It is the first of October, September is over, and someone is about to email the physicians a number called "collections". Ask where that number came from and the answer is usually a single report run at a single moment, unreconciled to anything. If the payment posting for the last three days of September is still sitting in a folder, the number is wrong, and next month's number will be wrong in the other direction.
A real month-end close in a practice is not accounting. It is a set of checks that prove the schedule, the charges, the claims, the payments and the bank deposits agree with each other for the month just ended. When they agree, the collections number means something. When they don't, the close tells you exactly where to look.
We close months for practices of every size, and the routine is the same. It takes half a day for a small practice and two days for a large group, and it should be finished by the fifth business day. Here is the routine, report by report.
Key takeaways
- Post everything through the last day of the month and lock the period before running a single report. A close run on moving data is not a close.
- Ten reports, each reconciled to a specific source: schedule to encounters, encounters to charges, charges to claims, deposits to postings, remittances to payments, and so on down to patient statements.
- The two reconciliations most practices have never done are bank deposits to posted payments and ERAs received to ERAs posted. That is where unposted cash hides.
- The one-page summary compares this month to last month and to the same month last year. Days in AR, net collection rate and percent of AR over 90 days are the three numbers to watch.
- Every variance has a process cause. Fix the hand-off, not just the claim, or the same variance returns in November.
Before you run anything: freeze the month
Post every payment and adjustment received through the last day of the month before you run a single report. That includes paper checks in the lockbox, patient card payments from the last day, and every electronic remittance the clearinghouse delivered by the 30th. Then lock the period in the practice management system if it supports it, so a payment posted on October 4 with a September deposit date does not quietly change September after the reports are printed. If your system cannot lock, record the run date and time on every report and rerun the whole set if anything is back-posted.
Decide the cut-off rule once and write it down. We use deposit date for payments and date of service for charges, and the summary says so. A practice that switches between posting date and deposit date from month to month will never get two months to agree.
The ten reports, in order
| # | Report | Reconciles to | Variance to investigate |
|---|---|---|---|
| 1 | Arrived appointments by provider | Signed encounters | Any visit with no signed note older than 3 days |
| 2 | Charges entered by date of service | Signed encounters | Signed encounters with no charge |
| 3 | Claims submitted and clearinghouse acceptance | Charges entered | Charges with no accepted claim after 5 days; rejections older than 2 days |
| 4 | Payments posted by deposit date | Bank deposits | Any dollar difference; unposted deposits |
| 5 | Electronic remittances (835) received | Payments posted and EFT deposits | ERAs received but not posted; EFTs with no ERA |
| 6 | Adjustments by code | Expected contractual rates | Write-off codes used outside policy; denials adjusted with generic codes |
| 7 | Unapplied and suspense balances | Zero | Anything older than 30 days |
| 8 | Credit balances | Refund log | Credits older than 60 days without a refund or transfer decision |
| 9 | AR aging by payer and by bucket | Prior month | Growth in the 91 to 120 and over 120 buckets |
| 10 | Patient statements sent | Patient AR | Balances with no statement in 30 days |
Reports one through three are the same reconciliations that catch unbilled encounters, and we treat the month-end run as the backstop for the weekly version. If the weekly check is being done, these three should show almost nothing at month end. If they show a lot, the weekly check is not being done, and that is the first finding of the close.
Reports four and five are the ones most practices have never done: proving that every dollar the bank received was posted, and every ERA that arrived was applied. The difference between them is money sitting in the wrong place. Report four is a two-column comparison: the bank statement's deposits for the month on one side, the practice management system's payments by deposit date on the other, matched line by line. Report five compares the clearinghouse's list of 835 files delivered with the list of remittances posted. An ERA that downloaded but never posted leaves a whole batch of claims aging as unpaid while the money sits in the bank, and it is invisible unless someone compares the two lists.
Reports six through eight are the integrity checks. Adjustments by code tells you whether write-offs are following policy. Unapplied cash should be zero or close to it; anything older than 30 days is a payment nobody could match to a charge, and the patient or payer is still being billed for it. Credit balances are their own subject, but the month-end close is where they get counted.
The numbers that go on the one-page summary
After the reconciliations, we produce a one-page summary. It has the following numbers, each compared with the previous month and the same month last year:
- Gross charges, contractual adjustments and net collections.
- Net collection rate: payments divided by (charges minus contractual adjustments) for claims from a period old enough to be adjudicated, usually 90 to 120 days back. Most office-based practices should see this in the mid to high nineties.
- Days in AR: total AR divided by average daily charges over the trailing 90 days. Under 35 is comfortable for most office-based practices; over 50 means something is stuck.
- Percent of AR over 90 days, by payer. A single payer with a growing over-90 bucket is a payer problem; every payer growing at once is a follow-up staffing problem.
- First-pass acceptance rate at the clearinghouse and first-pass payment rate at the payer.
- Denial count and denial dollars by top five reason codes.
- Unapplied cash, credit balances and refunds issued.
The days in AR calculation trips people up, so here it is with numbers. A practice with $1,260,000 in gross charges over the trailing 90 days has average daily charges of $14,000. If total AR on September 30 is $490,000, days in AR is 35. If the same practice reports days in AR of 28 one month and 41 the next with no change in volume, the likely explanation is not the payers; it is that charges were entered late in one month and caught up in the next, which is why report two is on the list.
A worked example of a variance
A four-provider orthopedic practice closed September with bank deposits of $412,300 and posted payments of $398,150. The $14,150 difference was one commercial payer EFT that arrived on September 29 with an ERA that had not downloaded from the clearinghouse. Without the deposit reconciliation the practice would have reported September collections $14,150 low, and October $14,150 high, and every claim in that remittance would have continued to age as unpaid for another week or more. The fix took twenty minutes once someone knew to look.
The same close showed adjustments of $9,800 posted with the generic write-off code. When we broke them out, $6,200 were denials with CARC 197 (precertification absent) that had been written off without an appeal because the biller believed authorization denials could not be appealed. Several of them could. That finding changed the practice's denial policy, which is the point of looking at adjustment codes every month rather than once a year.
Two mistakes that make a close useless
The first is running reports for different date ranges. Charges by date of service, payments by posting date and AR as of today are three different clocks, and comparing them produces confident nonsense. Decide which clock each report uses and write it on the summary. The second is fixing the claim without fixing the process. A variance found at month end is a symptom; the cause is a hand-off that failed, and it will fail again in November unless someone changes the hand-off. In the orthopedic example above, the fix was not posting the one ERA. It was adding a daily comparison of clearinghouse ERA files to posted batches, so the next one would be caught in a day rather than a month.
Who does what
The billing lead owns the close and signs off on the summary. The payment poster owns reports four through eight. The front office owns report one, because unsigned notes and arrived visits without encounters start there. The practice manager or physician owner reads the summary and asks about every variance flagged. If nobody asks, the close will stop being done properly within three months. We have watched it happen.
Questions we hear
Our accountant already reconciles the bank. Isn't that enough?
The accountant proves the bank balance agrees with the general ledger. Nobody but the billing team can prove that each deposit was posted to the right patient accounts in the practice management system, and that is where unposted remittances and misapplied payments live. The two reconciliations answer different questions and both are needed.
We are a two-provider practice. Do we really need ten reports?
Yes, but they take an hour, not a day. The volumes are small enough that most reports show a handful of lines. The habit matters more than the size, because a small practice that lets one ERA go unposted feels it in cash flow immediately.
How far back should we go if we have never done this?
Close the month just ended properly, then run reports four, five, seven and eight for the trailing twelve months, because those are the ones that find money. Do not try to reconstruct a year of schedule-to-charge checks; the unbilled encounters from January are mostly past timely filing and the exercise will only tell you what you already suspect. Practices that want an outside review can start with an RCM audit, which runs these reconciliations on the trailing 90 days; practices that hand billing to Revelrex receive this summary as part of the monthly reporting.
What to do this month
- Post everything dated September and lock the period, or record the run time on every report.
- Run the ten reports in order and write down every variance, however small.
- Match September's bank deposits to posted payments line by line, and the clearinghouse's ERA list to posted batches.
- Produce the one-page summary with days in AR, net collection rate and percent over 90 days, compared with August and with September 2025.
- Pick the two largest variances, name the process cause and assign an owner.
- Put the fifth business day of November on the calendar for October's close.
