How to Set Up a Chart of Accounts for a Dental Practice

Build a dental chart of accounts around how the practice actually gets paid: insurance collections and patient collections in separate income lines, with lab fees, dental supplies and each role's pay in their own cost lines. Keep the books on what you collected, and show production and PPO write-offs next to collections instead of mixing them into revenue. Equipment goes on the balance sheet as fixed assets, with the loans that paid for it as liabilities.

Why a generic chart doesn't fit a dental practice

QuickBooks starts you with a generic list of accounts built for a business that sells one thing and buys another. A dental practice gets paid from two directions at once: insurance carriers pay weeks later in lump EFTs, and patients pay their portion at checkout. On top of that, a good part of what your practice software calls production never turns into cash.

When the chart doesn't reflect that, everything lands in one "Sales" line and one "Supplies" line. You can't tell whether insurance collections are slipping, whether lab fees are creeping up or what hygiene costs to run. Our guide to the small business chart of accounts covers the basics. This post covers what a dental practice needs on top of them.

Revenue: split insurance from patient pay

Start with two income accounts: insurance collections and patient collections. Every insurance EFT or check goes to the first, matched to its EOB. Every payment taken at the front desk, whether card, cash, check or patient financing, goes to the second. That one split shows how much the practice leans on carriers and how well the front desk collects patient portions.

If you want more detail, you can also split revenue by service type, such as hygiene, restorative, crown and bridge, implants or ortho. Only do this if your practice software can report collections, not just production, by category, because a bank deposit won't tell you which procedures it paid for. Many practices keep the books at the insurance-versus-patient level and pull service-line detail from the software's reports.

Refunds to patients or carriers should reduce the matching collections account rather than sit in an expense line. That way revenue reflects what the practice actually kept.

Production, collections and PPO write-offs

Your practice software reports gross production: the full fee for every procedure you completed. PPO write-offs are the difference between that fee and what the plan allows, and together with other adjustments they explain most of the gap between production and what you collect.

How write-offs appear in the books is a decision for you and your CPA. Some practices record production as revenue and book write-offs to a contra-revenue account. Many keep the books on collections and leave production in the software. Either way, the bank only ever sees collections, so that's what the books reconcile to. Production and adjustment totals can then sit next to collections in your monthly reporting. Here's a hypothetical month:

The books show $76,000 of revenue, split $46,000 insurance and $30,000 patient. The $4,000 gap between net production and collections is mostly timing: claims still waiting on carriers and patient balances not yet paid. On cash-basis books, those open balances live in your practice software's aging reports, not in QuickBooks.

Costs: lab, supplies and people

Direct costs of care deserve their own section of the chart, because these are the numbers you'll watch against collections every month.

• Dental supplies: gloves, composites, impression materials, anesthetic and disposables. Some practices split clinical supplies from office supplies.
• Lab fees: crowns, bridges, dentures, aligners and nightguards. Track spend by lab vendor so you can compare them.
• Associate dentist pay: whether it's based on production or collections. Whether an associate is an employee or a contractor is a question for your CPA.
• Hygienist wages: kept apart so you can compare them to hygiene production.
• Dental assistant wages.
• Front office wages: reception, scheduling, billing and the office manager.
• Payroll taxes and benefits: employer taxes, health insurance and retirement contributions.

Splitting pay by role is what makes the P&L useful. A single "Wages" line can't tell you whether hygiene is paying for itself or whether front office cost has grown faster than collections. How the owner dentist is paid depends on the entity type, so your CPA should set that up. We keep owner pay in its own account, separate from staff.

Financing and card fees

CareCredit, Sunbit and similar patient financing companies usually deposit the treatment amount minus their fee. Card processors often do the same. If you record only the net deposit, revenue is understated and the fee disappears from the books.

Say a patient finances a $2,000 treatment through CareCredit and the deposit arrives as $1,880. Record $2,000 to patient collections and $120 to a patient financing fees account, and the entry ties to the $1,880 that hit the bank. Keep financing fees and card processing fees in separate accounts so you can see what each payment option costs you.

Equipment and loans on the balance sheet

Chairs, imaging units, intraoral scanners, milling units and office buildouts are fixed assets, not monthly expenses. Give each major category its own asset account, with an accumulated depreciation account beside it. Your CPA decides how each item is depreciated; we record the cost and the date it went into use so they have what they need. Here's more on how depreciation works.

The loan that paid for it gets its own liability account. Say you buy a $60,000 imaging unit with $10,000 down and a $50,000 loan. The asset goes on the books at $60,000, the loan at $50,000, and $10,000 comes out of the bank. When a $1,000 monthly payment includes $200 of interest, $800 reduces the loan and $200 goes to interest expense. Leases work differently depending on their terms, so ask your CPA how yours should be recorded.

A sample dental chart of accounts

Here's a starting point. Rename, combine or drop lines to fit your practice. Numbering is optional, but it keeps the chart in a sensible order.

Balance sheet

• 1000 Operating checking
• 1010 Payroll checking
• 1500 Dental equipment
• 1510 Leasehold improvements
• 1590 Accumulated depreciation
• 2000 Credit cards
• 2100 Payroll liabilities
• 2500 Equipment loans (one sub-account per loan)
• 3000 Owner's equity accounts (named for your entity type)

Income and direct costs

• 4000 Insurance collections
• 4100 Patient collections
• 5000 Dental supplies
• 5100 Lab fees
• 5200 Associate dentist pay
• 5300 Hygienist wages
• 5400 Dental assistant wages
• 5500 Clinical payroll taxes and benefits

Operating expenses

• 6000 Front office wages
• 6100 Rent
• 6200 Practice software and IT
• 6300 Card processing fees
• 6310 Patient financing fees
• 6400 Marketing
• 6500 Professional liability and business insurance
• 6600 Continuing education
• 6900 Interest expense

Multiple locations

If you run more than one office, decide early whether each location is its own entity with its own books or one entity tracked by location. That's partly a legal and tax question for your attorney and CPA. Within one set of books, class or location tracking in QuickBooks Online (on the Plus and Advanced plans) tags each transaction to an office, so you get a P&L for each one without duplicating the chart.

Keep the chart identical across offices so reports compare like for like. Shared costs, such as a central billing team or practice software, can be split by a set rule each month, like chair count or collections.

Common mistakes

• Recording gross production as revenue in cash-basis books, which makes the practice look more profitable than it is.
• Lumping insurance and patient payments into one income account.
• Booking financing and card deposits at the net amount, so the fees vanish.
• Putting lab fees and supplies in the same line.
• One "Wages" account for associates, hygienists and front office alike.
• Expensing equipment purchases and full loan payments instead of using the balance sheet.

What to hand your CPA at year end

• Reconciled bank, card and loan accounts
• A P&L with collections split by insurance and patient pay
• Production and adjustment reports from your practice software
• A fixed asset list with cost and in-service dates
• Lender statements showing year-end balances and interest paid
• Payroll reports broken out by role

How we set this up

When we take on bookkeeping for a dental practice, the chart of accounts is the first thing we build or clean up in QuickBooks Online. From there we reconcile insurance EFTs, patient payments, financing deposits and lab and supply bills to it every month, working from your practice software's collections and adjustment reports. It's the same approach we take across healthcare practice bookkeeping, tuned to how dental offices get paid.

If your current chart is the generic one QuickBooks created, or it has grown into dozens of near-duplicate accounts, we can restructure it and reclassify past months so the year reads consistently. See what's included in our dental practice bookkeeping. Plans start at $299 a month; any setup or catch-up fee is quoted up front.

Common questions

Should a dental practice record production or collections as revenue?

Many practices keep their books on a cash basis, so revenue is what was actually collected and production stays in the practice software. Others record production and book PPO write-offs to a contra-revenue account. Your CPA decides whether you report on a cash or accrual basis and how write-offs are presented.

Do I need a separate income account for each insurance carrier?

Usually not. One insurance collections account is enough for the books, and carrier-level detail already lives in your practice software and EOBs. Separate accounts for every carrier make the chart long and hard to keep consistent.

Can I fix my chart of accounts in the middle of the year?

Yes. In QuickBooks Online you can rename accounts, add new ones, merge duplicates and reclassify past transactions so the whole year reads the same way. Merging accounts can't be undone, so plan the new structure first and let your CPA know before you change it.

How should a dental office record a new chair or imaging unit?

Record it as a fixed asset at its full cost, with the date it went into use. If it was financed, the loan goes on the balance sheet as a liability and each payment is split between principal and interest. Your CPA decides how it's depreciated.