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Practice Management

Dental Practice Accounting: Collections, Production, Associate Pay and Multi-Location Reporting

Sherman Hsieh
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Dental Practice Accounting: Collections, Production, Associate Pay and Multi-Location Reporting

Last updated: October 8, 2026 · Independent guide · We do not sell rankings or coverage.

Dental practice accounting starts with one distinction: production is what your providers billed at full fee, and collections are the cash that actually arrives. Insurance write-offs, patient adjustments and unpaid balances sit between the two, and they decide your revenue, your associate pay and your location P&L. Your practice management (PM) system holds the procedure, claim and patient detail, while the general ledger should hold monthly summaries of those figures plus every cost the PM system never sees. Below are the entries, a worked example and how dental support organizations (DSOs) consolidate.

The rule and the journal entries

On the accrual basis, you record gross production as receivables and revenue, then reduce it by contractual write-offs and expected uncollectible amounts to reach net revenue. Collections reduce receivables. On the cash basis, which many dental corporations use for tax, revenue equals collections and production stays in the PM system as a statistic.

Account Debit Credit Note
Patient accounts receivable / Gross patient service revenue AR Revenue Gross production from the PM system
Contractual adjustments (contra-revenue) / AR Contractual adjustments AR PPO write-offs to the contracted fee
Implicit price concessions (contra-revenue) / Allowance for uncollectible AR Implicit price concessions Allowance Expected unpaid patient balances
Cash / AR Cash AR Payments, matched to bank deposits
Associate compensation / Accrued compensation Associate compensation Accrued compensation Per the contract base
Lab fees / Accounts payable Lab fees AP Tagged to location and provider
Dental supplies / Accounts payable Dental supplies AP Clinical consumables only

Worked example: one location, one month

The figures below are an illustration, not data from a real practice. A single-location practice runs its month-end PM reports.

  1. Gross production: $200,000, of which the associate dentist produced $60,000.
  2. Insurance write-offs: $44,000 ($14,000 on the associate’s patients). Net production is $156,000 for the practice and $46,000 for the associate.
  3. Collections: $148,000, with $43,000 allocated to the associate’s procedures. The collection ratio is $148,000 ÷ $156,000, or 94.9%, and receivables rose by $8,000.
  4. Uncollectible estimate: history suggests $1,500 of this month’s patient portion will not be paid.
  5. Associate pay: 30% of collections on the associate’s procedures, less 50% of the $3,000 lab fees on those cases: $12,900 less $1,500, or $11,400. On 30% of net (adjusted) production, pay would be $13,800 less $1,500, or $12,300.
  6. Costs: lab invoices of $9,000 and supply invoices of $10,000.
Account Debit Credit Note
Patient AR / Gross patient service revenue $200,000 $200,000 Gross production
Contractual adjustments / Patient AR $44,000 $44,000 PPO write-offs
Implicit price concessions / Allowance $1,500 $1,500 Expected unpaid patient balances
Cash / Patient AR $148,000 $148,000 Collections, tied to bank deposits
Associate compensation / Accrued compensation $11,400 $11,400 Paid next payroll; employer taxes extra if W-2
Lab fees / AP $9,000 $9,000 Includes $3,000 on associate cases
Dental supplies / AP $10,000 $10,000 Clinical consumables

Accrual net patient service revenue is $154,500 ($200,000 less $44,000 less $1,500). On the cash basis, revenue is the $148,000 collected, and lab and supply costs are recorded when paid, so state which basis your location reports use.

The $900 gap between the two associate pay versions comes from timing: $3,000 of the associate’s net production is not yet collected. If the contract does not name the PM report and write-off date setting that define its base, expect disputes at every pay run.

Where practice-management data ends and the general ledger begins

The PM system is the subledger for patient revenue: every procedure, claim, payer, provider and patient balance. The general ledger holds payroll, rent, lab, supplies and debt, which the PM system never sees. You connect them with summarized entries, which also keeps patient-level health information out of your finance system.

Item Lives in the PM system Posts to the general ledger
Procedures and fees Every procedure by code, provider and patient Monthly gross production by location and provider (accrual) or not at all (cash)
Write-offs and adjustments Claim-level write-offs, courtesy and other adjustment types Monthly totals by adjustment category
Payments Each insurance and patient payment Daily deposits matched to the bank statement
Receivables Aging by patient and payer One control balance, reconciled to the PM aging total each month

Two PM settings change the numbers you post. The first is when write-offs count. Open Dental lets you date PPO write-offs by insurance payment date, procedure date, or initial claim date for estimates with insurance payment date for adjustments, under Report Setup: Misc Settings, and notes that the procedure-date option shows estimates that require re-running historical reports if the final amount differs (Open Dental Manual, no date shown). Pick one setting, lock prior periods, and use it for both the ledger and associate pay.

The second is when multi-visit procedures such as crowns post: at preparation or at delivery. Whichever you choose, record the lab fee in the same month so a case that straddles month-end does not distort location margins.

The standards and tax rules behind it

Under US GAAP, revenue falls under ASC 606. PwC’s health care guide records contractual discounts as explicit price concessions (contra-revenue), and amounts a provider expects not to collect, when it does not assess a patient’s ability to pay before treatment, as implicit price concessions that also reduce revenue. Bad debt expense applies when the provider has accepted the patient’s credit risk, or when specific information shows the patient’s financial condition has deteriorated (PwC Viewpoint, no date shown).

For tax, C corporations generally cannot use the cash method (IRS Publication 538, revised January 2022), but the limit does not apply to a qualified personal service corporation, and Treasury regulations define the field of health to include “physicians, nurses, dentists, and other similar healthcare professionals” (eCFR 26 CFR 1.448-1T, up to date as of October 6, 2026). This is why many owner-dentists file on the cash basis while lenders and buyers ask for accrual statements.

For associates, the IRS looks at the entire relationship and the right to direct and control the worker (IRS, last reviewed May 19, 2026). A W-2 associate adds employer payroll taxes to the accrual; a 1099 associate does not, but the label must match the facts.

Multi-location groups and DSO consolidation

A group with several offices in one legal entity can report each office as a location or class in one ledger. A DSO is different, because state corporate practice of dentistry rules usually keep clinical ownership in dentist-owned professional corporations (PCs). Birner Dental Management Services, a former public DSO, described Colorado and New Mexico law barring non-dental entities from practicing dentistry, and a management fee equal to each PC’s adjusted gross center revenue less compensation paid to the dentists, dental hygienists and dental assistants at its office. Birner consolidated the PCs and eliminated its loans to them (Birner Dental Management Services, Form 10-K for fiscal 2017).

Whether a management company consolidates a PC it does not own is a variable interest entity (VIE) question under ASC 810. Deloitte’s guidance on professional practice structures says a reporting entity that absorbs essentially all of a VIE’s variability would be expected to consolidate it (Deloitte DART, no date shown), and KPMG describes the two-part primary beneficiary test for MSO and PC structures (KPMG, 2025, no specific date shown). Your auditor makes the call; your system must support the answer.

Once consolidated, the management fee is intercompany. In an illustrative month where one PC pays the MSO a $90,000 fee, the elimination entry is:

Account Debit Credit Note
Management fee revenue (MSO) $90,000 Removes the MSO’s intercompany revenue
Management fee expense (PC) $90,000 Removes the PC’s matching expense
Due to MSO (PC) / Due from PC (MSO) Unpaid balance Unpaid balance Eliminates any intercompany balance at month-end

Consolidated revenue is then the PCs’ patient revenue. If the two sides of the fee do not agree, investigate the difference before the package goes out.

Common mistakes

  • Booking gross production without the write-offs. Revenue is overstated by the full PPO discount.
  • Posting deposits as one lump sum. Without location and provider tags, the ledger cannot support location P&Ls or associate pay checks.
  • Changing the write-off date setting mid-year. Prior pay bases shift and cannot be reproduced.
  • Leaving the AR control account unreconciled. On the accrual basis, ledger AR should tie to the PM aging total each month.
  • Mixing lab fees and supplies. Lab is case-specific and often shared with associates; supplies are not.

How to report it

A useful monthly package shows, per location and provider, gross production, write-offs, net production, collections, collection ratio and AR change from the PM system, then net revenue, compensation, lab, supplies and occupancy from the ledger, with a line reconciling PM collections to deposits. A DSO adds consolidated statements, each PC’s fee calculation and the elimination schedule. Our guide to AR and AP dashboards covers the receivables views that support this.

How accounting systems automate it

Open Dental with QuickBooks Online. Open Dental, which sells PM software, offers a one-way QuickBooks Online integration that sends deposits mapped to bank and income accounts, with optional classes (Open Dental Manual, no date shown). You still post write-offs and accruals yourself.

QuickBooks Online. Intuit lists class and location tracking on Plus ($140 per month, limit of 40) and unlimited classes and locations on Advanced ($340 per month) (Intuit, no date shown). That suits one entity with several offices; see our article on accounting software for multi-location businesses.

Sage Intacct. For DSOs with several PCs, Intacct posts due-to and due-from entries automatically when a transaction spans entities (Sage Intacct help, last modified October 1, 2026). Sage does not publish prices.

Microsoft Dynamics 365 Business Central. Microsoft states that “processing consolidation eliminations is a manual process,” so the fee elimination is a journal you enter (Microsoft Learn, April 7, 2026). See also ERP for multi-entity accounting.

How we researched this

We read the top-ranking pages for dental practice accounting, including guides from Sage and Oracle NetSuite (both sell accounting software) and a Dental Economics article by two CPAs. None gave journal entries, showed how write-off timing changes associate pay, or explained DSO consolidation. We checked PM documentation, IRS and eCFR text, and PwC, Deloitte and KPMG guidance in October 2026.

Related guides

Frequently asked questions

What is the difference between production and collections in a dental practice?

Production is completed procedures at your full fee schedule, per the PM system. Collections are payments actually received. The gap is write-offs, other adjustments and balances still in receivables.

Are insurance write-offs an expense?

No. Under ASC 606, PPO and other contractual write-offs are explicit price concessions recorded as a reduction of revenue. Bad debt expense generally applies only when the provider has accepted the patient’s credit risk or has specific information that the patient’s financial condition has deteriorated.

Should associate dentists be paid on production or collections?

Either works; Birner Dental’s 10-K describes associates paid the greater of a guarantee or a percentage of production. Collections-based pay shifts collection risk to the associate. Either way, the contract should name the PM report, the write-off date setting and the lab fee share.

Can a dental practice use cash-basis accounting?

Many can. Treasury regulations treat dentistry as a health field for the qualified personal service corporation rules, which exempt those corporations from the bar on C corporations using the cash method. Lenders and buyers often still want accrual statements.

Why does a DSO consolidate practices it does not own?

Under ASC 810, a management company that directs the activities most affecting a dentist-owned PC’s results and absorbs its losses or returns is the primary beneficiary. It consolidates the PC and eliminates the intercompany fee.

Sources

Sherman Hsieh

CEO & Editor-in-Chief, Business-Software.com
Independent analysis of enterprise software — ERP, CRM and more
Sherman Hsieh is the founder, CEO, and editor-in-chief of Business-Software.com. He leads the site's independent, buyer-focused coverage of ERP, CRM, and other business systems, including vendor-neutral comparisons, pricing analysis, and implementation guidance. Before founding Business-Software.com, Sherman was an executive at Siebel ...

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