If You Don’t Read the Reports, You May Be Trusting the Wrong Numbers (for small medical practices)

A small medical practice can run on deposits, payroll, and a gut feel for how the month went.

That works until you need a real number.

The two reports that give you that number are the Profit and Loss and the Balance Sheet. You don’t have to prepare them. You do need to understand them, at least somewhat. Review them regularly. Once a month is enough.

QuickBooks calls the first report Profit and Loss. It is the income statement. It shows what came in and what it cost to run the practice. The Balance Sheet shows what the practice owns, what it owes, and what belongs to the owner, including what the owner has put in and taken out.

The Profit and Loss report (P&L)

This report answers two questions:

1. What did the practice bring in?

2. What did it cost to run it?

Revenue
Does the total on this report look like a practice that bills insurance and patients, or only like money that already hit the bank?

Your billing software may already show payer mix, adjustments, and patient-pay versus insurance-pay. That split does not automatically land on the P&L. If QuickBooks has only one income line — “deposits,” “medical income,” or “service revenue” — insurance deposits, patient card batches, and cash all sit in the same total. The report you use to run the practice doesn’t separate them unless the income accounts are set up that way, and it can’t show what was billed and not yet paid.

A slow month on the P&L might be fewer visits. It might be slower payers. You can’t tell from deposits alone. The P&L should tie to the billing reports in total — what was billed, what adjusted, and what was collected. If it doesn’t, you’re reading two different businesses.

Expenses
Read the large lines out loud. Rent, payroll, supplies, billing fees, malpractice, equipment.

Then look at the junk drawer: Miscellaneous, Office Expense, Ask My Accountant, Uncategorized.

If those catch-all accounts are big, too many charges were dumped in a pile instead of being given a real category. The total can make the practice look more expensive than it is. 

Owner activity mixed into expenses
Owner health premiums, personal charges, and money taken home are not the same thing as practice overhead. If they sit in expense accounts, profit is wrong and the return is built on the wrong story. Owner items belong in equity (draws), not in the operating expense list. More on that split here: Owner’s Draw ≠ Business Expense. 

Does the bottom line match the month you lived?
A month with normal hours and a normal schedule should not show a surprise loss or a surprise windfall unless something real changed, such as a payer dump, a bonus, a large supply order, a new hire. If the report and the month don’t agree, the coding is off. 

The Balance Sheet

This report answers a different question: what does the practice own, what does it owe, and what belongs to the owner, as of a specific day. 

Cash

Open the Balance Sheet for the last day of the month you are looking at, not today’s date. 

Does that cash number match the reconciled checking balance for that same day? 

If that month is not closed yet, treat the report as a draft. If the month is supposed to be closed and cash still does not match the bank reconciliation for that date, the report is not ready to use. 

Accounts Receivable (A/R)
A practice that bills insurance and patients usually has something still outstanding, such as claims in process, patient balances, secondary payers.

The useful check is not a perfect A/R number. It’s this: does the Balance Sheet show money that has been billed but not collected yet? If it doesn’t, you’re only watching the bank. 

Accounts that don’t match the practice
Every account on the Balance Sheet should have a plain-English reason to exist.

A loan you don’t have. Inventory you don’t keep. A credit card you closed. A benefit or plan account for a program the practice doesn’t sponsor.

If you can’t explain the account in one sentence, it doesn’t belong there. 

Bills and credit cards
Do the credit-card and payable balances look like the statements you actually have? Uncleared personal charges and old vendor bills quietly distort both profit and cash. 

Equity
Owner contributions and owner draws should live here. If they are scattered through expense and asset accounts, the practice and the household are still one pile of transactions. 

A 15-minute monthly pass

You don’t need a packet. You need two reports and a short list. 

1. Open the P&L for the month.

2. Open the Balance Sheet as of month-end, once bookkeeping is finalized for that month.

3. Ask:

• Does revenue look like the work we did, or only like deposits?

• Do the big expenses look like this practice?

• Are catch-all accounts quietly holding real activity?

• Does month-end cash match the reconciled bank balance for that same day?

• Does any account show a negative balance that should not be negative?

• Do holding accounts still have a balance after the month is closed?

• Does every balance-sheet account belong in this practice?

• Is owner activity in equity, not overhead?

If a line fails that test, that is the item to fix. Not next year. This month. 

That is how errors get caught while they are still small. The reports were never the problem. Leaving them unopened, or not understanding them at least somewhat, was. 

Ready for clearer books?

I work with solo and small medical practitioners who want QuickBooks Online books they can actually read.

That means a P&L that reflects the practice, and a Balance Sheet that only contains accounts the practice really has. 

If you want a second set of eyes on those two reports, reach out.

Own Your Numbers.

Nina Guidi, CPA

This article is for general information only and is not tax, legal, accounting, or insurance advice for your specific situation. Rules depend on your facts and current law. Talk with your CPA and, when needed, an attorney before you file, elect, or change anything.