This guest blog comes from our accountant and resident tax expert, Michael Bennett of Michael B. Bennett Ltd.
Possible problem for Therapists
A client asked me to help them as they were struggling a little with their digital accounts. Their set up was fairly standard. They were using Cliniko for patient records and sales/payment tracking and they were being paid via iZettle. Where they were struggling was tying up the money they received with the invoices being raised.
I did some digging and ascertained where the key problem was. Cliniko was posting directly within Xero into an itemised sales/customer ledger on a patient-by-patient basis; in bookkeeping terms this was creating a sales entry and a debtor (someone who owes money). However, as they were paying on the spot with a credit card, they were being marked off within Cliniko as paid.
iZettle was then linked directly into Xero and, on a daily basis, was raising an invoice for the total amount being collected – this appeared as a sales entry and a debtor, which was then being predominantly cleared against the monies coming in via the bank feed.
Those of you who are more adept at bookkeeping will realise that this creates a double-counting of the sales, once via Cliniko and once via iZettle. This means that the profits of the business were being considerably overstated, as was the amount of money owed to the clinic.
The solution is to turn off the direct link from Cliniko so that only iZettle posts the entries. You may then have, as in this case, a few sales invoices that need to be manually entered into Xero being those where the fees are being settled by insurance companies. One useful function of iZettle is that as well as capturing your credit card transactions for the day, it can also record your cash takings, which helps in capturing all income received, which means the only area not covered by automatic transactions is invoiced sales.
I only picked this up by chance when the numbers stopped making sense to the client. There may or may not be a similar problem with other third-party apps so take a good look at your system and check for anything similar. I would be more than happy to look at this for you.
Michael B Bennett FCCA