A medical or dental office can look busy at the front desk. The books can still leave the owner guessing about cash. Patient payments may arrive today. Insurance deposits may arrive later. Clinical costs and provider pay often land on a different schedule. A practical monthly process brings those moving pieces into one reliable picture.
Good bookkeeping for medical practices records patient and insurance receipts. It separates clinical costs from other expenses, reconciles the bank, and tracks provider pay the same way each month. You get a monthly profit and loss, a balance sheet, and support for the business tax return. You are not left with a year-end scramble. The IRS says your records should clearly show income and expenses. Keep invoices, receipts, deposit slips, and canceled checks (IRS recordkeeping guidance).
Do not record each payment by itself and stop there. Decide what the payment is, match the deposit to its source, and clear open items before they skew a cash decision. If you want help with that monthly close, start with bookkeeping for small businesses, then use the steps below for the practice-specific accounts.
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What bookkeeping for medical practices has to track
A medical or dental practice has more than one kind of income. The books should show copays, self-pay visits, and payment plans apart from each other. Then you can see what patients paid and what is still open. A clean record also lets you compare scheduled visits with cash received. Not every deposit is the same kind of revenue.
Insurance and other third-party payments need their own trail. The deposit may not match the amount billed. Adjustments, denials, write-offs, and timing all change the number. You should be able to tie a deposit to the payer and to the related visits. Then a short payment is easier to find. It does not disappear inside one large bank deposit.
Clinical costs also differ from a typical shop. Records may include medical and dental supplies, lab fees, rent, practice software, and malpractice insurance. For each purchase, keep the payee, amount, proof of payment, date, and a short description. Those details make the monthly reports useful. They also support the tax return.
People costs are another stream. Track pay to providers, employees, and contractors in the right categories. A practice may pay providers in more than one way. It also pays staff wages and outside vendors. The books should make those costs easy to review. This is not a payroll calendar or a worker-classification guide.
The IRS allows paper or electronic books, as long as they clearly show income and expenses. Gross receipts should show the amount and where the money came from. Invoices, receipts, deposit slips, and canceled checks are the usual support. Read the IRS recordkeeping guidance for the full list and retention details.
A general shop may only need broad sales and expense categories. A practice needs those basics, plus a clear view of patient payments, insurance deposits, clinical costs, and people costs. If you want the general version, start with small-business bookkeeping. This guide stays on the gaps that generic books miss.
How to close the books each month
A steady monthly close shows cash, collections, and operating costs. Pick a date after the month ends. Pull the source records. Then use the same steps each time:
- Download all activity. Pull the month's activity from the business bank, credit cards, and payment processors. Save the statements and the transaction detail, not just the ending balance. You need every deposit, withdrawal, fee, and transfer.
- Match deposits to receipts and insurance records. Compare deposits with patient receipts and insurance explanations of benefits, often called EOBs. Do not force a one-to-one match when an insurer bundles several claims into one payment. Write down which receipts and EOBs make up the deposit. Flag anything you still cannot explain.
- Code expenses consistently. Use a simple chart of accounts. Useful categories include clinical supplies, lab, occupancy, software, insurance, owner pay, and staff pay. Code the same cost the same way each month. A chart that is too detailed will not get used.
- Reconcile undeposited funds and merchant fees. Clear receipts that have reached the bank. Check items still sitting in undeposited funds. Record card and processor fees apart from the collections they came from. The bank deposit may already be net of fees. If you match only that net amount, you hide a real expense.
- Review receivables older than 60 days. Look at each older balance. Note whether it is waiting on an insurer, a patient, a corrected claim, or a write-off. Aging the balance shows where a follow-up call is worth the time.
- Lock the month and save the support. After the review, lock the month so finished numbers are not changed on a whim. Save the bank and card statements, processor reports, deposit details, EOBs, receipts, and reconciliation notes with that month. The IRS says records should clearly show income and expenses, with support such as invoices, receipts, and deposit slips. See the IRS recordkeeping guidance for the underlying documentation standard.
When the close is done, read the profit and loss first. It shows revenue and expenses for the month. That makes an odd lab bill, a rising software cost, or a change in staff pay easier to see. Then read the balance sheet. Check cash, money still owed to you, bills you owe, and owner equity. Together, these reports say more than the bank balance alone. For a plain tour of the reports, see what financial statements show a business owner.
Accountants Now delivers a monthly profit and loss and a balance sheet through a secure portal. The books are kept in QuickBooks or Xero. If the monthly reconcile is taking time away from patients, the bookkeeping service can take that close.
Why insurance deposits break a simple cash book
A practice can record a bank deposit and still misread the revenue behind it. Patients often pay at the visit. Insurance often pays weeks later. The insurance deposit may also be smaller than the billed charge. The payer may apply a contractual write-off. A book that records only the deposit can make one month look strong and the next month look weak.
Take a $200 visit. The patient pays a $40 copay today. Next month the insurer pays $90. The other $70 is a contractual write-off. On a cash book, month one shows $40 of income. Month two shows $90 when the insurance payment arrives. The $70 write-off is not cash income. The practice never collected it.
That timing is not wrong. It is how the cash method works. It may not match the month of the visit, or the full amount you billed. The gap matters when you review monthly revenue. It also matters when a full schedule produced less cash than you expected.
IRS Publication 538 draws a simple line. The cash method records income when you receive it and expenses when you pay them. The accrual method records income when you earn it and expenses when you incur them. The IRS also says you must stick with one accounting method. Read the IRS guide to accounting methods before you change anything on a return.
Do not switch methods just to make one month look better. A switch changes when income and expenses show up. Month-to-month comparisons get weaker, and the tax work gets harder. If you are not sure which method you use, look at the current books. See how they record patient payments, insurance deposits, write-offs, and unpaid bills.
This section is only the practical warning. For the full cash versus accrual lesson, see this accrual accounting explainer. A steady method, plus payment records and a note for each write-off, gives your bookkeeper a clean file to review.
In-house tracking versus a monthly bookkeeper
Keeping the books in the office can work. One person needs time each week to enter activity, reconcile accounts, and chase missing records. The question is not who can type entries into software. It is who will keep the record complete for decisions, tax filing, and questions about cash.
| Decision point | Keep it in the office | Hand the month to a bookkeeper |
|---|---|---|
| Who codes deposits | An office staff member categorizes deposits and keeps the source records organized. | A bookkeeper reviews and codes deposits as part of the monthly close. |
| Who watches claims older than 60 days | The practice tracks aging in its existing workflow and assigns follow-up internally. | The practice gives the bookkeeper the records needed to flag older claims for review. |
| Who prepares the profit and loss | An owner or employee reconciles the accounts and prepares the report. | The bookkeeper prepares monthly profit-and-loss statements and balance sheets. |
| Who assembles support for the tax return | The office gathers invoices, receipts, deposit slips, and other supporting records. | The bookkeeper keeps the monthly records organized for the tax filing process. |
For a small practice, a monthly handoff can make the split of work clearer. Accountants Now offers bookkeeping as a monthly subscription. You get a monthly profit and loss, a balance sheet, secure record storage, and unlimited one-on-one support. A monthly subscription is often easier to plan for than hourly billing. You do not have to build the close around one employee's spare hours.
Business tax preparation and filing is included with the monthly bookkeeping subscription. Tax filing can ride with the monthly books instead of becoming a separate handoff. A one-month free trial of the full bookkeeping service lets you see if the fit is real. If the books are already behind, catch-up bookkeeping is available. Price depends on a few factors. There is no published flat rate. The bookkeeping quote page is where you request a number.
Where payroll and the tax file fit
The books are not complete if provider pay and staff pay never reach the ledger. Payroll is a separate service from monthly bookkeeping. Accountants Now processes it through ADP. The service includes payroll taxes and W-2s. It can pay W-2 employees and independent contractors. When payroll hits the books, the monthly reports show real labor cost. Learn more about payroll services.
The monthly books are also the file the business tax return is built from. When income, expenses, and payroll are recorded all year, tax filing does not start with a pile of unsorted transactions. Business tax preparation and filing is included with Accountants Now bookkeeping subscriptions. If you need tax help without a bookkeeping subscription, standalone business tax return help is available.
For a federal overview, IRS Publication 334 covers small-business income, expenses, and self-employment tax. It can help you learn the terms and the records. This article is not tax advice. Your entity type, accounting method, and payroll setup can change what applies. Bring return questions to a qualified tax professional.
A monthly close is useful when you want a steady view of cash before a filing deadline. Regular records show whether revenue, costs, and payroll are moving as you expected. The tax professional also gets a cleaner starting point. If the books have fallen behind, catch-up work can restore them before you go back to a monthly schedule.
Practices in Broward County or Palm Beach County can read about South Florida bookkeeping services. Accountants Now also serves Orlando and Tampa. Those cities are separate from South Florida.
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Frequently Asked Questions
What records does a small medical practice need to keep?
Keep a record of every patient payment, insurance deposit, clinical purchase, and payroll or contractor payment. The IRS lets you use paper or electronic books if they clearly show income and expenses. Save the invoice, receipt, deposit slip, or canceled check behind each entry.
Why does the bank deposit not match what the practice billed?
One visit can produce a copay today, an insurance payment weeks later, and a write-off that never hits the bank. If the books record only the deposit, revenue looks lower than the care you delivered. Old claims stay hidden. Match the deposit to the payer and the visit. Record the write-off on its own line.
Should a medical practice use cash or accrual bookkeeping?
Cash books record income when money arrives and expenses when you pay them. Accrual books record income when you earn it and expenses when you incur them. Pick one method and keep it. Do not switch in a slow month just to make profit look better.
When should a practice hire a bookkeeper instead of doing it in the office?
Stay in-house if one person can reconcile the bank, code deposits, and produce a monthly profit and loss on time. Hand the month off when insurance deposits pile up, claims older than 60 days sit untouched, or tax time starts with a folder of statements. Catch-up help fits when the books are already behind.
Does monthly bookkeeping include the business tax return?
At Accountants Now, business tax preparation and filing is included with the monthly bookkeeping subscription. Payroll is a separate service. The monthly books are the file the return is built from. A clean close is what makes tax season shorter.
Put this month's books on a schedule
You do not need a perfect chart of accounts to start. You need one month closed. Match the deposits, code the expenses, and read the profit and loss. If that month is already late, catch up before you start a new routine.
Accountants Now keeps monthly books for small practices in QuickBooks or Xero. You get the profit and loss and balance sheet in a secure portal. Business tax filing is included with the bookkeeping subscription. The first month is a free trial of the full service.
