You want clean books, timely insights, and fewer surprises. You also want a system that runs without you chasing paperwork. This guide shows you how to set up dental practice bookkeeping systems for success. You will define roles, build controls, use the right tech, and standardize routines that protect cash and support growth. The steps are practical and easy to follow. They work for solo practices and multi-location groups.
Set Roles, Internal Controls, And Workflow
Segregation of Duties Across Front Desk, Manager, Bookkeeper, and CPA
Start by deciding who does what. Separation of duties lowers error and fraud risk. Use this split:
- Front desk: collects payments, issues receipts, and posts daily transactions.
- Manager: approves purchases, oversees payroll, and reviews reports.
- Bookkeeper: records transactions and reconciles all bank and card accounts.
- CPA: reviews financials, advises on tax, and confirms compliance.
Never let one person control cash, recording, and reconciliation. For example, the person who posts patient payments should not reconcile statements. If your team is small, add compensating controls like owner review of bank feeds and random spot checks.
Approval Paths, Documentation, and Audit Trails
Set thresholds for approvals (for example, manager up to $1,000, owner above that). Require supporting docs for every payment: purchase order, invoice, and proof of receipt. Use software that logs user activity and changes. Save PDFs of invoices. Build a simple workflow map so staff knows each step from purchase request to payment. Clear approvals and documentation create a reliable audit trail and speed up your month-end close.
Build a Dental-Specific Chart of Accounts
Production, Adjustments, Collections, and Write-Offs
Your chart of accounts should reflect how dentistry earns and collects money. Track production separate from collections. Record adjustments for discounts, refunds, and insurance contractuals. Keep write-offs distinct so you can see the true collection percentage. Reconcile practice management reports to accounting monthly: daily production totals, adjustments, insurance collections, patient payments, and write-offs. When these lines are clean, you can spot coding issues, fee schedule gaps, or slow follow-ups quickly.
Overhead, Cost of Goods, and Provider Compensation Buckets
Break expenses into useful buckets:
- Overhead: rent, utilities, IT, insurance, marketing, admin payroll.
- Cost of goods: dental supplies, implants, lab fees, sterilization costs.
- Provider compensation: doctor and hygienist pay, bonuses, and benefits.
Integrate a Modern Tech Stack
Connect Accounting, Practice Management, Payments, and Payroll
Pick cloud accounting (such as QuickBooks Online) that syncs with your practice management, payment processor, and payroll. When systems talk to each other, you avoid duplicate entries and reduce errors. Patient charges flow from scheduling and treatment plans to billing and then into accounting. Payroll pulls hours or salaries, applies benefits, and books employer taxes to the right accounts.
Use Automation, Bank Feeds, and Scheduled Reconciliations
Turn on bank feeds for checking, savings, credit cards, and merchant accounts. Use rules to auto-categorize routine transactions like rent, utilities, and subscriptions. Schedule reconciliations monthly. Match merchant deposits to daily batches, not to single transactions, so totals tie to your practice management day sheets. Automation cuts manual work and surfaces anomalies fast, like missing deposits, duplicate charges, or fees that spiked.
Standardize Revenue Cycle and Cash Flow
Daily Deposits, EOB Posting, and AR Aging Cadence
Establish consistent financial routines tailored to Canadian dental practices. Make daily deposits or confirm that your payment processor batches transactions every day. Post Explanation of Benefits (EOBs) or insurance remittance statements promptly so balances transfer from insurer to patient without delay. At the end of each day, close out your practice management software and reconcile the report with your bank and merchant deposits. Review accounts receivable (AR) aging weekly, focusing on 30-, 60-, and 90-day categories. Maintaining this cadence helps prevent missed payments and supports predictable cash flow – especially important in Canadian dentistry, where insurance reimbursement timelines can vary by province and carrier.
Collections Protocols for Insurance and Patient Balances
Develop a clear, documented follow-up schedule. For insurance claims: submit clean, accurate forms; verify claim status after 14 days; follow up again at 30; and escalate or appeal unresolved claims by 45 days. For patient balances: send a friendly reminder after 7 days, a second notice at 21 days, and a final reminder at 45 days before considering collections. Offer flexible, compliant payment options such as credit card on file, e-transfers, or automated payment plans. Train your team on consistent communication scripts and record every contact in the patient’s file. Well-structured collections protocols not only improve recovery rates but also reduce AR days – keeping your Canadian dental practice financially healthy and professionally organized.
Managing Expenses, Payroll, and Inventory for Canadian Dental Practices
Purchasing, Accounts Payable Workflow, and Vendor Controls
Keep purchasing structured and transparent. Use purchase requests for one-time or high-value purchases and purchase orders (POs) for routine supplies and equipment. Match invoices to POs and receipts before approving payments – a “three-way match” process that prevents errors and fraud. Maintain a verified vendor list with approved payment terms and up-to-date tax documentation. Limit who can add or modify vendors in your accounting system to reduce risk. Conduct a monthly audit of vendor payments to flag duplicate invoices, unusual amounts, or changes in bank details. Set a consistent bill payment schedule (twice per month works well) to stabilize cash flow and take advantage of early payment discounts.
Payroll, Compensation Models, and Benefits Administration
Use an integrated Canadian payroll platform or a trusted provider to automate source deductions, tax remittances, and year-end T4 slips. Clearly define provider compensation models in writing, especially if dentists or associates are paid a percentage of net collections. Ensure that these figures align with your reconciled monthly reports. Track vacation, continuing education (CE) allowances, and benefits digitally rather than on paper to avoid errors. Reliable and timely payroll strengthens team trust and ensures compliance with CRA and provincial labour standards.
Month-End Close, Reporting, KPIs, and Tax Planning
Follow a structured month-end close checklist: reconcile all bank, credit card, and merchant accounts; record payroll; book depreciation and loan interest; review AR and AP aging; and lock the accounting period. Perform a variance review comparing results month-over-month and year-over-year. Investigate any significant fluctuations in production, supply costs, or payroll. Document findings and implement process improvements.
Core KPIs for Dental Practice Health
Monitor key financial metrics monthly:
- Collection percentage = collections ÷ net production (aim for consistency above 98%).
- Overhead percentage = total overhead ÷ collections (track trends, not one-off spikes).
- AR days = (AR balance ÷ average daily net production) – lower is better.
- Case acceptance rate = accepted treatment ÷ proposed treatment (by value).
Review these in a clear dashboard by provider or location to guide performance coaching and operational decisions.
Quarterly Tax Estimates, Depreciation, and Year-End Preparatio
Pay quarterly tax installments to the CRA on schedule to avoid interest or penalties. Record depreciation regularly so your financials reflect true asset values. Maintain a fixed asset register with purchase dates, costs, and serial numbers. In the fourth quarter, confirm contractor tax details, review RRSP or retirement contributions, and plan major equipment purchases before year-end to optimize deductions. Early, proactive tax planning helps your dental practice save money and stay compliant – without the last-minute scramble.
Move Forward with Confidence: Let Dental Tax Simplify Your Paperwork Journey
At Dental Tax, we specialize in helping dentists and dental professionals manage the financial side of their practice with confidence. From bookkeeping and tax planning to business structure and growth strategies, our team ensures every detail aligns with your professional and personal goals.
Whether you’re launching a new practice, expanding your operations, or planning for retirement, we make the process seamless reducing stress, avoiding costly errors, and keeping your finances on track for long-term success.
Adam has an MBA from the Richard Ivey School of Business in London and also holds a Chartered Investment Manager designation.
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