How to Audit a Dental Client's Revenue Cycle in 30 Minutes
You have 30 minutes before meeting with a dental practice prospect. Can you assess their revenue cycle health quickly enough to know what you are getting into?
The Quick-Look Revenue Audit
Whether you are evaluating a prospective dental client or doing a periodic health check on an existing one, you need a fast way to assess their revenue cycle.
A full forensic analysis takes weeks. But a focused 30-minute review can reveal the major issues. You will know if the books are reasonably clean or if serious problems lurk beneath the surface.
This audit framework is designed for bookkeepers and accountants who serve dental practices. It gives you a structured approach to quickly evaluate revenue cycle health and identify areas needing deeper attention.
Before You Start: What to Request
To conduct a meaningful 30-minute audit, you need specific data. Request these items in advance:
From the bank:
- Three months of bank statements (operating account)
From the practice management system:
- Three months of collection reports (by payment type)
- Three months of deposit reports
- Current AR aging report
- Current credit balance report
- Three months of adjustment reports
From the practice:
- Three months of credit card merchant statements
If you are evaluating a prospect, ask for this data as part of your discovery process. If they cannot provide it or resist sharing it, that is itself a finding.
Minutes 1-10: Bank to PMS Reconciliation
This is the most important check. If bank deposits do not match PMS collections, something is wrong.
The Quick Calculation
For each of the three months:
- Add up total deposits from bank statements (exclude transfers, loan proceeds, and obviously non-revenue items)
- Get total collections from PMS collection report
- Calculate the variance: Bank deposits minus PMS collections
What the Numbers Tell You
Variance under 2%: Reasonably clean. Timing differences and minor issues only.
Variance 2-5%: Moderate issues. Worth investigating but not alarming.
Variance over 5%: Significant problems. Either unposted payments, posting errors, or worse.
Red Flags to Note
- Variances that are consistently positive (bank higher than PMS) suggest unposted payments
- Variances that are consistently negative (PMS higher than bank) suggest posting without collection
- Variances that swing wildly month to month suggest chaotic processes
Time check: You should complete this analysis by minute 10.
Minutes 11-15: Credit Card Reconciliation
Credit cards are a common area for discrepancies.
The Quick Calculation
For each month:
- Get total credit card payments from PMS
- Get total credit card deposits from merchant statement (gross, before fees)
- Calculate the variance
What to Look For
Credit card totals should match closely. Small differences from timing (batch date vs deposit date) are normal.
Variance under 1%: Normal timing differences.
Variance over 3%: Processing problems or posting errors.
Red Flags to Note
- Consistent shortfalls may indicate credit card payments posted but not processed
- PMS showing significantly more than merchant deposits suggests ghost postings
- Refunds not matching between systems
Time check: Finish by minute 15.
Minutes 16-20: AR Aging Analysis
AR aging reveals collection effectiveness and potential write-off exposure.
The Quick Metrics
Calculate from the AR aging report:
- Total AR: How much is outstanding?
- AR as days of production: Total AR divided by (annual production/365). Should be under 30 days.
- Percentage over 90 days: Should be under 15%.
- Percentage over 120 days: This is likely uncollectible.
What the Numbers Tell You
AR under 25 days, under 10% over 90 days: Excellent collections.
AR 25-35 days, 10-15% over 90 days: Normal range.
AR over 40 days or over 20% past 90 days: Collection problems need attention.
Red Flags to Note
- AR growing faster than production suggests collection breakdown
- High insurance AR over 90 days means claims are not being worked
- High patient AR over 90 days means collection efforts are weak
Time check: Finish by minute 20.
Minutes 21-24: Credit Balance Review
Credit balances indicate either overpayments needing refunds or posting errors.
The Quick Metrics
From the credit balance report:
- Total credit balance amount
- Credit balance as percentage of monthly collections: Should be under 1%
- Number of accounts with credits over 90 days old
What the Numbers Tell You
Under 0.5% of monthly collections: Well-managed.
0.5-1.5%: Normal range but room for improvement.
Over 2%: Systematic problem with overpayments or posting accuracy.
Red Flags to Note
- Large individual credit balances (over $500) need immediate attention
- Many small, old credits suggest nobody is managing this
- Growing total month over month means the problem is getting worse
Time check: Finish by minute 24.
Minutes 25-27: Adjustment Analysis
Adjustments can hide problems or indicate appropriate revenue management.
The Quick Metrics
From adjustment reports:
- Total adjustments as percentage of production: Varies by payer mix, but typically 15-30%
- Month-over-month trend: Should be stable
- Breakdown by category: Look for unusual concentrations
What to Look For
Adjustments should be:
- Predominantly insurance contractual adjustments
- Consistent month to month
- Supported by reason codes
Red Flags to Note
- Adjustment percentage spiking without explanation
- Large amounts in vague categories like "other" or "miscellaneous"
- Round-number adjustments (suggests manual entries, not ERA-based)
- Write-offs increasing as percentage of production
Time check: Finish by minute 27.
Minutes 28-30: Summary and Scoring
Use the final minutes to synthesize findings into an overall assessment.
Quick Score Card
Rate each area on a 1-5 scale:
| Area | Score | Notes |
|---|---|---|
| Bank/PMS reconciliation | ___ | |
| Credit card reconciliation | ___ | |
| AR aging | ___ | |
| Credit balances | ___ | |
| Adjustments | ___ |
Scoring guide:
- 5: Excellent, no concerns
- 4: Good, minor issues only
- 3: Acceptable, some work needed
- 2: Concerning, significant issues
- 1: Problematic, major intervention needed
Overall Assessment
Total score 20-25: Clean operation. Standard engagement.
Total score 15-19: Some issues to address. Normal for a practice without strong accounting support.
Total score 10-14: Significant concerns. Build cleanup time into your engagement scope.
Total score under 10: Major problems. Consider whether you want this client. If yes, scope and price accordingly.
Documenting Your Findings
Even in 30 minutes, document what you found:
- Key metrics calculated
- Red flags identified
- Questions for follow-up
- Overall assessment
- Recommended next steps
This documentation serves as your baseline for engagement.
What This Audit Does Not Cover
A 30-minute audit identifies major issues but cannot catch everything:
What you will likely catch:
- Significant reconciliation gaps
- AR collection problems
- Credit balance accumulation
- Adjustment anomalies
What you might miss:
- Fraud schemes with good cover-up
- Individual transaction errors
- Compliance issues
- Process weaknesses not reflected in numbers
The quick audit is a screening tool, not a comprehensive examination. Findings that raise concern warrant deeper investigation.
Using This Audit for Client Conversations
For Prospects
Use findings to:
- Demonstrate your expertise
- Show value you can provide
- Scope your engagement appropriately
- Set expectations about cleanup work needed
A prospect whose quick audit reveals problems needs to understand that fixing them is part of your engagement, with commensurate pricing.
For Existing Clients
Use findings to:
- Track improvement over time
- Identify emerging issues early
- Justify recommendations for process changes
- Demonstrate ongoing value
Running this audit quarterly keeps you informed and helps the practice improve.
For Your Own Practice Development
Track audit results across your dental clients:
- Which issues are most common?
- Where do you add the most value?
- What patterns predict successful engagements?
This data helps you refine your service offering and target better clients.
Turning Findings Into Action
If Reconciliation Is Weak
Recommend:
- Daily reconciliation procedures
- Training for staff
- Automated reconciliation tools
- Monthly oversight by you or your team
If AR Is Aging
Recommend:
- Claims follow-up procedures
- Patient collection efforts
- Write-off policy for truly uncollectible accounts
- Staffing assessment for billing function
If Credit Balances Are High
Recommend:
- Immediate review and refund processing
- Posting accuracy improvements
- Monthly credit balance review process
If Adjustments Are Concerning
Recommend:
- Adjustment policy documentation
- Approval requirements for large adjustments
- Regular review of adjustment reports
- Possible deeper investigation if fraud indicators exist
Ready to audit your dental clients faster and more thoroughly? Zeldent gives bookkeepers instant visibility into reconciliation health across all your practices. See bank-to-PMS matching, unidentified deposits, and exception alerts from one dashboard. Schedule a demo to see how Zeldent makes client audits effortless.
