Bookkeeping Basics for Dental and Medical Practices

The practice management system is not a general ledger. It does not produce a balance sheet, track loans or equipment, reconcile bank accounts, or record the cost side of the practice. It tracks production and collections extremely well and stops there.

The accounting file needs to agree with it on the revenue side. That reconciliation — production and collections reported in the practice system against revenue and deposits recorded in the books — is routine, frequently skipped, and a reliable source of findings. When the two have never been reconciled, the usual discovery is that deposits were recorded gross of adjustments, or that a payer's bulk payments were never broken out against individual claims.

Four patterns account for most of it.

Insurance receivables without adjustments

The defining feature of practice bookkeeping. What gets billed and what gets paid are routinely different, and the difference is a contractual adjustment rather than a collection failure.

If those adjustments are not recorded as claims settle, receivables fill with balances that will never be collected, and the aging report becomes a mix of real outstanding money and accounting residue. The practical effect is that nobody trusts the receivables number, so nobody works it, so genuinely collectible balances age alongside the artifacts.

Bulk deposits never broken out

Payers commonly remit one payment covering many claims. Recorded as a single deposit against nothing in particular, the cash is right and every individual patient balance stays open. Over a year this produces a receivables ledger that bears little relationship to what is actually owed.

Payroll as one line

Compensation is usually the largest cost in a practice and the one most often recorded as a single aggregate withdrawal. A profit and loss with one payroll line cannot answer any of the questions an owner actually has: what providers cost relative to what they produce, what hygiene contributes, what administrative overhead runs.

Payroll should be recorded from the provider's reports and broken out by role. Lynn Solutions records payroll from those reports and does not process payroll.

Equipment financing recorded as expense

Practices carry equipment debt, and payments recorded entirely as expense rather than split between principal and interest misstate both the profit and loss and the balance sheet. It is a small mechanical error that quietly distorts profitability for years.

Fifteen minutes, in this order.

1. Balance sheet. First, because this is where the problems above become visible. Watch receivables, any undeposited balance, equipment loan balances, and anything you cannot explain in one sentence.
2. Profit and loss, compared. Against last month and the same month last year. Seasonality in practices is real, so the year-over-year comparison usually carries more information than the month-over-month one.
3. Receivables, split. Insurance balances and patient balances are different problems with different follow-up. A combined aging report obscures both. A weekly AR rhythm works well here, with the split maintained.
4. Cash against obligations. The bank balance minus payroll taxes, the next payroll run, and any patient credits held. Practices with large payroll runs feel this gap sharply.

One ratio worth tracking beyond the standard reports: total compensation cost as a share of collections, month over month. It is the earliest indicator that capacity, scheduling, or payer mix has shifted, and it only works if payroll is broken out properly.

Adding a provider is usually the largest financial decision a practice makes, and it changes several variables simultaneously: compensation cost, collections timing, often the payer mix, and sometimes the space and equipment requirements.

Evaluating whether it worked requires a baseline you trust. Four things should be true first:

• Accounts reconciled. Otherwise the baseline is an estimate.
• Receivables reflecting real collectible balances, with contractual adjustments recorded as claims settle.
• Payroll broken out by role, so the new provider's cost is separable from everyone else's.
• A close that finishes early enough to be useful. Reports arriving three weeks late describe a decision you already made.

Without those, the honest answer to whether an addition is working arrives about a year late, which is well past the point where it is cheap to change course.

Worth being explicit, because practices carry a lot of obligations that sit outside bookkeeping.

Billing, coding, claim submission, denials management, payer contracting, credentialing, and anything clinical or regulatory are not bookkeeping work and are not services Lynn Solutions provides. Neither is HR or employment-law guidance. Payroll comes from your payroll provider and gets recorded in the books.

Whether the practice should be on a cash or accrual basis, and how revenue should be recognized, are questions for your CPA. Lynn Solutions is not a CPA firm.

What we handle is the record and the reporting: reconciliation, categorization, receivables accuracy, payroll recorded properly from provider reports, the reconciliation between the practice management system and the books, and monthly reports an owner can act on.

If the books are behind or the balance sheet holds things nobody can explain, that is a cleanup question first — cleanup or monthly bookkeeping covers how to tell.

If the records are sound and the gap is reporting and rhythm, what monthly bookkeeping includes covers the scope to expect and monthly bookkeeping and finance operations is the engagement. Where the question moves from what happened to what to do about it, CFO and advisory support layers on top of books that are already reliable.

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