Accounting is about tracking what happens in a business. The objective of accounting is to create controls with checks and balances to insure that all transactions are properly recorded. The checks and balances of accounting permits owners to identify possible theft or improper procedures or improper recording of transactions. Filopto provides a wide series of reports that can assist you in properly tracking your transactions and ensuring that your controls and procedures are followed.
IMPORTANT: Batch Accounting Systems and Real-time Accounting Systems
For more than 20 years, batch processing accounting systems have been entrenched in the accounting world. They take many forms, but common to most of these systems are the procedures and methodologies that dominate most bookkeeping and accountants lives.
There is a newer breed of accounting software, that breaks this mold and does away with manual processing of data. QuickBooks Pro is one such product and Filopto also uses this method of recording accounting data called Real-Time systems. Real-time systems are easier to use and provide the same level of details as batch systems without requiring complex procedures or the need to close accounting periods.
The batch processing method works something like this. You process things like vendors, invoices from journals to ledgers, to financial statements in a linear order via a function that is called "batching". Month-end, and year-end works in a similar fashion by batching all the transactions for a month and closing the month. Batches are accumulated and processing is finalized so that you can produce reports essential to your business such as financial statements.
A real-time system works very differently. Everything is done instantaneously and there is not need for period end processes. Once you press the save button on something like an invoice the information is immediately posted to all appropriate journals and ledgers, and financial statements. There is no batch numbered entry; instead it is a detailed transaction information record for each journal and ledger that is created. Information can be updated on the fly, auto-reversing entries can be made, and an audit trail is always there when you need it. This eliminates the complexity of batching transactions, closing months or years since the data is automatically accumulated and available at any time.
There are many advantages in working in a real-time system such as QuickBooks and Filopto. First and foremost is the elimination of the batching procedures, month-end procedures, and year end procedures that can cause so much stress in a bookkeeper or accountant life.
For employers, this also means less training time and troubleshooting hours over the course of a year. Possibly the most important aspect of a real-time system is the ability to produce reports essential to the business and financial decision making process immediately. Just as posting is immediate so too is reporting. The bottom line is greater functionality and speedier performance that comes standard with a real-time systems versus batch processing systems. By reducing the procedures required you benefit by less cost due to extra hours spent by your bookkeeper or accountant in the preparation of your accounting books.
Filopto is a real-time system, therefore you can forget about the batch procedures you use in a batch accounting system and use the power of the reports to benefit truly from Filopto. Real-time system means you cannot get out of balance. All transactions are completed by the system insuring that none of your transactions can be out of balance. All accounting periods are always open and never closed, as required by a batch system. The closing of periods, in Batch system, can cause a transaction to become out of balance. This issue does not exist in a real-time system. That does not mean that users should not be careful to properly date transactions.
There are still some reconciliation of accounts that should be done to insure the accuracy of the data, but they are much easier to accomplish and require less time than the traditional methods in a batch system. Below are the items that should be reviewed and reconciled.
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The basic equation for balancing your accounting books for accounting purposes is:
Assets = Liabilities + Owners Equity
In simplistic terms, the formula basically means: stuff the company owns (assets, which is also known as the left side of the chart of accounts or a debit) = things owed to other people (liabilities , also known as the right side of the chart of accounts or a credit) + what the owners are left with (owners equity, also known as the right side of the chart of accounts or a Credit) Instead of the word left, accountants use the word debit; and instead of the word right, accountants use the word credit. (The terms debit and credit are derived from Latin terms.)
Filopto database permits users to track all activities recorded into Filopto, which for the most part are assets (some payable tracking is also available). Filopto is not a full accounting package such as QuickBooks Pro, for example. Filopto can connect and communicate with QuickBooks Pro to reduce the accounting data entry required to be done by users ( see QuickBooks Pro Connector) . Filopto will track sales, account receivables, payment receipts, Inventory and some specific payable's (payroll time entries and insurance payable).
To verify the accuracy of the Filopto information some basic reconciliation of accounts and report verification are required.
Bank Reconciliation
Bank Reconciliation is probably the most important reconciliation you must do. The terms bank balance and book balance are used in the accounting and bookkeeping procedure known as reconciling the bank statement.
The bank balance refers to the ending balance appearing on a bank statement. For example, when a company receives its June checking account statement from its bank, the June 30 balance will be the bank balance. Usually this bank balance will not agree with the amount in the company's records since some checks written by the company will not have cleared the checking account by June 30. Similarly, some money received by the company on June 30 may not have been deposited in time for the amount to appear on the June bank statement.
Reconciling the bank account is the task of identifying the differences and investigating any abnormalities. Filopto makes the reconciliation a simple task. By using your preferred Bank Deposit reports the user can verify that all moneys recorded in Filopto and deposited to the bank match the bank statement. You should easily be able to see patient X paid $YYY.00 on a specific date and the money was deposited in your bank account. The sum of all these deposits should be equal to the amount the Bank is saying you deposited for that day. If it is not equal to what the bank reports as the deposit, you must identify the difference and investigate any abnormalities. If The Filopto Bank deposits are equal to the bank statements, you are balancing with your Bank which is your first and most important priority. You should balance your bank every month.
Inventory Reconciliation
The next reconciliation you should do is for the Inventory. You buy and sell inventory items. Filopto can track everything you buy (via P.O. system) and everything you sell. The task of reconciling the Inventory is to identify any inventory item missing or not matching the quantity of items reported by Filopto. Here again the objective is to identify any abnormalities and take the action necessary to limit any quantities not matching up with Filopto reports. The Inventory reconciliation is accomplished by doing a physical count of all inventoried items in your organization. Filopto can help with this task by first listing the inventory items having quantities at the end of a specific period. The program called FiloptoInventoryCount, located in the Filopto program folder is designed to record the physical count of the inventory and produce a discrepancy report for the inventory items not equal to the count recorded in Filopto.
By doing an Inventory physical count and comparing it with what was recorded in Filopto you can identify areas of concern and possible loss of inventory items.
Sales Reports
Filopto offers many sales reports that can assist owners in the tracking of their activities. Reviewing the sales reports on a regular basis can identify if all your sales are being properly recorded in Filopto and help identify possible issues with your bank reconciliation very early. We recommend that owners review the sales being recorded in Filopto and do a reconciliation or spot checks with the appointments recorded in the scheduler to insure that all transaction are properly recorded. The Invoice and Report Manager also provides other reports such as invoices not yet invoiced, or invoices with insurance not processed, to identify fees that are not being billed properly.
Accounts Receivables (AR)
Account Receivables (AR) are the amounts of money owed to the business. It is important to track on a regular basis the balance of the accounts receivable. Filopto offers real-time AR reporting with summary and detail reports to clearly identify who owes the business what amount and how long have they owed it to the business. As rule of thumb, ideally you would be paid immediately and if you extend credit, your customers will pay you withing 30 days. Some organizations have internal policies not to pay until 60 days after the charge is incurred. This is a method used to use your money to finance their business. The longer it takes a customer to pay, the less likely you will get paid. This is why many Banks will not lend money on AR accounts over 60 days. That is the reason why you want to carefully track the AR reports to see who is owing you and what amount this represents. If customers or insurance companies go over your internal policy for payment period it is time to send them to collection or to consider them as Bad Debt since you may not be paid for your services. A high Accounts receivable that is over 60 days typically indicates a problem and can hinder your ability to get financing from banks or other lenders. Collect your money as soon as possible, you worked for it, it is owed to you!
Accounts Payable (AP)
The Accounts Payable report list the amounts you must remit to Insurance companies. Some Insurance Companies require Providers to pay them for the benefit of serving their clients. Most insurance companies having these charges automatically reduced the amount paid to the Provider to cover this charge. If you must send payment to an insurance company the Insurance Accounts Payable report will list the charges owed if recorded in Filopto ( see Insurance Company Billing Rules). Other reports you must consider are the Credit Memo listing which list the amounts you owe to your patients. This is another liability your accountant will want to know about. (the AR report also includes the Credit Memos of patients).
Eye on your Business
Eye on your Business is a real time tracking analysis of your business with access to other reports and charts to give a quick overview of what is happening in your office. It reports the sales, appointments, inventory items, inventory cost, and gross sales of your business as well as key indicators to help you manage your business. A careful and regular review of this module can provide key information on how your business is doing. If you see an indicator or amount not correct or suspicious it is the time to take action and get the details. Filopto provide a wide range of reports to help you find the information you are looking for, it is your responsibility to take the appropriate action to insure the proper functioning of your business.
Other Important Reports and Settings
Accounting is about tracking what is happening. As such you must look at some of the other available reports in Filopto to get a full and clear picture( Office Manager tab, Report Manager button). Reports you want to review include the Voided items reports, refunds and returns reports; see what was canceled,why and by who.
Also make certain that only trusted individuals can make changes to an item price, or inventory records etc... having the correct controls can significantly reduce risk and make the job of monitoring your business easier (see employee security section and system settings) We strongly suggest that you review the reports available in Filopto and that you identify the ones best suited for your business environment.
IMPORTANT:
When in doubt or not certain what you need to do, consult your professional advisors such as your accountant or lawyer to determine the appropriate action.
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