Accounting for clinics and medical practices
A practice gets paid on someone else's schedule. You deliver care today, bill an insurer, get partially paid weeks later, and reconcile the difference against a contracted rate you did not set. Books that ignore that timing gap will misstate almost every month.
What this trade does to a set of books
Billed is not collected
Revenue recorded at the billed amount overstates the month, because insurers pay a contracted rate. The write-off between billed and allowed has to be recorded or the books are fiction.
Deposits arrive as lump sums
One insurer deposit can cover dozens of claims across several weeks. Without reconciling the remittance advice to the deposit, the books lose the connection between work done and money received.
Payroll is the whole cost structure
For most practices staffing is the single largest expense and the one that determines whether another provider or hygienist is affordable. It needs to be tracked as a percentage of collections, not of billings.
Owner compensation is a tax decision
How an owner-provider takes money out of the practice, salary versus distribution, changes the tax bill materially, and it needs deciding during the year rather than at filing.
Included for clinics and medical practices
- Revenue recorded at collected, with contractual adjustments booked
- Insurer deposits reconciled to remittance advice
- Payroll coordination across providers and support staff
- Staffing cost tracked as a share of collections
- Owner compensation planning for the practice entity
- Equipment purchases and Section 179 decisions
Asked by owners in this trade
Should my books record what I billed or what I collected?
Collections, with the difference between billed and allowed recorded as a contractual adjustment. Recording revenue at the billed amount inflates every month and makes the practice look more profitable than it is, which distorts hiring and equipment decisions. The gap between billed and collected is also the number that tells you whether your billing process is working.
How do I tell whether I can afford another provider?
The test is what total staffing cost does to your collections, not what the salary looks like on its own. That means the salary plus payroll taxes, benefits, and any additional support staff the new provider requires, measured against the collections they can realistically generate in their first year, which is usually below a mature schedule for at least two quarters.
What is the right way for an owner-provider to pay themselves?
It depends on the entity, but for an S corporation the requirement is reasonable compensation as W-2 salary, with additional profit available as a distribution. Getting the split wrong in either direction carries a cost: too little salary invites scrutiny, too much means paying payroll tax you did not owe. It is a decision to make with your accountant during the year, not at filing.
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