## Footnote
Example: If AR Turnover equals 12, then Days in AR is approximately 30.42.
58
What are the three types of pet insurance?
The three types of pet insurance are:
* Major medical
* Accident/injury
* Wellness
## Footnote
Clients with pet insurance tend to schedule more visits and spend 2x more over a pet's lifetime and have a higher cap on treatment expenses
59
What is Care Credit?
An outside financing institution that allows clients to apply for credit via phone, fax, or online.
## Footnote
There is typically a cost to the practice for offering this option.
60
What is a potential cost associated with held credit card payments?
Consider adding a service fee for each credit card transaction to cover costs.
## Footnote
Be sure to read the agreement of each card for any stipulations regarding surcharges.
61
What is a wellness and preventive care package?
A package that allows clients to spread out payments to encourage acceptance of higher levels of care.
## Footnote
Adding an administration fee to the wellness plan is reasonable.
62
What three financial responsibilities are typically outsourced in most practices?
* Primary tax preparation and advice
* Valuation of the practice
* Large financial issues
## Footnote
These responsibilities help practices manage their finances effectively.
63
Are wages for doctors who are paid on a salary basis considered a fixed or variable expense?
Fixed
## Footnote
Fixed expenses remain constant regardless of the level of goods or services produced.
64
Define Cost Of Goods Sold.
The products used to produce a service for the client, or products sold to clients.
## Footnote
COGS is critical for determining gross profit.
65
This type of accounting recognizes revenue when it is earned and expenses when they are incurred. Is this Cash-based or Accrual-based?
Accrual
## Footnote
Accrual accounting provides a more accurate financial picture.
66
Which type of accounting is typically considered more accurate?
Accrual
## Footnote
Accrual accounting aligns revenue with expenses for better financial reporting.
67
What is another name for the Profit and Loss Statement?
The Income Statement
## Footnote
The Income Statement summarizes revenues and expenses over a period.
68
When comparing expenses on the Profit and Loss Statement, it is important to express expenses in dollar amounts but also as ___________________of __________.
A percentage of gross
## Footnote
This helps in analyzing expense trends relative to income.
69
The basic accounting equation is Assets = __________ + _________.
Liability + Owner Equity
## Footnote
This equation reflects the relationship between a company's assets, liabilities, and equity.
70
Regarding payroll deductions; what does FICA stand for, what does it fund, and is it paid by the employer, employee, or both?
Federal Insurance Contribution Act - a tax paid by both the employer and the employee to fund Social Security and Medicare.
## Footnote
FICA is essential for funding social insurance programs.
71
At the end of the year, any independent contractor who received more than $______ in wages from the practice must be issued a 1099 form.
$600
## Footnote
This threshold is important for tax reporting purposes.
72
If the contractor fails to file and pay their taxes, and the practice did not issue a form 1099 at the end of the year, what risk is the practice subject to?
The practice can be held responsible to pay all back taxes, interest, and penalties.
## Footnote
This highlights the importance of proper tax documentation.
73
If the practice is found to be spending more than it is generating, what steps can be taken to gain control?
* Decrease spending
* Increase revenue
* Hold employees accountable for waste
* Consider reevaluating your fee structure
* Review charges to capture them correctly
* Have a plan to pay back a line of credit if necessary
## Footnote
These steps are crucial for financial health.
74
AR should be no higher than _____% of gross revenue?
1.5%
## Footnote
Maintaining a low AR percentage indicates effective cash flow management.
75
When a non-sufficient funds check has been written to the practice, the practice has three choices of action, what are they?
* Accept the financial loss
* Attempt to collect
* Use a third party collection agency
## Footnote
These options are important for managing bad debts.
76
Which act regulates collection procedures of past due accounts?
Fair Debt Collection Practices Act.
## Footnote
This act protects consumers from abusive debt collection practices.
77
Accounts receivable turnover – how many times the accounts receivable balance is converted into cash. What is the formula for AR Turnover?
Credit Sales / Average Accounts Receivable = Accounts Receivable Turnover.
## Footnote
This ratio is important for assessing the efficiency of collections.
78
Regarding the value of the accounts receivable turnover; is it better to have a higher or lower number?
A higher value for the accounts receivable turnover ratio is better because it indicates the AR balance is turned into cash more often.
## Footnote
Higher turnover suggests better cash flow management.
79
How do you calculate the average accounts receivable?
Beginning AR + Ending AR / 2.
80
What is considered more accurate, cash based accounting or accrual based accounting?
Accrual Based.
81
Which financial statement is considered the most important for small business?
Profit and Loss Statement.
82
Is staff payroll considered a fixed or variable expense?
Variable.
83
The Federal Insurance Contribution Act – or FICA is a payroll tax that is paid by the employer or employee?
Both employer and employee.
84
Which payroll tax is paid by employers only and only on the first $7,000 of an employee’s earnings?
Federal Unemployment Tax Act (FUTA).
85
What is an Employer Identification Number (EIN)?
It is a business identification number assigned by the IRS to identify tax accounts of employers.
86
AR that are over ______% need intervention to get the entire team to follow an AR policy.
3%.
87
Which Act prohibits placing 'delinquent account' stickers on the outside of an envelope when mailing statements to clients?
The Fair Debt Collections Practices Act.
88
What does the accounts receivable turnover calculation tell us?
How many times the accounts receivable balance is converted into cash.
* The ratio shows how efficient a company is at collecting its credit sales from customers.
89
According to the AVA, the average net income in general practices produces in a given year is......
10 to 12%
90
Equity is sometimes referred to as.....
Net book value
91
Accounting method that allows for a more clear vision of day to day operations
Cash base accountIng
92
In cash base accounting, it is important that practice expenses are paid in a timely manner to avoid....
Overstating net income
93
The majority of practice use what type of accounting
Cash based accounting
94
Which type of accounting is most accurate?
Accrual based accounting
95
What is the primary purpose of financial reports?
To enable ownership and management to properly review what has happened in the period being measured.
96
Who should be involved in the thorough review of financial statements?
Owner, manager, key employees, and department heads.
97
How can financial statements be organized for better analysis?
By segmenting statements by department, such as a separate income statement for boarding.
98
What is one purpose of financial statements related to past performance?
To understand the past performance of the practice and use it as a basis for future trends.
99
True or False: Financial reports should only be reviewed annually.
False
100
Fill in the blank: Financial statements may be segmented by _______.
[department]
101
What should be part of the monthly routine for owners and managers?
Thorough review of the financial statements.
102
Why is isolating a department as a 'stand-alone' profit center useful?
It allows for better analysis and understanding of that department's financial performance.
103
What is the benefit of a basic financial statement review?
Identifies trends or recognizes problems needing attention
104
Why is a day-to-day approach to financial statements necessary?
It is beneficial for running a successful practice
105
Should practice owners feel apprehensive about a lack of accounting training?
No, they should not be apprehensive
106
What do financial statements measure?
Financial performance in historical and prospective terms
107
What might higher than expected expenses indicate?
The need for further investigation
108
What happens if financial statements are not reviewed regularly?
Expenses could become out of control without noticing
109
Is it sufficient to just report financial performance?
No, it is important to use financial statements as a management tool
110
What is the most important financial statement?
The Income Statement
111
What does the Income Statement begin with?
The entry of income and entry of expenses
112
Why should the P&L sheet be detailed?
To determine where inconsistencies may lie by comparing benchmarks
113
What must all entries in financial reports be categorized as?
Entered consistently in the correct category
114
What is compared in the line items of the P&L?
Both prior year and current year under review
115
Why is stating expenses as a percentage of revenue valuable?
It ensures accurate interpretation and comparison to historical performance
116
Fill in the blank: The next important step after accurately reporting financial performance is using financial statements as a _______.
[management tool]
117
Some examples of fixed expenses are
Most utilities, medical insurance, rent, if doctors are paid on salary
118
Examples of variable expenses
Cogs, Dvm wages if paid on production and staff payroll
119
Steps to evaluate the profitability of a service
Gross revenue per month or year of the specific service, square footage used by the service, fixed costs for entire practice, fix cost per square foot of service
120
What does the Balance Sheet summarize?
Assets, liabilities, and equities of the practice at the time of the statement
## Footnote
Offers no historical figures
121
What is the basic accounting equation represented by the Balance Sheet?
Assets = Liability + Owner Equity
122
Who may assist in completing balance sheets?
An accountant
123
True or False: Increases in real estate value are generally represented on the balance sheet.
False
124
What does the Cash Flow Statement illustrate?
Cash generated by the business minus cash flowed out
## Footnote
Renders the cash total at the end of the year
125
Why are Cash Flow Statements rarely used?
They can be slightly more complicated to create and the information is not much different from the P&L
126
When should financial reports be generated after the end of the period?
Within 5 - 10 business days
127
What is essential for financial statements to be useful for decision making?
Reliable and accurate data
128
How can accuracy in financial reporting be ensured?
Through an independent audit
129
Why might most veterinary practices not invest in an independent audit?
It is not practical due to expense
130
What is a common alternative to an independent audit for ensuring accuracy?
Review using Accountant's compilation
131
What type of reports should a typical veterinary practice use?
Reports that are easy to interpret
132
How should financial reports balance simplicity and detail?
Maintain simplicity while being sufficiently detailed to aid decision making
133
What should the information in financial reports be worthy of?
Analysis
134
What types of data should be included for analysis in financial reports?
Data from the previous year (or other comparison period), industry benchmarks, and budgets
135
Financial report should be generated within how many business days at the end of the month
5-10
136
What are the principles to consider when analyzing finances?
• Safeguarding assets
• Pricing/fee structure
• Cost evaluation
• Procurement of capital
• Incremental performance
## Footnote
These principles form the foundation for effective financial analysis.
137
What does safeguarding assets entail?
Assets should be protected and accounted for
## Footnote
This principle emphasizes the importance of securing financial resources.
138
What should be evaluated regarding pricing/fee structure?
Is it adequate?
## Footnote
Assessing the pricing structure ensures that services are competitively priced.
139
What is involved in cost evaluation?
Consider the cost of services and sales
## Footnote
Understanding costs helps in setting appropriate pricing and maximizing profitability.
140
What is meant by procurement of capital?
Obtaining resources from owners and creditors, repaying borrowed amounts, and measuring owners return on investment
## Footnote
This includes strategies for securing funding to support business operations.
141
What factors are key ingredients of measuring incremental performance?
• Change in costs
• Cash flow
• Profit
• Investment
## Footnote
These factors provide insights into the performance of different departments or profit centers.
142
How does accountability via departmentalization enhance financial analysis?
Profit centers have their own statement of performance, offering insights into profitability
## Footnote
This approach allows for targeted analysis of different business areas.
143
What is true profitability?
The profitability numbers used for fiscal health, factoring in depreciation, owner compensation, rent to owner, and discretionary expenses
## Footnote
This differs from profitability used solely for tax purposes.
144
How is return on capital calculated?
(Income/average total assets)x100=return on capital percentage
## Footnote
This measure is typically assessed before interest, taxes, depreciation, and amortization.
145
What are Key Performance Indicators (KPIs)?
Basic statistics used to measure performance, compare benchmarks, and explain changes
## Footnote
KPIs are essential for tracking the financial health of a practice.
146
Name common KPIs used in financial analysis.
• Total revenue and total transaction by month
• Average transaction charge by month
• New clients and lost clients by month
• Revenue, transactions, and average transaction charge per DVM per month
• Revenue by category
• Accounts receivable by aging classification
## Footnote
Each KPI provides valuable insights into different aspects of the practice's financial performance.
147
What is the purpose of percentage statement analysis?
To state all expenses as a percentage of revenue on the income statement and compare with benchmarks, prior periods, and budget performance.
## Footnote
This helps in understanding the proportion of expenses relative to revenue.
148
What does variance analysis identify?
It identifies the variance of a financial metric and may help explain why that variance occurred.
## Footnote
For example, a wage expense significantly over budget prompts further investigation.
149
What is the formula for Net Profit Margin?
Net Profit Margin = practice profit/practice revenue.
## Footnote
A higher value indicates more revenue that falls to the bottom line instead of being consumed by expenses.
150
What does Gross Profit Margin measure?
It measures how much profit is in a product or service.
## Footnote
Gross Profit Margin is calculated as (gross profit/revenue)x100
151
Define Average Transaction Charge.
Average Transaction Charge = practice revenue/practice transactions.
## Footnote
Ideally, this value should be continually increasing.
152
What is the formula for Revenue Per Full Time DVM?
practice revenue/full time DVMs.
153
What does a higher Accounts Receivable Turn-over indicate?
It indicates that the accounts receivable balance is converted to cash more often.
## Footnote
This is calculated as credit sales/average accounts receivable.
154
True or False: A higher Net Profit Margin indicates more expenses are consuming revenue.
False.
155
Fill in the blank: Gross Profit Margin is calculated as _______.
(gross profit/revenue)x100
156
What is the significance of comparing financial metrics with benchmarks?
It helps in assessing performance and identifying areas for improvement.
157
What type of analysis uses financial relationships between various metrics?
Ratios.
158
How many times a year is biweekly payroll issued?
26 times a year
159
What is one benefit of biweekly payroll?
Can reduce costs of payroll due to decreased time invested in managing it
160
What is the issue with dividing the year into biweekly payroll periods?
26 does not divide evenly into 4 quarters of the year
161
In a year with biweekly payroll, how many pay periods will occur in two quarters?
Six pay periods in two quarters, and 2 quarters will have seven
162
Why is it difficult to make specific historical comparisons for payroll expenses with biweekly payroll ?
The increase cost of the quarters with seven payroll periods will be inconsistent year to year
163
Fill in the blank: Biweekly payroll is issued _____ times a year.
26 times
164
True or False: Biweekly payroll always results in an equal number of pay periods across all quarters.
False
165
How many times a year is biweekly payroll issued?
26 times a year
166
What is one benefit of biweekly payroll?
Can reduce costs of payroll due to decreased time invested in managing it
167
What is the issue with dividing the year into biweekly payroll periods?
26 does not divide evenly into 4 quarters of the year
168
In a year with biweekly payroll, how many pay periods will occur in two quarters?
Six pay periods in two quarters will have seven
169
Why is it difficult to make specific historical comparisons for payroll expenses with biweekly payroll
The increase cost of the seven payroll period quarters will be inconsistent year to year
170
Fill in the blank: Biweekly payroll is issued _____ times a year.
26 times
171
True or False: Biweekly payroll always results in an equal number of pay periods across all quarters.
False
172
What are federal payroll taxes?
Taxes that employers are responsible for withholding and forwarding to the IRS
## Footnote
These taxes include federal income tax, Social Security tax, and Medicare tax.
173
What factors determine the amount of federal income tax withheld?
The amount of the employee salary and number of allowances claimed by the employee
## Footnote
Allowances can affect the overall tax liability and withholding amount.
174
True or False: Employers are not responsible for forwarding withheld federal payroll taxes to the IRS.
False
## Footnote
Employers must ensure that all withheld amounts are sent to the IRS on behalf of their employees.
175
What is tax form 941?
The employers quarterly federal tax return
## Footnote
Used by employers to report income taxes, Social Security tax, and Medicare tax withheld from employee's paychecks.
176
What is tax form 940?
The employers annual federal unemployment tax return
## Footnote
Used to report and pay federal unemployment taxes.
177
What is W3?
Transmittal of wage and tax statement
## Footnote
A form that summarizes the total earnings, Social Security wages, Medicare wages, and withholding for all employees. End of year with W-2
178
What should a written payroll policy define regarding employment status?
Definitions of full and part-time
## Footnote
This provides clarity on employee classifications.
179
How should paid time off (PTO) be addressed in a payroll policy?
Define how and when paid time off is accrued and if it rolls over at your end, or it is paid out at termination
## Footnote
Important for understanding employee benefits.
180
What is the importance of segregating duties in payroll processes?
Segregate the duties for updating personal data from the duties of payroll accumulation, recording, and recording
## Footnote
Helps prevent errors and fraud.
181
What is required for changes made to payroll records?
Require management approval to any changes made to payroll records and or personal information
## Footnote
Ensures accountability and accuracy.
182
What access restriction should be implemented for payroll files?
Restrict access to payroll and personnel files to a need to know basis
## Footnote
Protects sensitive employee information.
183
What payroll method should be considered to eliminate written checks?
Consider mandatory direct deposit
## Footnote
Streamlines the payroll process.
184
What should be done with new hires and terminated employees to ensure efficient payroll practices
Process new hires and terminated employees in a timely manner
## Footnote
Ensures accurate payroll management.
185
What information should be included in personnel records?
Personnel records should include date of hire, PTO paid versus use, non-paid time off versus use, tardiness
## Footnote
Essential for tracking employee attendance and benefits.
186
What should be done when using an outside company for payroll?
Internal records should be compared to the payroll company's records to catch discrepancies immediately
## Footnote
Periodic reviews of all payroll transactions are also necessary.
187
What should be monitored to prevent time theft?
Monitor the time clock to ensure employees are not clocking in and out for each other
## Footnote
Important for maintaining accurate work hours.
188
How should payroll advances be managed?
Track employees' payroll advances very carefully and payback should be via payroll deduction
## Footnote
Ensures proper management of employee loans.
189
What happens if an independent contractor fails to file taxes at the end of the year?
The practice can be held responsible to pay back taxes, interest, and penalties
## Footnote
This situation arises when the practice did not issue a form 1099.
190
What form is typically issued to independent contractors at the end of the year?
Form 1099
## Footnote
This form is used to report payments made to independent contractors.
191
True or False: If an independent contractor does not file taxes, the practice is not liable for any penalties.
False
## Footnote
The practice can be held responsible for back taxes and penalties if no 1099 was issued
192
Fill in the blank: If an independent contractor fails to file taxes, the practice can be held responsible to pay back _______.
taxes, interest, and penalties
193
What is Accounts Payable (AP)?
Amounts owed to suppliers that are payable in the future
194
What is the first step in managing Accounts Payable?
All employees who unpack a shipment should initial the packing slip/invoice confirming all items on the invoice were included with the shipment
195
What should be compared to the current price in your practice management software?
Prices on the packing slips/invoices
196
What should all packing slips/invoices be compared to?
The monthly statement
197
What should the packing slips/invoices do in relation to the monthly statement?
They should reconcile exactly
198
Who should reviewed and confirmed supporting documentation be passed on to?
The bookkeeper or manager responsible for preparing the unsigned check
199
Who typically reviews and signs the unsigned check?
The responsible party, typically the owner
200
What must be done if a practice is spending more than it is generating?
There must be a plan in place immediately to stop the financial hemorrhage.
## Footnote
This indicates the urgency of addressing financial issues to ensure the sustainability of the practice.
201
What are two strategies to improve financial health in a practice?
Decrease spending and increase revenue.
## Footnote
These strategies are essential for reversing negative financial trends.
202
Who should be held accountable for waste in a practice?
Employees.
## Footnote
Accountability helps ensure that resources are used efficiently.
203
What financial aspect should be reevaluated to potentially improve practice revenue?
Fee structure.
## Footnote
Adjusting fees may align services with market standards and improve cash flow.
204
What should be reviewed to ensure charges are correct?
Charges should be reviewed to be sure they are being captured correctly and not missed.
## Footnote
Accurate billing is crucial for maintaining revenue and financial integrity.
205
What should a practice have if a line of credit is necessary?
A plan to pay back the loan as soon as possible.
## Footnote
Ensuring repayment plans are in place can prevent long-term financial issues.
206
What does Accounts Receivable (AR) refer to?
Monies owed to the practice for services rendered or products sold that have not been paid for at the time of the service or when the product is dispensed.
207
What should practices keep Accounts Receivable no higher than?
1.5% of gross revenue.
208
What percentage of Accounts Receivable should receive the focus of the entire team?
Over 3%.
209
What is one compromise to help charity cases regarding Accounts Receivable?
Institute a flex or indigent account that can be financially sustained by client contributions or fund raisers.
210
What should be discussed with a CPA when creating a flex or indigent account?
The creation of such an account.
211
What should be reviewed when establishing a flex or indigent account?
State laws.
212
What can the team develop regarding the flex or indigent account?
Guidelines for what cases are eligible to potentially use the fund.
213
What does Accounts Receivable (AR) refer to?
Monies owed to the practice for services rendered or products sold that have not been paid for at the time of the service or when the product is dispensed.
214
What should practices keep Accounts Receivable no higher than?
1.5% of gross revenue.
215
What percentage of Accounts Receivable should receive the focus of the entire team?
Over 3%.
216
What is one compromise to help charity cases regarding Accounts Receivable?
Institute a flex or indigent account that can be financially sustained by client contributions or fund raisers.
217
What should be discussed with a CPA when creating a flex or indigent account?
The creation of such an account.
218
What should be reviewed when establishing a flex or indigent account?
State laws.
219
What can the team develop regarding the flex or indigent account?
Guidelines for what cases are eligible to potentially use the fund.
220
What are the three choices a practice has when a check is returned for non-sufficient funds (NSF)?
• Accept the financial loss
• Attempt to collect
• Use a third-party collection agency
## Footnote
If the delinquent amount is collected, a collection agency will deduct their fee from the total amount collected.
221
How can a practice avoid NSF checks?
By using a check machine or verification service that verifies funds or transfers funds in real time into the practice bank account.
## Footnote
The real-time transfer of funds method is the most cost-effective.
222
What should a practice do when it becomes aware of a NSF check from a client?
Place a returned check fee on the client account to recoup bank charges, lost time, and money.
223
Why is it important to document a driver's license number from every client who writes a check?
To increase the chances of successful collection in the event of a check returned for NSF and for prosecution in case of stolen checks.
224
What is considered a best practice to help prevent fraud when dealing with checks?
Documenting a driver's license number.
225
What are the two basic ways of accepting payment on accounts receivable?
• Manually
• Computerized accounts receivable management
226
What is a significant advantage of computerized accounts receivable management over manual management?
All calculations, interest, and statement fees are automatically calculated and added to the client's account, eliminating errors and decreasing employee embezzlement.
227
What must be managed carefully in the manual method of accepting payments to prevent internal embezzlement?
All charges, statements, interest, account aging, and payments must be recorded separately and typically on an individual ledger.
228
What should be done when payment is received in the manual method?
Provide a receipt to the client and forward it to the accounts receivable manager, who will update the ledger manually.
229
How can aged accounts be visually managed in a manual system?
By flagging them with different colors and sending appropriate notices to clients.
230
Who is responsible for creating and enforcing client credit policies?
Practice managers
## Footnote
This responsibility includes ensuring that no-charge policies are adhered to.
231
Is posting a sign stating all accounts must be paid at times of service considered adequate for a no charge policy to prevent accounts receivable
No
## Footnote
This practice does not fulfill the requirements for client credit policies.
232
What must be given to all clients whose pet will receive services?
Estimates
## Footnote
This is necessary for transparency and legal documentation.
233
Why is a client signature critical?
For legal documentation that the client authorized the services
## Footnote
This ensures that the services are approved by the client.
234
What is the minimum deposit percentage that must be collected before service?
50%
## Footnote
This deposit is based on the expected total of the service.
235
Who needs to understand and accept the client credit policies?
All team members
## Footnote
It is essential for consistency and compliance across the practice.
236
What is the standard time frame for accounts to be paid after charging?
30 days
## Footnote
Some clients may have higher balances that require longer collection times.
237
How should practice software age accounts receivable?
0-30, 31-60, 61-90 days, over 90 days
## Footnote
This helps the practice manager review accounts more accurately.
238
When should clients be sent a statement after services are performed?
Immediately
## Footnote
The likelihood of collection increases when the service is still fresh in the client's mind.
239
What should be done if clients have no payment in over 60 days?
Notify them of the overdue account
## Footnote
This can include a handwritten note on the statement.
240
What type of sticker can be placed on overdue statements?
Brightly colored overdue sticker
## Footnote
Stickers cannot be placed on the outside envelope according to the Fair Debt Collection Practices Act.
241
What should clients be notified of for accounts past due beyond 90 days?
Account will be turned over to a collections agency
## Footnote
This is a strategy for collecting overdue accounts.
242
What is a recommended action if all attempts to collect a payment have been exhausted?
Turn the account over to collections
## Footnote
If the agency is unable to collect, it will be reported to a credit bureau affecting the client's credit for 7 years.
243
What is one legal option for collection of delinquent accounts?
Small claims court
## Footnote
Consider the amount owed versus the time and filing fees involved.
244
What might be a practical solution for uncollectible debts?
Write the amount off as bad debt
## Footnote
This can sometimes be more practical than pursuing collection.
245
What should be done with a delinquent account in the practice management system?
Flag it
## Footnote
This helps avoid providing future services to the delinquent client.
246
What is the standard time frame for accounts to be paid after charging?
30 days
## Footnote
Some clients may have higher balances that require longer collection times.
247
How should practice software age accounts receivable?
0-30, 31-60, 61-90 days, over 90 days
## Footnote
This helps the practice manager review accounts more accurately.
248
When should clients be sent a statement after services are performed?
Immediately
## Footnote
The likelihood of collection increases when the service is still fresh in the client's mind.
249
What should be done if clients have no payment in over 60 days?
Notify them of the overdue account
## Footnote
This can include a handwritten note on the statement.
250
What type of sticker can be placed on overdue statements?
Brightly colored overdue sticker
## Footnote
Stickers cannot be placed on the outside envelope according to the Fair Debt Collection Practices Act.
251
What should clients be notified of for accounts past due beyond 90 days?
Account will be turned over to a collections agency
## Footnote
This is a strategy for collecting overdue accounts.
252
What is a recommended action if all attempts to collect a payment have been exhausted?
Turn the account over to collections
## Footnote
If the agency is unable to collect, it will be reported to a credit bureau affecting the client's credit for 7 years.
253
What is one legal option for collection of delinquent accounts?
Small claims court
## Footnote
Consider the amount owed versus the time and filing fees involved.
254
What might be a practical solution for uncollectible debts?
Write the amount off as bad debt
## Footnote
This can sometimes be more practical than pursuing collection.
255
What should be done with a delinquent account in the practice management system?
Flag it
## Footnote
This helps avoid providing future services to the delinquent client.
256
What does the Fair Debt Collection Practices Act regulate?
Collection procedures of past due accounts
## Footnote
It aims to protect the public from unethical collection practices.
257
Who does the Fair Debt Collection Practices Act primarily apply to?
Collection agencies
## Footnote
These regulations must also be considered by veterinary teams when collecting outstanding accounts.
258
What types of treatment are debtors protected from under the Fair Debt Collection Practices Act?
Harassment, oppressive tactics, or abusive treatment.
259
What false statement is prohibited by the Fair Debt Collection Practices Act?
Claiming to be a lawyer.
260
When can clients not be called regarding their overdue accounts?
At work if objected, or at inconvenient times such as before 8am and after 9pm.
261
Who can account details be discussed with according to the Fair Debt Collection Practices Act?
Clients themselves.
262
What is a strategic recommendation when making phone calls to clients with overdue accounts?
Using a caller ID blocker.
263
What should team members remember when a client becomes negative during a call?
Not to take the client's negative words personally.
264
What should conversations about account collection be focused on?
The account collection.
265
What must team members do at the beginning of a call when attempting to collect past due balance
Introduce themselves.
266
Why must team members confirm who they are speaking with?
To avoid disclosing client personal account information to someone other than the client.
267
What should not be included in a voice mail message regarding an overdue account?
Details of the overdue account.
268
What information should be identified in a voice mail message?
The practice, team member, and phone number to return the call.
269
What should be documented in the record after conversations and payment plan agreements?
The conversations and payment plan agreements.
270
What does the Fair Debt Collection Practices Act regulate?
Collection procedures of past due accounts
## Footnote
It aims to protect the public from unethical collection practices.
271
Who does the Fair Debt Collection Practices Act primarily apply to?
Collection agencies
## Footnote
These regulations must also be considered by veterinary teams when collecting outstanding accounts.
272
What types of treatment are debtors protected from under the Fair Debt Collection Practices Act?
Harassment, oppressive tactics, or abusive treatment.
273
What false statement is prohibited by the Fair Debt Collection Practices Act?
Claiming to be a lawyer.
274
When can clients not be called regarding their overdue accounts?
At work if objected, or at inconvenient times such as before 8am and after 9pm.
275
Who can account details be discussed with according to the Fair Debt Collection Practices Act?
Clients themselves.
276
What is a strategic recommendation when making phone calls to clients with overdue accounts?
Using a caller ID blocker.
277
What should team members remember when a client becomes negative during a call?
Not to take the client's negative words personally.
278
What should conversations about account collection be focused on?
The account collection.
279
What must team members do at the beginning of a call?
Introduce themselves.
280
Why must team members confirm who they are speaking with?
To avoid disclosing client personal account information to someone other than the client.
281
What should not be included in a voice mail message regarding an overdue account?
Details of the overdue account.
282
What information should be identified in a voice mail message?
The practice, team member, and phone number to return the call.
283
What should be documented in the record after conversations and payment plan agreements?
The conversations and payment plan agreements.
284
What should all practices have regarding employee accounts receivable?
A written policy
285
Best AR practice states that employees should not be allowed to _______.
Charge (have a balance for service rendered)
286
Why might practices be unable to collect on an account when an employee leaves?
Employees may have large balances
287
What financial risk do practices face by allowing employees to carry a large balance?
They can lose money due to generous employee discounts
288
If a practice allows an employee to carry a balance, what should it not exceed?
$100
289
What should be expected if a balance exists on an employee account?
Mandatory monthly payments
290
What must practices check when deducting money from an employee's paycheck?
State laws
291
What documentation must managers have regarding payroll deductions?
Authorization from the employee
292
What do federal laws prohibit regarding wage deductions?
Withholding that reduces wages below minimum wage
293
What should be analyzed to provide insight on practice performance?
Accounts receivable
## Footnote
Accounts receivable analysis helps understand liquidity, solvency, and profitability.
294
What are the two most common ways of analyzing accounts receivable status?
Accounts receivable turnover and average accounts receivable ratios
## Footnote
These calculations help assess financial health.
295
What do accounts receivable calculations help determine?
Liquidity, solvency, and profitability
## Footnote
These factors are crucial for assessing a practice's financial performance.
296
What type of sales should be included when calculating accounts receivable turnover?
Credit sales
## Footnote
Cash sales or cash revenue should not be included.
297
What should the credit sales and average account be from?
The same period
## Footnote
Consistency in the period is essential for accurate calculations.
298
Is a higher value for the accounts receivable turnover ratio better or worse?
Better
## Footnote
A higher ratio indicates that the AR balance is turned into cash more frequently.
299
What should a practice do if the accounts receivable turnover ratio is low?
Analyze its collective efforts and consider changes to accounts receivable
## Footnote
A low ratio may indicate inefficiencies in collecting receivables.
300
What is the formula for accounts receivable turnover?
Credit sales divided by average accounts receivable
## Footnote
This formula calculates how efficiently a practice collects its receivables.
301
What should be analyzed to provide insight on practice performance?
Accounts receivable
## Footnote
Accounts receivable analysis helps understand liquidity, solvency, and profitability.
302
What are the two most common ways of analyzing accounts receivable status?
Accounts receivable turnover and the days and accounts receivable ratios
## Footnote
These calculations help assess financial health.
303
What do accounts receivable calculations help determine?
Liquidity, solvency, and profitability
## Footnote
These factors are crucial for assessing a practice's financial performance.
304
What type of sales should be included when calculating accounts receivable turnover?
Credit sales
## Footnote
Cash sales or cash revenue should not be included.
305
What should the credit sales and average account be from?
The same period
## Footnote
Consistency in the period is essential for accurate calculations.
306
Is a higher value for the accounts receivable turnover ratio better or worse?
Better
## Footnote
A higher ratio indicates that the AR balance is turned into cash more frequently.
307
What should a practice do if the accounts receivable turnover ratio is low?
Analyze its collection efforts and consider changes to accounts receivable
## Footnote
A low ratio may indicate inefficiencies in collecting receivables.
308
What is the formula for accounts receivable turnover?
Credit sales divided by average accounts receivable
## Footnote
This formula calculates how efficiently a practice collects its receivables.
