What Dental Accountants Wish Practice Owners Knew About Reconciliation
Your CPA sees your books once a quarter or once a year. What they find often surprises them, and not in a good way.
The View From Your Accountant's Desk
Dental accountants have a unique perspective on practice finances. They see dozens, sometimes hundreds, of practices every year. They know what clean books look like. They also know what chaos looks like.
And here is what most will tell you privately: the majority of dental practices they work with have reconciliation problems. Not fraud. Not incompetence. Just gaps, inconsistencies, and unresolved items that make accurate financial reporting harder than it needs to be.
These problems cost practice owners in multiple ways. They cost time during tax preparation. They cost money in accounting fees for cleanup work. And they cost opportunity when unclear financials obscure the true health of the practice.
The good news is that most reconciliation issues are preventable. Here is what your dental accountant wishes you understood about keeping clean books.
Unidentified Deposits Are a Bigger Problem Than You Think
Every dental accountant has seen it: a bank account full of deposits that nobody can explain. Insurance EFTs that were never matched to ERAs. Patient payments that were received but never posted. Mystery amounts that have been sitting unresolved for months.
Why This Matters to Your CPA
When your accountant prepares your financials or tax return, they need to categorize every dollar. Income needs to be properly classified. Deposits need to match to revenue in your practice management system.
Unidentified deposits create problems at multiple levels:
Tax reporting accuracy. If deposits cannot be matched to specific revenue sources, your income reporting may be inaccurate. You could be overpaying or underpaying taxes.
Financial statement reliability. Investors, lenders, and potential buyers look at your financials. Unexplained items raise questions about the accuracy of everything else.
Audit risk. Unidentified deposits are exactly what auditors look for. They suggest weak internal controls.
What You Can Do
Resolve unidentified deposits weekly, not quarterly. Every deposit should trace back to a specific source within days of arriving. If you cannot identify a deposit within two weeks, escalate it to your office manager or accountant immediately.
Your PMS Reports and Bank Statements Should Match
Practice owners often assume their practice management system is the source of truth. They run reports, see revenue numbers, and believe those numbers.
Your accountant sees it differently. They reconcile your PMS reports to your actual bank deposits. And those numbers frequently do not match.
Common Causes of Mismatches
Timing differences. Payments posted in December might not deposit until January. This creates year-end discrepancies that require adjustments.
Posting errors. Payments entered incorrectly, applied to wrong patients, or posted to wrong dates throw off the reconciliation.
Unposted payments. Money received but never recorded in the PMS shows up in the bank but not in your reports.
Adjustments without documentation. Write-offs, discounts, and adjustments made without clear records make it impossible to reconcile cleanly.
What Your Accountant Wishes You Would Do
Perform monthly bank reconciliation yourself, or have your bookkeeper do it. Compare your PMS payment totals to your bank deposits for the month. Investigate and resolve differences before they age.
When your accountant receives already-reconciled books, they can focus on tax strategy and financial analysis instead of detective work. You pay for higher-value services instead of cleanup.
Credit Balances Require Attention
Patient credit balances accumulate in every practice. Some are legitimate overpayments awaiting refunds. Others are posting errors. Many are simply unresolved and forgotten.
The Problem With Ignored Credit Balances
Credit balances represent money you may owe to patients. From an accounting perspective, they are liabilities on your balance sheet.
When credit balances grow without explanation:
Your liabilities are overstated. Your balance sheet shows obligations that may not be real, distorting your financial picture.
Refund compliance becomes an issue. Many states have escheatment laws requiring you to turn over unclaimed funds after a certain period.
It signals control problems. Accumulated credit balances suggest that payment posting and reconciliation are not being managed carefully.
What Accountants Recommend
Review your credit balance report monthly. For each balance, determine: Is this a real overpayment that needs refunding? Is this a posting error that needs correcting? Has this been sitting unresolved for more than 90 days?
Set a policy that no credit balance sits unresolved for more than 60 days. Either refund it, apply it, or correct the underlying error.
Adjustments Need Documentation
Every dental practice makes adjustments. Insurance contractual adjustments. Professional courtesy discounts. Write-offs for uncollectible balances. These are normal parts of running a practice.
What concerns accountants is when adjustments lack documentation or follow no consistent pattern.
Red Flags Accountants Watch For
Adjustment totals that spike unexpectedly. A sudden increase in write-offs or discounts suggests either a policy change or a problem.
Adjustments without reason codes. When adjustments are not categorized by type, it becomes impossible to analyze patterns or verify appropriateness.
Round-number adjustments. Legitimate insurance adjustments are usually odd amounts. Round numbers like $100 or $500 adjustments often warrant scrutiny.
Adjustments that consistently zero out balances. When every patient balance gets adjusted to zero, something is wrong with either pricing, posting, or collection.
Best Practices for Adjustments
Create clear adjustment categories in your PMS. Every adjustment should have a reason code that explains why it was made.
Require manager approval for adjustments above a threshold amount. This creates accountability and a paper trail.
Review your adjustment report monthly. Look for trends, outliers, and patterns that need investigation.
Year-End Is Not the Time to Reconcile
Many practice owners operate all year without reconciling, then expect their accountant to sort everything out at tax time. This approach creates multiple problems.
Why Last-Minute Reconciliation Fails
Information is stale. Trying to figure out what a deposit was for in January when it is now December is nearly impossible. Memories fade. Staff turns over. Records get buried.
It costs more. Accountants bill for their time. Cleanup work takes longer and costs more than reviewing already-clean books.
Errors persist. Problems that could have been caught and fixed in January compound all year. A posting error in February might have affected every month that followed.
Tax strategy suffers. When your accountant spends all their time on cleanup, they have no time for tax planning. You miss deductions and opportunities.
A Better Approach
Reconcile monthly. It takes an hour or two when done consistently. Compare your bank statement to your PMS reports. Identify and resolve discrepancies.
Send your accountant quarterly reports. Even if you do not have a formal meeting, keeping your accountant informed helps them help you.
Start year-end preparation in November, not January. Give your accountant clean books before the tax season rush.
Insurance Payment Tracking Matters More Than You Think
Insurance payments are complex. They arrive as lump sums covering multiple patients and dates of service. They include contractual adjustments. They sometimes include take-backs or recoupments.
Many practices post insurance payments without fully reconciling them. The money came in, it got posted, done. But that is not enough.
What Your Accountant Needs to See
ERA to deposit matching. Every insurance deposit should trace back to an ERA that explains exactly what the payment covers.
Proper adjustment recording. Insurance contractual adjustments need to be recorded accurately, not estimated or rounded.
Take-back documentation. When insurance companies recoup previous payments, there needs to be a clear record of what was recouped and why.
The Revenue Recognition Issue
If you post insurance payments without proper matching, your revenue recognition may be incorrect. You might be recording revenue before it is actually earned, or after. This matters for financial accuracy and tax timing.
Your accountant needs to understand your revenue cycle to report it correctly. Clean insurance reconciliation makes this possible.
Your Bookkeeper Is Not Enough
Many practices rely on a bookkeeper to manage their finances. A good bookkeeper is valuable. But bookkeeping is not the same as dental-specific financial management.
What Bookkeepers Often Miss
PMS to accounting software reconciliation. Bookkeepers work in QuickBooks or similar software. They may not understand how to reconcile to your dental PMS.
Dental revenue cycle nuances. Insurance payment timing, production versus collections, and adjustment categories are dental-specific concepts.
Internal control gaps. Bookkeepers record transactions. They do not necessarily evaluate whether the underlying processes are sound.
The Role of a Dental-Specific CPA
Dental accountants understand the industry. They know what to look for. They can evaluate whether your revenue cycle is functioning properly, not just record the results.
If you use a general bookkeeper, consider having a dental CPA review your books quarterly. The fresh perspective catches issues before they compound.
Clean Books Signal a Well-Run Practice
Beyond the practical benefits of accurate financial reporting, clean books send a message. They tell your accountant, your banker, and any potential buyer that you run a well-managed practice.
Practices with clean financials:
Get better loan terms. Lenders trust borrowers who demonstrate financial discipline.
Command higher valuations. Buyers pay premiums for practices with clean, verifiable books.
Spend less on professional fees. Clean books require less accountant time to review and report.
Make better decisions. When you trust your numbers, you can use them to guide strategy.
What You Can Start Today
You do not need to overhaul everything at once. Start with these high-impact changes:
Reconcile your bank account monthly. This single habit catches most problems early.
Resolve unidentified deposits weekly. Do not let mystery amounts accumulate.
Review credit balances monthly. Refund, apply, or correct every one within 60 days.
Document all adjustments. Every write-off and discount should have a clear reason.
Communicate with your accountant regularly. Do not wait until tax time to share information.
Ready to give your accountant the clean books they wish every practice had? Zeldent automatically reconciles your bank deposits to your PMS daily, catching discrepancies before they become year-end problems. Schedule a demo to see how automated reconciliation supports better financial management.
