Bookkeeping for Dentists: A Practical Setup Guide

Start with a separate practice account

Run all practice income and expenses through dedicated bank accounts and a business card. Never pay personal bills from them.

A clean line between the practice and your household makes every later step easier. Open a checking account for the practice, plus a separate account for payroll taxes if you like to set money aside. Pay yourself by a regular transfer.

Why it matters: mixed accounts make it nearly impossible to know what the practice truly earns. See separating business and personal finances.

Build a chart of accounts that fits a dental office

Group income by service type and expenses by category so reports show where money comes from and where it goes.

A simple chart of accounts for a practice might include:

• Income: hygiene, restorative, cosmetic, orthodontic, other
• Cost of services: dental supplies, lab fees
• Payroll: clinical staff, front office, payroll taxes, benefits
• Overhead: rent, utilities, software, marketing, insurance
• Equipment: purchases, repairs, loan interest

Keep it short. Too many categories make monthly reports unreadable. For more, see general ledger accounts.

Handle insurance payments correctly

Record insurance deposits against the patient charges they pay, and keep contractual write-offs separate from true bad debt.

Insurance creates the biggest bookkeeping trap in a practice. The patient is billed a fee, the insurer pays a smaller contracted amount, and the difference is an adjustment, not income you lost to collections.

1. Post each insurance deposit to the practice software and match it to claims.
2. Record contractual adjustments separately.
3. Track patient balances after insurance.
4. Reconcile the software's collections total to the bank deposits each month.

If the totals do not match, find out why before closing the month.

A monthly routine that takes hours, not days

Reconcile bank accounts, categorize transactions, review receivables and run a profit and loss report each month.

Our bookkeeping tips and bank reconciliation guide walk through each step.

Assign one person to own the monthly close and one to review it. In a small office the owner dentist often reviews, which is fine as long as someone other than the person who posts payments checks the deposits against the bank. Small controls like this prevent most billing and cash handling errors.

Payroll, taxes and record retention

Payroll must be run on schedule with taxes deposited on time. Keep records for the period the IRS and your state require.

Dental offices usually employ hygienists, assistants and front desk staff, so payroll is the largest expense. Use a payroll service or software that files and deposits taxes. Late deposits bring penalties.

Patient records and financial records have different retention rules. Ask your CPA and review state dental board requirements. For general business records, see how long to keep business records.

Good books make funding easier

When you apply for equipment or working capital, accurate statements speed up review and show a funder what the practice earns.

A funder wants bank statements and a clear picture of revenue. If your records are current, you can show what a new chair or scanner would add. Illustrative example: a $45,000 purchase that brings in $4,000 more each month has a payback of roughly 11 months before financing costs.

ROI Funder places equipment financing and working capital for practices with 6+ months in business, $20,000+ monthly revenue and 500+ FICO. Learn about dentist accounting too.