Accounting & Record Keeping
Developing robust accounting systems to track and report on expenditures will provide midwifery practice groups (MPGs) accurate financial information and enable them to make sound business decisions. MPGs are required to retain financial records (see the document retention protocol under the Financial tab on this page) and present them in the event of an audit.
Role of an Accountant
Delegating the ongoing management of accounting or record-keeping systems to a hired accountant, bookkeeper or qualified administrator assists the practice in operating as an effective business. An accountant can advise on the business’ legal requirements, prepare annual budgets, and complete tax returns; they can also answer questions the practice may have regarding bookkeeping and assist in setting up a bookkeeping system.
If relying on an employee to maintain the financial records and accounts in order, it is advisable to ensure that strong financial controls are put into place prevent fraud.
If possible, hire an accountant who is familiar with the funding and financial management of MPGs. Hire an accountant that has a professional body holding them to accountability standards and requiring professional insurance (e.g., Chartered Professional Accountants or Certified General Accountants).
There are numerous accounting packages that can help MPGs manage the financial side of the business. Most software programs can be used to download bank transactions, reconcile month-end statements, pay bills, manage accounts receivable and payable, report across year end dates and preform budget comparisons. Three widely used software are “Sage” (known as Simply Accounting), QuickBooks and Quickbooks Online. Before selecting a program research it’s features and consult the accountant to ensure it meets the practice's needs.
To effectively manage the MPG’s finances, the following set of books are required:
- Purchases and payments records
- Sales and receipts
- Payroll records
Practice groups may also choose to include books that contain the following:
- Inventory control
- Project costing
Cheque Book Management
Irrespective of the program the practice uses, sound cheque book management involves:
- Obtaining a deposit book and using numbered cheques with cheque stubs that detail the expense, the date the cheque was made, whom it is made out to, HST amounts and an invoice number.
- Placing the cheque number and date on invoices. This is useful in the event of an audit or to trace a transaction in the future.
- Ensuring that the bank issues monthly statements along with any cancelled cheques (copies or originals) to facilitate the business in performing regular bank reconciliations.
Bank reconciliation is an essential control process, and typically occurs on a monthly basis. It is a comparison of a bank statement to accounting records. It ensures that all cash transactions have been recorded in accounting books and the bank balance has been adjusted for any deposits or cheques that are in transit (i.e., sent by the practice but not yet recorded by the bank).
Income statements show the income and expenses over a particular time period. This may be a month, quarter or year. Each source of revenue and each expense are shown. Data can be aggregated to draw comparisons over a period of time or to the same time period in a prior year. This is used to show trends, to highlight issues and determine how the business is doing financially.
Budget Variance Reports
A budget variance report is similar to an income statement, but it shows the planned income and/or expense as compared to the actuals achieved. A favourable budget variance will show the actual income higher than the budget or the actual expense lower than the budget; unfavourable variance shows the opposite. This is particularly helpful for decision-making and tightening controls, such as over-stock supplies, staff overtime, and underspent grants.
The Funding Agreement requires all financial records including invoices and related documents, be kept in a manner consistent with generally acceptable accounting principles for review by the Transfer Payment Agency (TPA), for seven years from the date of termination of the agreement. These records are subject to an annual financial audit at the discretion of the TPA. Similarly, the Canada Revenue Agency, College standards, Ministry of Labour and various pieces of legislation direct various retention periods.
The AOM’s template protocol on document retention (found under "Financial" on the protocols page) provides guidance on retention of all documents. Be sure to tailor the template to reflect current evidence, best practices and practice group/community specific info before use.