Quick answer: Medical A/R reconciliation is the monthly proof that four numbers agree: what your billing system says you billed and adjusted, what it says you collected, what your bank says you deposited, and what QuickBooks says you earned. In most practices, nobody ever tests it. Charges live in the billing system, deposits get recorded as revenue in the books, and the space between them — denials, underpayments, posting errors, missing patient balances — is invisible. This guide is the tie-out, step by step.
The chain your revenue actually travels
Every practice dollar follows the same path: charge in the billing system → payer adjudication → contractual adjustment → insurance payment plus patient responsibility → payment posting (ERAs and manual) → bank deposit → QuickBooks. Each arrow is a place money can be lost or misstated. Reconciliation means checking the arrows, not just the endpoints.
The five-step monthly tie-out
- Charges to net revenue. Pull the month’s charges from the billing system, subtract contractual adjustments and write-offs. That’s the month’s net revenue at expected value. If adjustments are more than your contracts explain, something is being written off that shouldn’t be.
- Payments posted to payments received. Total insurance payments (from ERAs — the electronic remittance advice that accompanies each payer payment — and any paper EOB postings) plus patient payments posted in the billing system. This is what the system believes was collected this month.
- Payments received to bank deposits. Match posted payments to actual deposits — payer by payer for electronic funds, batch by batch for cards and cash. Watch the three classic wedges: merchant fees netted out of card deposits, patient refunds and payer recoupments reducing deposits, and timing (payments posted in one month landing in the next). Every wedge should be identified and quantified, not shrugged at.
- A/R roll-forward. Beginning A/R + charges − adjustments − payments = ending A/R. Compare that computed number to the billing system’s actual aging report. If they don’t match, payments or adjustments are being posted outside the period — or the aging itself is carrying orphaned balances (common after an EHR conversion).
- Books to all of the above. QuickBooks revenue and undeposited funds should now be explainable from steps 1–4. Revenue in the books should be reconciled revenue — not just whatever hit the bank.
A worked example
A three-physician practice posts $310,000 in charges for June. Contractual adjustments are $128,000, so net expected revenue is $182,000. The billing system shows $175,500 posted in payments ($151,000 insurance, $24,500 patient). Bank deposits for June total $168,900.
The tie-out finds the $6,600 gap: $2,100 in merchant fees netted from card batches, $1,800 in payer recoupments against old overpayments, $1,400 in refunds to patients, and $1,300 of end-of-month EFTs that landed July 2. Every dollar explained. The A/R roll-forward, though, computes $12,000 higher than the aging report — which turns out to be denials that were posted as “pending” and quietly aged past 120 days. That $12,000 is the month’s real finding: claims that need working now, while they’re still appealable.
Days in A/R and the numbers this unlocks
Once the tie-out runs monthly, the practice’s vital signs become trustworthy. Days in A/R = total A/R ÷ (average daily charges) — a practice charging $10,000 a day with $420,000 in A/R is at 42 days, healthy for most specialties; drifting past 50 means follow-up is slipping. Net collection rate = payments ÷ (charges − contractual adjustments) — the percentage of collectible money actually collected; below the mid-90s, you’re funding your payers. Both belong on the one-page scorecard we describe in medical practice KPIs — but they’re only meaningful if the underlying numbers reconcile.
Where the chain usually breaks
- Deposit-only bookkeeping. Revenue equals deposits, so denials and underpayments never appear anywhere.
- Unreconciled ERAs. Auto-posting marks remittances “done” while exceptions land in a work queue nobody owns.
- Bulk adjustments. Month-end cleanup write-offs that blend contractual amounts with avoidable losses, by payer, forever.
- Patient balances off the radar. Statements go out; nobody reports what fraction of patient responsibility is ever collected.
- The billing-service black box. A percentage-based service reports collections; nobody ties the report to the bank. Good services survive that audit easily — which is exactly why it should run monthly.
Frequently asked questions
What is medical A/R reconciliation?
The monthly process of proving that billing-system charges, adjustments, and payments; the A/R aging; actual bank deposits; and the accounting records all agree — so reported revenue reflects what the practice really earned and collected.
What is an ERA versus an EOB?
Both explain how a payer adjudicated claims. The EOB is the human-readable statement; the ERA is the electronic version your billing system can post automatically. Auto-posted ERAs still need reconciliation, because exceptions and rejections don’t post themselves.
Why don’t our bank deposits match the billing system’s collections?
Usually merchant fees netted from card deposits, refunds and payer recoupments, and month-end timing. Each is legitimate — but each should be identified and quantified monthly, because the same wedge also hides posting errors and missing money.
How often should a practice reconcile billing to bank to books?
Monthly, as part of the close. Daily payment-batch balancing at the front desk plus a monthly full-chain tie-out catches nearly everything while it’s still fixable.
The reconciliation is the service
This tie-out is the core of Precision Accounting & Consulting’s medical practice accounting work — we run it monthly for practices across New York, from primary care to surgical groups to physical therapy, working from the reports your billing system already produces. If nobody in your practice can say whether the billing system, the bank, and QuickBooks agree, that’s the first thing we’ll find out.
This article is for general informational purposes only and does not constitute tax, legal, or accounting advice. Consult a qualified professional about your specific situation.
Reconciling accounts receivable matters more in a practice where pay is production-based, because how collections flow into physician compensation means a billing error becomes a payroll error one cycle later.
Talk to an accountant who works in your industry
Precision Accounting & Consulting works with contractors, law firms, medical practices and property owners across the country. If something on this page raised a question about your own books, send it over and we will give you a straight answer.