Prerequisites
- Separate bank accounts per entity
- An executed management services agreement (MSA) with the fee mechanics specified
- A bookkeeper or CPA with dental experience
Production, collections, and the ledger
Dentistry has its own revenue vocabulary, and the books have to map it rather than fight it:
The practice management system’s day sheet is not the ledger, but the two must reconcile: production posted, adjustments taken, and collections received should tie to the bank month by month.
Chart of accounts
Use one chart of accounts
Use the same chart of accounts and account numbering across each PC unless a documented local requirement calls for a difference. Then consolidation is a mechanical roll-up rather than a mapping exercise, per-office unit economics are comparable, a new entity’s books are a template copy, and investors can be given per-entity detail without translation. Inconsistent account definitions make consolidation and location comparisons harder and require a mapping layer to correct.PC chart, the dental-specific parts
Give lab fees and dental supplies their own accounts. Lab fees for crowns, dentures, and aligners are direct costs that change with the restorative mix. Acquirers often benchmark these lines first, and grouping them under “cost of goods” makes diligence harder.
DSO chart
Revenue: net, not gross
A common first-close error is treating gross production as revenue without accounting for contractual adjustments and expected collectability.
Your full fee schedule is not the same as expected collections. Participating PPO practices commonly write off 30–45% of gross production.1 Booking gross production as revenue overstates the business and distorts every metric built on it. Track write-offs by plan so you can see which fee schedules are reducing margin and decide whether to renegotiate or leave a network. See Underpayments and payer contracts.
Accrual vs. cash. Under accrual accounting, recognize revenue when the service is performed at the amount you expect to collect, with a receivable for the unpaid balance. Cash-basis accounting is simpler but does not show accounts receivable. Investors and lenders will often request accrual reporting. Ask your CPA to set the estimation method.
Track hygiene as a department
Split production and compensation between the hygiene department and the doctor department from day one. Use classes or departments in the ledger that mirror the PMS provider types. Hygiene may account for 25–35% of a general practice’s production.2 Its trend can show recall and schedule continuity, while doctor production reflects a different service mix. Separate the departments in the ledger so the group can produce the reporting described in Produce investor-grade reporting.Intercompany accounts
1
Create matched pairs
- PC: Management fee expense ↔ DSO: Management fee revenue
- PC: Intercompany loan payable ↔ DSO: Intercompany loan receivable
- PC: Intercompany interest expense ↔ DSO: Intercompany interest income
2
Book both sides in the same period, at identical amounts
3
Reconcile monthly
Intercompany balances must be equal and opposite. If the PC’s management fee payable and the DSO’s receivable diverge, one entity booked something the other didn’t, and that divergence compounds every month until someone reconciles it, usually during diligence.
4
Eliminate on consolidation
Management fee revenue and expense are the same dollars viewed twice. Consolidated revenue including both is double-counted, and it is one of the first things a quality-of-earnings review catches. Same for loans and accrued interest.
The three views
Produce all three monthly from the start. See How investors read DSO financials.
When per-entity QuickBooks breaks
QuickBooks per entity works to roughly three to five entities. Past that the friction shows up as:- Manual consolidation in a spreadsheet, every month
- No automated intercompany elimination
- No consolidated cash view
- Growing close time; adding a week per entity is not unusual
- Version-control problems on the consolidation workbook
Migrate before the close becomes unmanageable. A fundraise is a difficult time to change accounting systems.
Hiring the bookkeeper
Not a generalist. You want someone who has seen:- Net revenue recording with PPO write-offs as contra-revenue
- Production-to-collections reconciliation against the PMS day sheets
- AR aging and allowance estimation for dental
- 835-based cash reconciliation
- Intercompany accounting between related entities
- Multi-entity consolidation with eliminations
Verify it worked
- Identical chart of accounts across all PCs
- Revenue recorded net of PPO write-offs
- Write-offs tracked by plan in contra accounts
- Lab fees and dental supplies on their own lines
- Hygiene and doctor departments tracked separately
- Patient credit balances recorded as a liability
- Matched intercompany account pairs on both sides
- Intercompany balances reconciled monthly and equal-and-opposite
- Eliminations applied on consolidation
- Three views produced monthly
- Bookkeeper has dental and multi-entity experience
Common failure modes
Sources
- PPO write-off benchmarks: Veritas Dental Resources, the true cost of dental insurance participation (30–40% per ADA fee-survey commentary; 42–45% average per practice-analytics data); Dental Billing Assist, dental billing KPI benchmarks (net production should hold at 60–70%+ of gross).
- Dental Economics / Levin Group annual practice survey data: research report on hygiene; 2025 survey.