Bookkeeping Basics for a Growing Group Practice

Here is a pattern I see repeatedly. A practice owner is convinced her newest clinician is her strongest hire, and the books disagree, because once that clinician's collections are separated from her contractor payments, supervision hours and share of the billing service, the margin is thinner than anyone assumed. Usually nothing is wrong with the hire. The split has simply never been re-priced since the practice's first year.

You cannot see that in a bank balance. Bookkeeping is how you find out.

Separate accounts, and why it is not optional

Start here, because nothing downstream works without it. Your practice needs its own checking account, savings account for taxes, and credit or debit card, all in the entity's exact legal name. Every dollar the practice earns lands there; every dollar it spends leaves from there.

Three reasons this matters more than it sounds:

• Legal. If you formed a PLLC or PC for liability protection, running personal expenses through it is the single fastest way to undermine that protection.
• Practical. Categorizing 900 mixed transactions at year end costs you hours and costs your bookkeeper money. Categorizing 400 clean business transactions is a different job entirely.
• Evidentiary. Commingled accounts turn a narrow question from a tax examiner into a broad one.

Pay yourself by transferring money to your personal account on a schedule, an owner's draw, or W-2 payroll if you are an S corporation. Do not buy groceries with the practice card and plan to sort it out later. There is no later.

A chart of accounts built for a practice

The default chart of accounts that ships with your accounting software was designed for a generic small business. It will let you record everything and tell you nothing. Rebuild it around how a practice actually earns and spends, and keep it lean, thirty well-chosen accounts beat a hundred vague ones.

Income, split by how the money arrives, because each stream behaves differently:

• Private-pay client fees
• Insurance and EAP reimbursements
• Supervision and consultation fees
• Workshops, courses, speaking and writing
• Other income (rented office hours, evaluations, court work)

Direct costs, costs that exist only because you delivered services. Keeping these separate from overhead is what makes margin visible:

• Clinician contractor payments
• Clinician wages and the employer payroll taxes on them
• Billing service and clearinghouse fees
• Merchant and payment-processing fees
• Clinical supervision paid on behalf of staff

Operating expenses, rent and occupancy, EHR and telehealth software, professional liability and business insurance, licensure and CEUs, marketing and directory listings, office supplies and furnishings, cleaning, phone and internet, professional fees, bank charges, meals, travel, education.

Equity, owner contributions, owner draws, and (for an S corporation) distributions. These are not expenses. Coding a draw as an expense overstates your costs and understates your profit, and it is one of the most common errors I unwind in a clean-up.

One structural point: resist creating a new account every time a question comes up. Use classes in QuickBooks Online or tags to slice the same accounts by clinician, location or service line. Accounts answer "what did we spend on?" Classes answer "who or where?"

A chart of accounts is not a filing cabinet. It is a set of questions you have decided you want answered every month. How I explain the redesign to new group-practice clients

Tracking per-clinician profitability

This is the number that changes how a group practice is run, and almost nobody has it in year one.

Tag every income transaction and every direct cost with the clinician it belongs to. Then, for each person, you can produce a simple contribution figure:

Collections attributable to that clinician − what you pay them − their direct costs = contribution margin.

Deliberately leave overhead out at first. Allocating rent and software across clinicians invites arguments about the allocation and obscures the point. Contribution margin tells you what each person adds before overhead; total contribution across the team has to cover overhead and leave you a profit. That is the whole model, and you can run it on one page.

Three things to watch while you build it:

• Collections, not charges. Insurance-based practices bill one number and receive another. Profitability lives in what arrives, and the gap between the two is worth measuring on its own.
• Timing. You often pay a clinician on a schedule that does not line up with when the claim pays. Compare like periods, or you will accuse a perfectly good clinician of losing money in a month when a payer was slow.
• Your own time. If you are seeing clients and running the business, split your compensation between the two roles. Otherwise your clinical margin looks unrealistically strong and your admin cost looks like nothing.

Contractor or employee, the cost you are actually comparing

Two separate issues get tangled here. Let me untangle them.

The compliance issue. Whether a clinician is an independent contractor or an employee is not a choice you and they make together. It is determined by the working relationship. The IRS looks at behavioral control, financial control and the nature of the relationship. Setting someone's schedule, requiring them to use your EHR and your intake process, supervising their clinical work, providing the office, and restricting outside practice all point toward employment. Several states go further with an "ABC" test that is significantly harder to satisfy, and a worker can be a contractor federally and an employee under state law at the same time.

Getting this wrong is expensive, back payroll taxes, penalties, interest, and potentially state wage claims. It is worth an hour with your CPA or an employment attorney before you write the agreement, not after a state agency asks.

The costing issue. Assuming both options are legitimately available, compare them honestly. A contractor at a 60/40 split costs you the split. An employee at the same clinical output costs you their wage plus:

• Employer Social Security and Medicare at 7.65% of wages
• Federal unemployment tax, plus state unemployment at your state's experience rate
• Workers' compensation, and in some states disability and paid family leave contributions
• Any benefits, paid time off, retirement match, licensure or CEU support you provide
• Payroll administration and the time it takes to run it

Track those employer-side costs in their own accounts rather than burying them in a single "payroll" line. That is how "the split looks generous" becomes "the split is generous, and here is by how much."

The monthly close checklist

A monthly close is a short, repeatable routine that ends with numbers you trust. Aim to finish it within ten days of month end. Work through it in order:

1. Reconcile every account (checking, savings, credit cards, merchant accounts, loans) to the actual statement. Not "it looks right." Reconciled, with a zero difference.
2. Clear uncategorized transactions. Nothing should be sitting in "Ask My Accountant" at close.
3. Tie deposits to the billing system. Compare collections in your EHR or billing platform to income recorded in the books, and record processor fees as an expense rather than netting them out of income.
4. Post payroll properly. Wages, employer taxes and withheld liabilities each to their own account, and the payroll liability balances should agree with what has been remitted.
5. Check contractor payments against signed agreements and collect any missing Form W-9 now, not next January.
6. Review owner activity. Draws and contributions to equity, distributions to distributions, and nothing personal hiding in expenses.
7. Split loan payments between principal and interest.
8. Handle prepaid and annual items (insurance, annual software renewals, licensure) so one big December charge does not distort a single month.
9. Read the reports. Profit and loss for the month against the prior month and the same month last year; balance sheet for anything negative that should not be.
10. Close and lock the period so nobody quietly edits a reconciled month.

Ten steps, an hour or two if you have kept up, most of a weekend if you have not. That difference is the entire argument for doing it monthly.

What your CPA needs at year end

Handing over a clean package instead of a shoebox saves you real money, because your accountant stops doing bookkeeping and starts doing tax work. The list:

• Reconciled profit and loss, balance sheet and general ledger for the year
• Year-end bank, credit card and loan statements
• Payroll reports, quarterly filings, annual reconciliation, and copies of W-2s
• Contractor totals with a signed W-9 for each one, so 1099s can be issued correctly and on time
• Invoices for equipment and furniture purchased during the year
• Your mileage log, home office square footage and utility totals if either applies
• Health insurance premiums paid and any retirement plan contributions
• A short note about anything unusual, a new state, a new entity, a large one-off, an owner loan

On 1099s: the long-standing reporting threshold for contractor payments was $600, and it was raised by 2025 legislation for payments beginning in 2026. Confirm the current figure before you file rather than working from memory, and collect the W-9s regardless, because chasing them in January is miserable.

Common QuickBooks mistakes

The same handful, over and over:

• Double-counted income. Recording an invoice and then recording the deposit as new income instead of matching it to the invoice.
• Net deposits. Booking what the processor deposited rather than gross collections less fees, which quietly hides a deductible expense and understates revenue.
• Owner draws coded as an expense. They belong in equity.
• Loan payments coded entirely to expense. Only the interest is deductible; the principal reduces the liability.
• Undeposited Funds as a junk drawer. If that balance is growing, something is not being cleared.
• Bank rules on autopilot. Automatic categorization is useful and confidently wrong at least once a month. Review it.
• Payroll booked as one lump sum from the bank feed, which destroys any hope of tracking labor cost properly.
• Never reconciling. Everything above is survivable. This one is not, an unreconciled ledger is a guess with formatting.

Keeping client information out of your books

Your accounting file is a financial record, not a clinical one. Keep the EHR as the system of record for anything client-identifiable, and keep memo fields in the books generic, a deposit reference, an invoice number, a payer name. There is rarely a bookkeeping reason to record a client's name and never a reason to record anything about their care.

If an outside bookkeeper, accountant or billing service will encounter protected health information in the course of their work, that relationship needs a business associate agreement. Ask for one. Any firm that works with healthcare practices will have it ready.

When to hand it off

Doing your own books in year one is a genuinely good education, you learn where the money goes in a way no report can teach you. But there is a point where it stops paying: usually when you add your second clinician, when a month's transactions no longer fit in one sitting, or when you catch yourself avoiding the software.

A reasonable middle path is to keep the day-to-day categorization yourself and have a professional review and close each month. That costs less than full-service bookkeeping and still gets you numbers you can rely on.

This article is general guidance rather than advice about your practice, worker classification in particular turns on facts and on your state's rules, so please work through it with your own CPA. If you want a hand, accounting and bookkeeping is where we do monthly closes and clean-up work, and payroll and retirement covers the contractor-versus-employee side. If you would rather build the habit yourself first, the a simple, consistent chart of accounts is a good starting structure.