Allocating Indirect Costs in Healthcare: Simpler With Sage Intacct

By - May 3, 2023

Healthcare accounting comes with complex and time-consuming requirements for even the smallest of providers. As organizations grow larger, the scale and sophistication of their accounting requirements does as well. But no matter the scale, allocating indirect costs is one of the biggest struggles.

Properly allocating indirect costs gives decision makers an accurate understanding of financial performance from all angles. Unfortunately, for many accountants, making those allocations is a data-intensive and people-driven process, making it both a daunting undertaking and one at high risk for errors, inefficiencies, and inconsistencies. To put it differently: indirect costs are important to understand but easy to confuse.

As healthcare becomes more competitive, more consolidated, and more considerate of value, financial management will be increasingly important. There’s little margin for error and potentially hefty consequences for mistakes and oversights. Improving how indirect costs get allocated is, for many in healthcare, a prime candidate to upgrade. Better yet, making those improvements – and allocating indirect costs – has never been easier thanks to the tools that Sage Intacct brings to healthcare.

Sage Intacct Introductions

Healthcare providers of all shapes and sizes have made Sage Intacct their financial management solution of choice for many reasons, from the cloud-based toolkit to the quarterly updates that add powerful new features for free. But perhaps the most compelling aspect of Sage Intacct is how it improves upon the ordinary accounting workloads that create the biggest headaches in healthcare. We will dive into an example shortly, but let’s first introduce two features in Sage Intacct:

  • Statistical Accounts: These accounts track non-financial information such as the number of employees or hospital beds broken down by department. Sage Intacct has an easy process for adding, changing, or removing statistical accounts so that the system never lacks the data it needs for robust financial management and analysis.
  • Dynamic Allocations: This tool allows accountants to set up rules that will automatically allocate costs, revenues, or other variables between multiple targets. Automating this work saves accountants large amounts of manual number crunching while providing a more accurate and granular perspective on financial performance.

How to Allocate Indirect Costs

Let’s imagine a mid-sized hospital wanting to understand how the indirect costs of utilities (water, electricity, etc) broke down according to the number of full-time employees in each department. This information could reveal where utility costs are lower or higher than normal – information that could potentially help to lower bills, improve utility usage, or even locate hidden mechanical problems.

Normally, this would be a long, laborious, and manual process. But it’s simple with Sage Intacct.

Accountants would first create a statistical account to record the number of full-time employees working in each department of the hospital. Accountants would then specify which account is used to pay for utilities and how those expenses should be allocated. In this case, the hospital would allocate them by the “department” dimension, and further specify that it should be a dynamic allocation broken down by the FTE counts recorded in the statistical account. Finally, they need to specify a target entry to post the allocations.

With all that established, the process for allocating indirect costs runs almost on autopilot. And when managing financial information and monitoring financial performance becomes this easy, accountants spend more time utilizing insights and less time finding them. It’s the ideal approach to healthcare accounting. And with Sage Intacct, the features are there to utilize right out of the box.

Getting Started With Sage Intacct

Some readers don’t have Sage Intacct yet. Others do but haven’t utilized dynamic allocation or taken full advantage of all the system can do to serve healthcare. For everyone eager to leverage all that Sage Intacct can accomplish, accommodate, and accelerate, the team at RSM is here to help.

Let’s start with a consult and go from there – contact us to arrange something around your schedule.

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