Daily Balancing – the Right Way

David Harris

Everyone knows that daily balancing is a key safeguard for your practice’s finances, but there is very little information available to a dentist on how to do it properly. So here’s a recipe:

1. Which reports should be scrutinized? Most software can produce a lot of different reports. Most software has a report specifically designed for day-end review. It may be called a “daily summary”, “day-end report,” or “daysheet”, or it may have a different name in your software. For purposes of this discussion, I will refer to it as the “daysheet”. The daysheet will normally show procedures performed, fees associated with the procedures, payments received, and adjustments made, as well as any deletions or corrections that were made. Normally at the bottom of the report are totals for each of these activities, plus a breakdown of the payments received by type (cash, check, credit card payment, third party deposit, etc.) Most daysheets also show your accounts receivable balance at the beginning of the day and the balance at the end of the day. If the daysheet from your practice management software is missing some of this information, you will need to print additional reports to ensure that you have everything listed in this paragraph.

2. Some reports will isolate any one of these items in a single report. For example, most software will generate an adjustments report that only lists adjustments or a production report that isolates procedures performed and fees billed. These reports have their uses and allow you to review a specific type of transaction. However, for the day-end review that you are performing, I recommend that you look at the daysheet, which allows you to see all of the activities undertaken for each patient today in a single report. So for a patient who visited the practice for treatment, you can see what was billed, what was paid, and any adjustments or modifications that were made. This approach is preferable to, for example, looking at today’s adjustments on a separate report, which means that you will not have the context for the adjustments made. Put another way, a $200 adjustment on $1,600 of treatment means something quite different from the same $200 adjustment applied to a $250 treatment, and looking at an adjustments report simply will not give you that context, without cross-referencing it to other reports. The daysheet, if generated with the proper settings, will allow you to have all of the information needed for your daily review in a single report.

3. The daysheet and other reports from your practice management software used in this process need to be printed by you, your spouse, or an external person like a bookkeeper or accountant. You should never rely on a staff member to generate the reports used for reconciliation. Doing so creates the possibility of “selective reporting” where certain activities are excluded from the report. If this is done, you will think that report you are using summarizes the entire practice when it does not.

4. I love the approach taken by a friend of mine, Sandy Baird, a practice management consultant based in Tennessee. Sandy says that the day-end routine needs to be a team concept and that team members other than the practice owner also have roles. For example, Sandy suggests that each associated dentist, assistant, and hygienist needs to print a production report for their own activities, compare it with their schedule and ensure that correct fees and procedures were applied and that work performed was coded to the correct provider. This activity is not a substitute for the owner’s review of the practice but increases the chances of finding inaccuracies.

5. You need to review day-end reports personally. This review should not be delegated to anyone. However, as mentioned in the previous paragraph, your review should be supplemented by the reviews carried on by individual billers of their own activities. You are the only person who has a chance of spotting a discrepancy between what was done and what was billed for work that you performed, plus you, as practice owner must use this chance to look at the overall activities of the practice. Month-end reviews are also important, but there is no substitute for reviewing a day while what took place is still fresh in your mind.

6. A delayed review of a day is close to useless. Your ability to find an error or unusual transaction degrades considerably with even a 24-hour delay in performing the review and looking at last Thursday’s report on Monday afternoon represents a lost opportunity to find inaccuracies.

7. When reviewing the day-end report, there are several things you should scrutinize:

   a. Review all fees that were billed for accuracy. Embezzlement is not the only threat to your practice’s revenue; simple clerical mistakes can also be costly. A one-digit error in a procedure code can cost you hundreds of dollars.

   b. Review payments received. One thing to check is to look at payments made by patients during the day to ensure that your policies for collecting co-pays are being followed. In other words, if your policy is to collect co-payments (or at least estimates thereof) on walk-out, your daysheet will tell you if team members are following this policy.

   c. Ensure that there was a fee charged for every patient you saw today unless you know that a specific patient was booked for a “no-charge” appointment (an example of a no-charge appointment is a visit within a multi-visit procedure that had a single fee, such as an ortho check if your practice does orthodontic treatment).

   d. Review all adjustments (both debit and credit adjustments) and ensure that you understand the reason for them and that the adjustments make sense in the context. Substituting an adjustment code for a payment code is one of the most basic methods of concealing theft.

   e. Check the “continuity” of accounts receivable. The “closing” balance of receivables from the last day that your practice was open should be exactly the same as the “opening” receivables balance for today. If these two receivables balances are not identical, it means that there was some activity in your practice management software between the end of your last workday and the beginning of the current one.

   f. An excellent idea is to print “roll-up” reports instead of current-day ones from your software. Even though it is commonly called a “daysheet,” this report can cover any period you wish. So if today is Monday, and your office’s last working day was last Thursday, rather than review a Monday daysheet, you should be looking at one that spans the period from the last cutoff on Thursday until the end of today. This report will show you any transactions that took place in the three days when the office was closed. Since you are printing the reports yourself, this is not hard to do.

8. Ensure that all patients are “checked out” in your practice management software. Checking out is the process of closing an appointment in practice management software. Checking out a patient forces the front desk staff to either apply a charge or record a patient as having had a no-charge appointment. When any patient who had chargeable work done is not checked out, you have lost money.

9. Many practices do not use adjustment codes properly. Each “reason” for making an adjustment needs to have a unique code. So each PPO, and every other category of discounts (e.g., senior citizen discount, professional courtesy for referral sources, etc.), and every marketing initiative that you undertake, needs a unique adjustment code. There should be very few “miscellaneous adjustments”, and whenever one is made, staff need to make a detailed explanation in the patient notes. Give some extra attention to any miscellaneous adjustments on your report and check the notes made to ensure that you agree with the basis for the adjustment and that it does not fit within one of the defined adjustment categories. And if there are a fair number of miscellaneous adjustments made for more or less the same reason, this is a good time to place a label on that type of situation and create a tailored adjustment code for it.

   Not having (and using!) specific adjustment codes deprives you of information needed to make key decisions about your practice, such as whether you should drop a specific PPO plan or whether a specific marketing initiative is working. Having only a few adjustment categories (or one generic category used for all adjustments, and yes, I have seen this on occasion) also makes it easier to “bury” fraudulent adjustments. Forcing specificity makes inappropriate adjustments much more conspicuous.

   Whatever the cause of an adjustment, it represents money out of your pocket, and for that reason, it requires scrutiny comparable to if you were writing a check for the same amount.

10. There is no particular benefit to having an external party review the daysheet or daily balancing. You should personally verify the agreement between practice management software and today’s deposit. It is permissible to outsource the monthly reconciliation that compares a month at once. Reconciling the entire month at once drastically reduces the workload involved for the person performing the reconciliation, because most of the timing differences that have occurred within the month will have worked themselves out, and it is only the ones that straddle the beginning or end of the month that need to be addressed. This monthly reconciliation provides a “double-check” on the daily work that you are doing.

11. The “timing differences” discussed earlier in this chapter create challenges in balancing and reconciliation. Situations where collections are recorded earlier or later in your practice management software than when they are received by your bank mean that it is often impossible to know by closing time today whether today is properly balanced. When a patient pays today by credit card, it will be several days before that payment can be confirmed

    Conversely, payments deposited by insurance companies directly in your bank account normally appear in your account a couple of days before you receive the Explanation of Benefits from that insurance company.

    Timing differences complicated the balancing (done by staff) and reconciliation (done by you, your spouse, or an outside party) processes because they require keeping track of “held over” items for a few days until the other part of the transaction can be verified.

    For timing differences, online banking is a must to allow you to confirm that the correct amounts were deposited. This adjustment is easy for amounts that appear in the bank before being recorded in your practice management software. However, for amounts with the deferred receipt, confirmation that these amounts were correctly received needs to wait a few days.

    The result of this timing difference is that “real-time” end-of-day reconciliation is no longer possible, and you need to review balancing a few days after the fact to be able to verify time-lagged credit card deposits. Prosperident has developed a spreadsheet that makes monitoring of deferred and advanced amounts easier. If you are comfortable using spreadsheets, please email us at requests@prosperident.com, and we will be happy to send you a copy.

12. In addition to dealing with timing differences, online banking access for the dentist is virtually a necessity for other reasons. Online access allows you to compare your practice management software against what actually appeared in your bank account. Relying on pieces of paper like a bank deposit book (which can be adulterated), and waiting for the bank to send a month-end statement to provide ultimate confirmation of deposits, are not good ideas.