Why healthcare practices are different
Three things make medical and dental bookkeeping unlike general small business bookkeeping:
- Revenue is decoupled from cash. You see the patient today and get paid by the insurance company in 30–90 days. Cash-basis accounting hides the actual performance of the practice; you really need accrual to see what's happening.
- Insurance adjustments are massive. Billed amounts and collected amounts often differ by 30–50%. Tracking only what gets deposited misses the whole story.
- The expense profile is unusual. High equipment costs, malpractice insurance, lab fees, supplies, and provider compensation create a mix you don't see in most other businesses.
Set up a practice-friendly chart of accounts
Standard QuickBooks templates don't fit healthcare. A properly structured chart of accounts for a practice should separate:
Revenue
- Service Revenue (gross production, what you billed)
- Insurance Adjustments (contractual write-offs — contra-revenue)
- Patient Refunds (also contra-revenue)
- Other Revenue (rental income from subleases, etc.)
The net of these is what shows up as net revenue. Seeing gross production separately from adjustments is essential — it tells you whether your collection rate is improving or declining.
Direct costs (COGS)
- Lab fees
- Dental or medical supplies used in patient care
- Implant costs and other patient-specific materials
Provider compensation
- Owner-doctor compensation
- Associate doctor compensation
- Hygienist compensation (for dental practices)
Keeping provider compensation separate from general staff payroll is critical for understanding practice margins.
Staff payroll and benefits
- Front desk and administrative wages
- Dental assistants / medical assistants
- Office manager
- Payroll taxes (broken out)
- Health insurance and benefits
Practice overhead
- Rent
- Utilities
- Malpractice insurance
- General liability and property insurance
- Practice management software
- Marketing
- Continuing education
- License and credentialing fees
- Office supplies (non-clinical)
Tracking insurance receivables
This is the heart of medical and dental bookkeeping. The practice management system (Dentrix, Eaglesoft, athenahealth, Epic, etc.) tracks patient-level accounts receivable in much more detail than QuickBooks ever could. The trick is reconciling between the two:
- The practice management system is the source of truth for individual patient and insurance balances
- The accounting system tracks the aggregate financial picture
- The two should reconcile monthly — total A/R in the practice management system should match the A/R balance in the books
For most practices we work with, this looks like:
- Daily or weekly journal entry from the practice management system into QuickBooks summarizing the day's production, adjustments, and collections
- Monthly reconciliation of the A/R balance
- Monthly aging review to identify problem claims
Trying to manage every patient invoice inside QuickBooks instead of the practice management system is a mistake we see all the time — it duplicates work and introduces errors.
Handling deposits and bank reconciliation
Insurance deposits arrive in batches — multiple claims paid in a single ACH or check. Each deposit needs to be matched to the specific claims it covers:
- Pull the EOB (Explanation of Benefits) for each payer
- Match each EOB to the corresponding deposit
- Apply each payment to the correct patient and claim in the practice management system
- Record the aggregate deposit in QuickBooks with proper categorization
The front desk or billing staff typically handles the patient-level posting; the bookkeeper handles the QuickBooks side. Both have to happen for the system to work.
Equipment and capital purchases
Medical and dental practices buy a lot of equipment, and most of it needs to be capitalized rather than expensed:
- Major equipment (chairs, X-ray machines, CBCT, intraoral scanners, autoclaves) — capitalized as fixed assets, depreciated over their useful life
- Office furniture and computers — same treatment, typically depreciated over 5–7 years
- Software and IT infrastructure — sometimes capitalized, sometimes expensed depending on cost and useful life
- Leasehold improvements (build-out costs) — capitalized and depreciated over the lease term
Section 179 expensing and bonus depreciation can sometimes accelerate the deduction for major equipment purchases, but the strategy involves both bookkeeping and tax planning — coordinate with your CPA before year-end.
Payroll considerations
Practice payroll has a few quirks worth knowing:
S-Corp owner-doctors
Many practices are S-Corps and the owner is paid a W-2 salary plus distributions. The IRS expects the W-2 salary to be "reasonable compensation" — too low and you risk reclassification of distributions as wages. This is a CPA conversation, but the bookkeeping needs to support whatever split is chosen.
Associate doctors
Often paid on a percentage of production or collections, sometimes with a guaranteed minimum. The math has to be tracked carefully — typically inside the practice management system with monthly tie-out to payroll.
Hygienists (dental)
Often paid hourly, sometimes with a production bonus. Florida labor law on overtime and minimum wage applies as it would in any business.
Front desk and assistants
Standard hourly payroll. Watch for proper overtime calculation when bonus pay is involved.
Payroll support
Our payroll support service coordinates with your payroll provider on the technical execution while we handle the bookkeeping side.
Practice metrics worth tracking monthly
Beyond the standard P&L, practices benefit from tracking:
- Gross production — total billed, before adjustments
- Net production — after insurance adjustments and write-offs
- Collections — what actually came in
- Collection rate — collections ÷ net production (target: 98%+)
- A/R days — how long it takes to collect
- Overhead percentage — total overhead ÷ collections
- Provider productivity — production by provider
Industry benchmarks vary by specialty, but for general dentistry, overhead at 60% or below is considered healthy, with provider compensation excluded. For medical primary care, ranges vary more widely based on specialty.
Florida-specific items
- No state income tax simplifies bookkeeping at the state level
- Florida Reemployment Tax applies to W-2 employees as in any business
- Workers' compensation required for most practices with employees
- Sales tax generally doesn't apply to medical and dental services (services are exempt), but does apply to retail sales of products like whitening kits, electric toothbrushes, etc. if the practice sells them
- State board fees for licensing, plus DEA fees for prescribers — tracked as professional fees
Frequently asked questions
Yes. Practice management software handles patient-level scheduling, billing, and clinical records. Accounting software handles the full financial picture of the business. They serve different purposes and need to be reconciled to each other, not replace each other.
QuickBooks Online is the most common choice for solo and small group practices. Larger multi-location practices sometimes graduate to Sage Intacct or industry-specific tools. The integration between QuickBooks and your practice management software matters more than the accounting software brand.
Monthly at minimum, with weekly review of production and collection metrics from the practice management system. A practice running on quarterly financial review is too slow to catch problems before they become expensive.
Most practices outsource bookkeeping because the volume usually doesn't justify a full-time in-house person, but the work does require specialized knowledge. Our piece on outsourced vs. in-house bookkeeping has the longer answer.
How we help
SoFlo360 supports Florida medical and dental practices with monthly bookkeeping, practice management software reconciliation, payroll support, and clean handoffs to your CPA. We work with solo practitioners and small group practices across South Florida. Spanish-friendly support available.