Bookkeeping for Dentists: 7 Best Practices and Tips

Oct 14

Dentist with patient considering bookkeeping for dentists

You became a dentist to fix teeth, not to reconcile bank statements. Still, the reality of owning a dental practice is that you’re not just a dentist anymore: you’re a business owner.

Being a business owner means dealing with insurance reimbursements, equipment purchases, team payroll, and a million other financial details you never covered in dental school. You spent years mastering root canals and crowns, not cash flow management.

The good news is that you don’t need to become a bookkeeping expert to run a profitable dental practice. Instead, you need to implement a few key tips and tricks. This post covers seven best practices to help you maintain financial clarity without sacrificing your focus on patient care.

Why Bookkeeping for Dentists Requires a Specialized Approach

Running a dental practice is unlike a typical small business. You’re dealing with insurance companies, longstanding treatment plans, and a constant juggle between what you’ve billed and what has actually hit your bank account.

Most generic bookkeeping advice doesn’t cut it for dental offices. I see the same costly mistakes over and over again when dentists try to go the generic small business bookkeeping route:

Losing track of insurance payments: When you're not reconciling claims regularly, money slips through the cracks, and you have no idea what you're actually owed.
Cash flow chaos despite being "profitable": Your schedule is packed and revenue looks great on paper, but somehow there's never enough in the bank when bills are due.
Missing out on dental-specific tax deductions: From CE courses to that new dental chair, there are deductions you should be taking advantage of that classic bookkeeping and tax advice won’t cover.

With the right practices and habits you can avoid falling into these traps and more, setting yourself up for a profitable future with your practice.

7 Best Practices for Bookkeeping for Dentists

1. Separate Your Personal and Business Finances Completely

When you're first starting out, using one account for everything can feel simpler. But it's a trap that'll bite you later.

Mixing personal and business finances makes your tax prep a total nightmare. Your CPA (or whoever's doing your taxes) has to spend extra time sorting through transactions one by one, which means higher fees for you.

Plus, if your practice ever faces legal issues, having mixed finances can pierce your corporate veil and put your personal assets at risk, which is not ideal.

What you’ll want to do is set up dedicated business checking and credit card accounts. Use them exclusively for practice expenses. When you need to pay yourself, do it properly through a formal owner's draw or payroll process, not random transfers whenever you feel like it.

If you ever want to sell your practice or get a business loan, lenders and buyers want to see clean, separated finances. Mixed accounts are a red flag that screams "unprofessional" and can tank your practice valuation or loan application.

2. Implement the Right Accounting Software

You wouldn't use a scalpel for a root canal. If you’re using the wrong accounting software, your finances are going to end up just as botched.

I'm a big believer in QuickBooks Online; it's what I use with all my dental clients. The key is setting your system up specifically for your dental practice.

Your chart of accounts should reflect dental-specific categories, such as lab fees, dental supplies, and hygienist wages (which are considered production costs, not overhead).

You’ll also want to integrate your tools. When your accounting software talks to your practice management system, patient billing and insurance tracking happen automatically so you can cut manual data entry out of your workflow processes.

3. Master Your Cash Flow Management

Dental practices are tricky, because you can be completely booked, provide amazing care, and still have trouble paying your building lease some months. Why? Because there's often a massive gap between when you do the work and when you actually get paid.

You perform a crown prep on Monday, submit the insurance claim on Tuesday, and then... you wait.

Sometimes weeks. Sometimes months.

Meanwhile, your staff needs paychecks, your landlord wants rent, and your supply orders keep coming. If you want to master cash flow management for your dental practice, you need to review your accounts receivable aging report every week. Look at what is outstanding and follow up aggressively.

Consider offering payment plans or small discounts for upfront payment to accelerate collections. You may also want to build a cash reserve covering at least three months of expenses. That buffer will help you sleep at night when insurance companies are dragging their feet.

4. Track Revenue and Expenses

Dental practices have some unique financial considerations you need to consider when setting up your chart of accounts.

Your chart of accounts should separate production costs (dentist and hygienist salaries, lab fees, dental supplies) from overhead (front desk staff, rent, marketing). This distinction matters because it tells you your profitability per procedure. You might think those veneers are a moneymaker until you properly account for lab fees and realize you're barely breaking even.

Next, be sure to track your income by service type and payer. How much came from cleanings versus restorative work? How much from insurance versus cash pay? This data helps you make smart decisions about what services to promote and whether being in-network is actually worth it.

On the expense side, categorize everything. When you can see exactly where every dollar goes, you can spot problems more easily. Perhaps your supply costs are increasing, or your overhead percentage is significantly above the industry benchmark of 60-65%. If you’re not tracking your expenses, you’ll never know.

5. Reconcile Everything Monthly (At Minimum)

Reconciliation is about identifying and resolving problems before they become disasters. This process is where you’ll make sure your books match reality when it comes to bank statements, insurance claims, and patient accounts.

You're looking for transactions that appear in your bank account but aren't reflected in QuickBooks, or vice versa. These discrepancies might be innocent (a forgotten transaction) or they might be signs of fraud or billing errors. Either way, the earlier you catch it, the better.

Insurance claim reconciliation is huge for dental practices. You submitted a claim for $800, the EOB says the insurance paid $600, but your bank shows $550. What happened to the other $50? These gaps add up fast if you're not tracking them.

Don't forget patient receivables. Verify that what patients actually owe matches what's in your system. I've seen practices write off thousands because their records were such a mess that they didn’t feel confident trying to collect.

6. Understand Tax Deductions Specific to Dental Practices

Our next best practice is all about tax deductions. Stop leaving money on the table by missing the generous tax deductions the IRS offers for dental practices like yours.

Section 179: This deduction lets you deduct the full cost of qualifying equipment in the year you buy it. You don't have to depreciate it over several years. One year, full deduction.
Continuing education: Conferences, CE courses, and even the travel costs to get there are all tax-deductible. The same goes for professional development, journals, and association memberships.
Miscellaneous deductions: Dental supplies, office materials, and lab fees are all deductible. The same goes for your malpractice insurance premiums, business liability coverage, health insurance for employees, and marketing costs.

Working with a CPA who actually understands dental practices makes a huge difference. They know what deductions apply to your situation and can help you plan purchases to help you maximize your tax benefits.

7. Establish Strong Internal Controls and Review Processes

Even if you have the most trustworthy staff in the world, you need internal controls, checks, and balances.

First and foremost, segregate duties for anything involving money. The person who makes bank deposits shouldn't be the same person reconciling accounts. The person processing insurance payments shouldn't be the one sending out patient bills. Splitting up these duties gives every financial touchpoint a second set of eyes, reducing the likelihood of mistakes (or fraud).

Even if you outsource your bookkeeping (which honestly, you probably should), you still need to review your financial statements regularly. At a minimum, look at your profit and loss and balance sheet every month. Are any numbers way off from last month? Is your overhead creeping up? Are you actually profitable or just busy?

Regular reviews turn your bookkeeping from a chore into a quick process that helps you identify opportunities for your business. Take advantage!

Essential Metrics: What Bookkeeping for Dentists Should Reveal

Good bookkeeping is great for keeping the IRS happy, but it also shows you exactly how your practice is performing. Here are the key metrics you should be tracking:

Production vs. collection ratios: This ratio shows you how efficient your billing and collections processes are. Aim for at least 95% collection of what you produce.
Overhead percentage: This is your total expenses divided by total revenue. For dental practices, you want this around 60-65%.
Revenue per patient: Track the average revenue generated per patient visit to see whether your pricing makes sense and track whether patients are actually accepting your recommended treatment plans.
New patient acquisition cost: How much are you spending on marketing, divided by how many new patients you're getting? This number helps you stay profitable and identify which of your marketing efforts are working.

Once you've got these metrics dialed in, you can make smart decisions instead of just guessing. You’ll need this data to decide everything from when to buy that new 3D imaging system to whether or not you need to market your implant services more aggressively. Data takes the emotion out of decisions and lets you run your practice like the business it is.

When to DIY vs. Outsource Your Dental Bookkeeping

Unsure of whether or not it’s time to outsource your dental bookkeeping? Let’s take a look at some key indicators.

First, if you're spending more than 10 hours a week on bookkeeping, you're doing it wrong. That's 10 hours you could be seeing patients and actually making money. The other red flag is when you feel like you’re flying blind. If you aren’t sure exactly how profitable your practice is or worse, you’re making mistakes and missing estimated tax payments, it’s time to get help.

What kind of bookkeeping help should you bring in?

Some practices train an office manager to handle day-to-day bookkeeping. Others outsource to bookkeeping services (like, ahem, what I offer) or full-service tax and accounting firms. The right choice depends on your practice size and your books.

Here's how I think about it: what's your clinical time worth? If you're billing $300-500 an hour chairside, spending your evenings reconciling accounts is expensive. Outsourcing bookkeeping might cost you $500-1,500 a month, but it frees up hours of your time and gives you actual financial clarity. Most dentists I speak with consider that a worthwhile investment.

Streamline Your Bookkeeping for Dentists with the Right Partnership

Solid bookkeeping is the foundation for any profitable dental practice. When you know your numbers, you make better decisions. Better yet, when your financial house is in order, you’ll sleep better at night.

That's exactly why I started Primary Care Financial. I got tired of seeing health and wellness businesses drowning in QuickBooks when they should be growing their practices or home with their families. You didn't go to dental school to become an accountant, and you shouldn't have to be one.

I specialize in taking bookkeeping stress off the plates of dental practice owners in Metro Detroit and beyond. We're talking monthly bookkeeping that's actually done right, financial clarity you can understand without a finance degree, and on-demand access to a CPA who gets the unique challenges of running a dental practice.

You focus on your patients. I'll handle the numbers.

Ready to stop stressing about your books? Book a free discovery call and let's talk about your practice's biggest bookkeeping challenges.

Steve Koch