Why Your Dental CPA Keeps Asking About Unidentified Deposits
Every quarter, your accountant asks the same question: What are these deposits? And every quarter, you scramble to figure it out.
The Question That Keeps Coming Back
If you have worked with a dental CPA for any length of time, you have heard some version of this question:
"There are several deposits in your bank account that I cannot match to anything in your records. Can you tell me what these are?"
Maybe it is $4,300 from three weeks ago. Maybe it is a series of smaller amounts that add up to $12,000. Maybe it is a deposit that has been sitting unidentified for six months.
Your accountant is not asking to be difficult. They are asking because unidentified deposits create real problems for your financial reporting, your tax returns, and potentially your practice's financial health.
Understanding why this question matters helps you take it seriously and resolve these issues before they compound.
What Your CPA Sees That You Might Not
When your accountant reviews your books, they are trying to create an accurate picture of your practice's finances. Every dollar needs a category. Every deposit needs an explanation.
The Reconciliation Gap
Your accountant compares your bank statements to your practice management system reports. In a perfect world, these match exactly. In the real world, there are always differences.
Some differences are simple timing issues. A deposit made on the last day of the month might not clear until the next month. These are easy to explain.
Other differences are more concerning. A $5,200 deposit shows up in the bank, but there is nothing in the PMS that explains it. No insurance payment matches that amount. No patient payment was recorded. The money appeared, but nobody knows why.
Why This Matters for Financial Statements
Your financial statements need to accurately report revenue. If a deposit cannot be matched to a revenue source, your accountant has to make a choice:
Include it as revenue anyway. This might overstate your income if the deposit is actually a loan, a refund, or a transfer from another account.
Exclude it from revenue. This might understate your income if it really is patient or insurance revenue that was never properly recorded.
Flag it as unidentified. This creates a messy balance sheet item that raises questions from anyone reviewing your financials.
None of these options is good. The right answer is to identify the deposit, but that requires work your accountant cannot do without your help.
Tax Implications
Unidentified deposits can trigger tax problems.
If the IRS ever audits your practice, they will look at your bank deposits. Every deposit that is not clearly explained as non-taxable (loans, transfers, refunds) is presumed to be taxable income.
Unidentified deposits from years ago that you wrote off as "probably something innocent" can become taxable income in an audit. The burden is on you to prove they were not revenue.
Your CPA asks about these deposits partly to protect you from this risk.
Common Sources of Unidentified Deposits
Before you can resolve unidentified deposits, understand where they typically come from.
Insurance EFTs Without Posted Payments
This is the most common source. An insurance company sends an electronic payment directly to your bank. The money arrives, but nobody downloads the ERA or posts the payment to patient accounts.
The deposit sits in your bank, unmatched. Meanwhile, patient accounts show outstanding balances for claims that were actually paid.
Patient Payments Never Posted
A patient pays at checkout. The front desk is busy. They process the credit card but forget to post the payment in the PMS. Or they post it to the wrong patient. Or they post it to the wrong date.
The money reaches the bank, but there is no corresponding record in your system, at least not one that matches.
Deposits from Non-Revenue Sources
Not every deposit is revenue. Practices sometimes receive:
- Loan proceeds
- Owner capital contributions
- Refunds from vendors
- Transfers from other accounts
- Security deposit returns
If these are not clearly documented, they look like unidentified revenue to your accountant.
Timing and Batching Issues
Credit card deposits arrive one to three days after transactions occur. If your month-end falls between the transaction and the deposit, matching gets confusing.
Insurance companies sometimes combine multiple payments into single deposits. A $7,400 deposit might actually be three separate payments for different patients. Without the ERA breakdown, it looks like one unexplained amount.
Old Items That Were Never Resolved
The most frustrating unidentified deposits are the old ones. Someone flagged them months ago, intended to research them, and never did. Now the trail is cold. The people who might have known have forgotten or left.
These aged items are hardest to resolve and most likely to end up written off.
Why Your Accountant Cannot Just Figure It Out
Practice owners sometimes wonder why their CPA cannot just investigate and resolve these items. After all, they are the financial experts.
Limited Access
Your accountant does not have access to your practice management system. They do not know your patients. They cannot look up which insurance payments were expected or which patients paid that day.
They see bank statements and whatever reports you provide. The detailed investigation requires someone inside your practice.
It Is Not Their Job
CPAs prepare financial statements and tax returns. They advise on financial strategy. They do not manage your daily deposit reconciliation.
When they ask about unidentified deposits, they are flagging a problem for you to solve. They can wait for your answer, but they cannot do your homework.
Time Equals Money
Even if your accountant could investigate, their time is expensive. Do you want to pay $200 per hour for someone to call insurance companies and review patient ledgers?
Resolving unidentified deposits internally is more efficient and less costly.
How to Resolve Unidentified Deposits
When your CPA presents a list of unidentified deposits, here is how to work through them.
Start With the Largest Amounts
Prioritize by dollar amount. A $6,500 unidentified deposit matters more than a $47 one. Focus your investigation time on the items that have the most financial impact.
Check Insurance EFTs First
For any deposit that could be an insurance payment, check your ERA reports and clearinghouse portal. Look for payments that arrived around that date with matching or similar amounts.
Insurance EFTs are the most common source of unidentified deposits and usually the easiest to track down.
Review Credit Card Batches
If the deposit amount looks like it could be a credit card batch, check your merchant account records. Match the deposit date and amount to your batch history.
Credit card timing issues often explain deposits that appear on different days than expected.
Look for Non-Revenue Sources
Review your records for any non-revenue transactions around that date:
- Did you receive a loan or line of credit draw?
- Did you transfer money between accounts?
- Did a vendor issue a refund?
- Did you deposit a security deposit return?
These are easy to forget but common sources of confusion.
Check Adjacent Dates
Timing differences mean a deposit recorded on March 1 might relate to activity on February 28 or March 2. Look at a range of dates, not just the exact deposit date.
Document Everything
As you identify deposits, document your findings. Note what each deposit was, how you verified it, and any supporting documentation.
This documentation helps your accountant categorize the item correctly and protects you if questions arise later.
Accept Some Losses
Some old deposits will never be identified. The information is gone. The people who knew have moved on.
At some point, you have to make a decision: write off the unidentified amount and move on. Discuss with your accountant how to categorize these items appropriately.
Preventing Future Unidentified Deposits
The best approach is preventing unidentified deposits from accumulating in the first place.
Reconcile Weekly, Not Quarterly
If you only look at deposits when your accountant asks, problems have months to accumulate. Weekly reconciliation catches issues while they are fresh and resolvable.
Match Insurance EFTs Daily
Every insurance EFT that arrives should be matched to an ERA within 24 to 48 hours. Make this someone's specific responsibility.
When EFTs are matched promptly, they never become unidentified deposits.
Post Payments Immediately
Patient payments should be posted in the PMS the same day they are collected. No exceptions. No backlog.
Same-day posting ensures that deposits can always be traced to specific transactions.
Document Non-Revenue Deposits
When you receive money that is not patient or insurance revenue, document it immediately. Note the source, purpose, and date in a log that your accountant can reference.
This prevents confusion later when the deposit appears on your bank statement.
Create a Pending Identification Process
Despite best efforts, some deposits will initially be unidentified. Create a process for tracking and resolving them:
- Flag unidentified deposits within one week of receipt
- Assign someone to investigate each one
- Set a deadline for resolution (no more than 30 days)
- Escalate items that cannot be resolved
A formal process prevents unidentified deposits from aging into permanent mysteries.
What to Tell Your Accountant
When your CPA asks about unidentified deposits, respond with:
Identified Items
For each deposit you have researched, provide:
- The deposit date and amount
- What it was (insurance payment, patient payment, loan, etc.)
- How you verified this
- Any supporting documentation
Items Still Under Investigation
For deposits you have not yet identified:
- Acknowledge them
- Explain what you have checked so far
- Provide a timeline for resolution
Items You Cannot Identify
For deposits that cannot be identified:
- Explain why (too old, no records, staff turnover)
- Discuss with your accountant how to categorize them
- Accept their guidance on tax treatment
Being responsive and organized makes your accountant's job easier and keeps your fees lower.
The Cost of Ignoring the Question
Practice owners who brush off their CPA's questions about unidentified deposits face real consequences.
Higher accounting fees. Your accountant spends more time working around incomplete information.
Inaccurate financials. Your profit and loss statement may not reflect reality.
Tax risk. Unidentified deposits can become taxable income in an audit.
Operational blindness. If you do not know where your money comes from, you cannot manage your revenue effectively.
Sale complications. Buyers doing due diligence will find unidentified deposits. They will discount your valuation or walk away.
The few hours spent resolving unidentified deposits pays dividends in cleaner books, lower risk, and better financial management.
Tired of scrambling every time your CPA asks about unidentified deposits? Zeldent automatically matches your bank deposits to your PMS records daily, so every dollar is accounted for before your accountant ever asks. Schedule a demo to see stress-free reconciliation.
