Beaverlog Tips: Volume 14 - July 15, 2003

Income Reports

The THERAPIST has three income-related reports, the Income report, the Income Accounting report, and the Payroll report. For a brief period (release 10 through release 12), the original income report was replaced with what is now called the Income Accounting report. In release 13, the original report was restored and the new report given the appellation, Income Accounting report. These two income reports work quite differently though, in some cases, may give identical results.

Before discussing the reports themselves, it is important to look at some accounting principals and take a peek under the hood at how The THERAPIST handles payments and income.

Accounting 101

In accounting terms, income has a very specific definition. It is money you have received AND have applied to charges. The second part of this condition is critical. Moneys received but not applied to charges are prepayments and are liabilities, not income. They are liabilities because the money still technically belongs to the patient. It is only when this money is applied to charges (services), that it becomes income.

If the service has been rendered, you could argue that the money received should be classified as income but The THERAPIST takes the strict view and doesn't count it as income until it has been applied.

Payment in The THERAPIST exist in three files. The first file (Payments, also referred to as Base Payment) records the payment as it was received. It includes , among other things, the payment date, the amount, and the payer.

The second file (PaymentPatients) records how the payment was divided between one or more patients. This is what you see as a payment on a patient's transaction list and is especially important when an insurance check is entered that covers services for multiple patients. This file also records prepayments waiting to be applied to service charges.

The third file (PaymentApplications) records how the patient's portion of the original payment is applied to one or more services. You see these records when you click on the Payments button on a service's money tab or as a list when you edit a payment transaction. You also see these records when you highlight a service in the transaction list and press the View Related button.

At first glance, it would seem logical that income would simply be totaling the records in the PaymentApplications file. Originally, we thought so too until we came face-to-face with the real world. In reality there are sensible reasons for unapplying payments already applied to services. A common example is when a patient pays in full and you later receive an insurance payment. You might unapply the patient payment, apply the insurance payment, then apply the appropriate amount of the original patient payment.

If the original patient payment was applied in January then unapplied and partially reapplied in March, when should the patient payment be considered income? If an income report was generated for January it would show the entire service charge paid and applied to income. If later, after unapplying and reapplying, the total paid toward the service is different, how and when is that difference accounted for? If you give it some thought, you should be able to come up with additional examples.

The solution was to add another file (Income) in version 2.0.010. You never see this file directly, The THERAPIST maintains all records in when you do your normal activities of receiving payments and applying them to services. The difference is that additional records are added to this file when you unapply a payment to a service or delete a payment which has been applied to services. In the above example a record would be written to this file when the patient payment is originally entered and applied to the service. Another record will be added when the patient payment is unapplied. Yet another record is added when the insurance payment is applied and a final (let's hope) record is added when a portion of the patient payment is reapplied. The date of each of these actions is the date they occurred (or the payment date if the payment is applied to services when the payment is entered).

Ok, we're now ready to look at the income reports.

Income Report

This is the original income report and was missing from the program from 2.0.010 through 2.0.012. It was originally derived from the equivalent report in The THERAPIST for DOS. It was a time of innocence when we naively thought reporting a snapshot of payments applied to services at any given time was an accurate reporting of income.

This report looks exclusively at the PaymentApplications file so in the example above, the report for income in January would look quite different if printed on February 1 than if printed on April 1. Accountants and tax preparers were going nuts!

While not entirely without usefulness this report should not be used to track your income.

Income Accounting Report

The Income Accounting report added as the Income Report in version 2.0.010 and was renamed in 2.0.013. It was created to address the problems of the original report. It look for income exclusively in the Income file. The are sections for income records deleted showing negative income detail for payments unapplied from services. This report also shows a snapshot of current prepayments but does not count these as income.

If you want to be rigorous in your accounting, this is the report you should use.

Payroll Report

This report is only available with the Power Options module. It was changed to work the same way as the Income Accounting report. These two report would give the same results except that the Payroll report adds payroll calculations based on the income figures.