Practice bookkeeping, defined.
Practice bookkeeping is the discipline of recording revenue that arrives on a delay through insurance and patient or client payments, treating pre-paid packages and memberships as the deferred revenue they are, tracking provider compensation cleanly enough to know true margin, and reconciling the accounting to the practice management system rather than running two sets of numbers that never agree.
Three things determine whether the profit line means anything: collections reported separately from production, package revenue recognized as it is delivered, and provider compensation isolated from general payroll. Get those right and the number on the bottom of the page is one you can act on.
What's in the monthly close
- Transaction categorizationEvery transaction coded to a chart of accounts built for your practice type, not a generic template.
- Bank & merchant reconciliationAccounts reconciled monthly, with merchant processing fees separated from revenue rather than netted into it.
- Deferred revenueMemberships, care packages, and pre-paid treatment series recognized as delivered, not as received.
- Provider compensationSalary, production, and hybrid comp tracked by provider so you can see margin where the decisions are made.
- Inventory & cost of goodsFor practices carrying real inventory, pharmacy, retail, injectables, COGS tracked properly so margin is real.
- Statement packageA closed P&L, balance sheet, and cash statement by a fixed date each month, formatted to be read.
The cleanup
Nearly every practice that comes to us needs one. We take your existing file apart and tell you exactly what it is misstating, usually some combination of a chart of accounts inherited from a template, months of uncategorized transactions, deferred revenue that was never recorded, owner draws mixed with operating expense, and equipment financing booked as an expense instead of a capitalized asset.
The cleanup is quoted separately and up front, and it typically takes 30 to 60 days. CFO advisory starts once the books are reliable, and we tell you up front if the fix is bigger than you expected.
What a practice chart of accounts has to do
A generic small-business chart of accounts assumes revenue arrives when work is done, that inventory is either central or irrelevant, and that the owner’s pay is a wage. None of the three holds in a practice, which is why a practice running on a default template produces statements that are internally consistent and externally meaningless.
- Production and collections as separate linesWhat you diagnosed and delivered is not what arrived in the bank. Reported as one number, the gap between them is invisible and it is where most practice revenue goes.
- Prepaid care as a liabilityMembership plans, care packages, wellness plans and program enrollment are money collected against care still owed. Booked as revenue on receipt, the practice looks more profitable than it is and the bank balance looks more available than it is.
- Provider compensation isolated from operating costSalary, production splits and hybrid arrangements separated from staff wages, so margin can be read per provider rather than per practice.
- Inventory where it appliesOptical frames and lenses, pharmacy and retail stock, and consumables carried and costed properly rather than expensed on purchase.
- Merchant fees against the revenue they belong toCard and financing fees netted where they occur, not accumulated in a single administrative line.
- Financed equipment on a depreciation scheduleone-year equipment write-offs are a tax decision. Left in the operating statements they make one year look catastrophic and the next look excellent.
What arrives each month
- A profit and loss statement you can act onStructured for a practice: collections against production, provider margin, overhead by category as a percentage rather than a dollar figure.
- A balance sheet that shows what is actually yoursDeferred revenue as a liability, financed equipment and its remaining obligation, and the working capital position underneath the bank balance.
- A cash statementThe bridge between the profit figure and the change in the bank account, with the reconciling items named.
- An operating summaryThe handful of numbers specific to your practice type, collection rate, hygiene margin, capture rate, inventory turns, utilization, tracked month over month.
Why the close date matters more than it sounds
A practice whose books close six weeks after month end is making decisions on a picture that is already stale. By the time the January statements arrive, February is over and the hire has been made or not made without reference to either.
Closing on an agreed date is not an administrative nicety. It is what makes the numbers usable for anything other than filing a return, and it is the single most common difference between a practice that reads its statements and one that files them.
Frequently asked
What accounting software do you work in?
QuickBooks Online for the large majority of practices. We can work in QuickBooks Desktop or Xero where a practice is already established there, and we'll migrate you if the current setup is holding you back.
Do you work with our practice management system?
Yes. We integrate the accounting with your PM system so production, billing, and collections data reconciles to the books, rather than maintaining two systems that never agree.
Our books are a mess. Is that a problem?
It's the normal starting point. Most practices need 30 to 60 days of cleanup before the numbers can be trusted, uncategorized transactions, a chart of accounts inherited from a template, merchant fees booked as revenue, deferred revenue never recorded. We quote the cleanup separately and up front.
Do you handle payroll?
We work alongside your payroll provider and make sure provider compensation, clinical staff, and owner draws are recorded correctly and mapped to the right accounts. Payroll itself stays with your provider.
When do the books close each month?
By a date agreed at onboarding, commonly around the 15th of the following month, depending on how quickly third-party statements arrive.
General information for practice owners, not accounting, tax, legal, valuation or investment advice for your situation. MedPraxis CFO is not a CPA firm, a registered investment adviser, or a business broker. Talk to your own CPA, attorney or adviser before acting on anything here.