On the third of every month, a practice administrator we know prints the "Month End Summary" from the practice management system and emails it to the physicians. Charges, payments, adjustments, ending AR. Nobody questions it because it comes from the system. Then in April an accountant asks why the bank deposits for the quarter are $31,000 higher than posted payments, and nobody can answer.
The report was never wrong. It was just never checked against anything. That is the difference between a month-end report and a month-end close. The report is what the system says happened. The close is the set of comparisons that prove the system is right, or find where it is not.
Most independent practices do not do a close because nobody ever showed them what one looks like. It is not complicated. It is six reconciliations, done in a fixed order, on a fixed calendar.
Key takeaways
- A month-end report is what the system says; a close is the set of checks that prove it. Start at the bank and work inward.
- Six reconciliations cover it: deposits to payments, remittances to postings, charges to encounters, adjustments by code, unapplied balances, and the AR roll-forward.
- Lock the period once it is closed. Reports that change after they are sent destroy trust in every report that follows.
- The reconciliation notes, not the summary page, are what make the numbers believable to an owner or an accountant.
Why the order matters
Each reconciliation depends on the ones before it. You cannot trust the AR balance until you trust payments and adjustments. You cannot trust payments until deposits match remittances. Start at the bank and work inward.
The bank is the anchor because it is the only number in the whole process that the practice did not produce. The practice management system, the clearinghouse and the posting log are all internal, and an error in one tends to be copied faithfully into the others. The bank statement comes from outside. Everything else has to agree with it.
The six reconciliations
1. Bank deposits to posted payments
Every dollar that hit the bank account in the month should appear as a posted payment (insurance or patient) dated in that month, and the reverse. Pull the bank statement and the payment posting report by deposit date. Differences fall into a few buckets: EFTs received but not yet posted, patient card payments batched across a month boundary, refunds, and money posted to the wrong month. List every difference with an explanation. An unexplained difference is the one you chase.
2. Remittances to posted payments
Every ERA (the electronic 835 remittance) and paper EOB received in the month should be posted in full, including zero-pay remittances that carry denials. Compare the clearinghouse ERA report to the posting log. Unposted ERAs are the most common cause of payments in the bank with no posting, and denials sitting in an unposted ERA are aging toward the appeal deadline without anyone knowing they exist.
3. Charges to encounters
Every completed encounter in the month should have a charge, and every charge should have an encounter. Pull the schedule of arrived visits and the charge report by date of service and compare counts by provider. This is the leakage check, and if you do it monthly the gap stays small. We wrote about the weekly version of this in why completed encounters never become claims.
4. Adjustments by code
Adjustments are where mistakes hide, because nobody reconciles them to anything external. Run the adjustment report grouped by adjustment code. Contractual adjustments should track the payer mix; if they jump, either a fee schedule is wrong or someone is writing off denials as contractual. Look separately at every non-contractual code: timely filing write-offs, small balance write-offs, bad debt, courtesy adjustments. Each of those is a decision someone made, and the month-end review is the only time anyone looks at them together.
5. Unapplied and suspense balances
Payments that were posted but not applied to a specific claim sit in an unapplied account. They inflate AR (the claim still looks open) and understate collections. The unapplied balance at month end should be small and every item should have a reason and an owner. Anything over 30 days old is a red flag.
6. Ending AR roll-forward
The final check ties everything together: beginning AR plus charges minus payments minus adjustments should equal ending AR. If it does not, something was posted with a date outside the month, a batch was reopened, or the report parameters differ. The roll-forward is a two-minute calculation that catches an hour of problems.
A worked example: the $31,000 difference
Back to the practice in the opening. When the billing manager finally ran the bank-to-payments reconciliation for the quarter, the $31,000 broke into four pieces, and none of them was theft or a system fault.
| Difference | Amount | Cause | Fix |
|---|---|---|---|
| EFTs in the bank, no posting | $18,400 | Two payers moved to a new EFT enrollment in February; the ERAs were routed to a clearinghouse mailbox nobody was watching | Post the ERAs; add the mailbox to the daily posting routine |
| Card terminal deposits | $7,900 | Patient card payments taken at the front desk were batched nightly to the bank but keyed into the system only when the paper receipts reached billing, often the next month | Post card payments on the day of service from the terminal report |
| Refund timing | $2,600 | Patient refunds were posted in March but the checks cleared in April | Explain as a timing item; no correction |
| Wrong-month posting | $2,100 | A March ERA posted with an April deposit date | Correct the deposit date before locking the period |
Two of the four items had been repeating every month. The unposted ERAs also carried 41 denials that nobody had seen, several of them past the appeal window by the time they were found. The reconciliation took the manager about four hours the first time and under an hour each month after that.
A five-day closing calendar
| Business day | Tasks | Owner |
|---|---|---|
| Day 1 | Post all remaining ERAs and lockbox items dated in the prior month. Confirm all charges for the month are entered. | Posting lead |
| Day 2 | Bank to payments reconciliation. Remittance to posting reconciliation. List and explain differences. | Posting lead |
| Day 3 | Charges to encounters by provider. Adjustment review by code. Unapplied review. | Billing manager |
| Day 4 | AR roll-forward. Close the period in the practice management system so nothing else posts into it. | Billing manager |
| Day 5 | Produce the reporting package with the reconciliation notes attached. Review with the owner or administrator. | Practice administrator |
Closing the period matters more than people expect. If the system allows posting into a closed month, last month's numbers change after the report went out, and nobody trusts any report again. Most systems support a period lock. Use it.
Five business days is realistic for a practice with up to about ten providers. Larger groups often compress it to three by splitting posting across people, and very small practices stretch it because the same person is also answering the phone. The calendar can flex; the order cannot.
What the reporting package should contain
Charges, payments and adjustments by provider and by payer. AR aging by payer class in 0 to 30, 31 to 60, 61 to 90, 91 to 120 and over 120 buckets. Days in AR. Net collection rate on a trailing twelve months. The top ten denial reasons with counts and dollars. Unapplied balance. And a half page of notes explaining every reconciliation difference and what was done about it. The notes are the part everyone skips, and they are the part that makes the numbers believable.
Two definitions, since they are often confused. Days in AR is total insurance AR divided by average daily charges over the last 90 days; it tells you how long money waits. Net collection rate is payments divided by charges less contractual adjustments, over a period long enough for the claims to have resolved; it tells you how much of what you were owed you actually collected. A practice can have good days in AR and a poor net collection rate if it writes off quickly, which is why the package needs both.
Mistakes we see most
- Running reports by posting date one month and by date of service the next. Pick one convention per report and never change it.
- Treating the clearinghouse deposit total as the reconciliation. The clearinghouse knows what was remitted, not what was posted or what reached the bank.
- Letting the same person post payments and reconcile deposits with no second review. This is a control problem as well as an accuracy problem.
- Skipping the close in a busy month. The months you skip are the months with the problems.
- Reconciling only insurance payments. Patient payments, especially card payments through a separate terminal, are where the bank differences usually live.
Questions we hear
We are a two-physician practice with one biller. Is this overkill?
No, but it scales down. The six checks take a small practice two or three hours a month once the reports are saved. The alternative is finding out in a tax year that $30,000 was never posted.
Should the accountant do this?
The accountant reconciles the bank to the general ledger. Only the billing office can reconcile the bank to remittances and remittances to claims. The two should meet in the middle: the practice's posted payments for the month should be the number the accountant books as revenue collected.
What if our billing company does the close?
Ask for the reconciliation notes, not just the summary. A billing company that closes properly will have them. When Revelrex handles billing, the monthly report to the practice includes the roll-forward and the explained differences, because a number without its reconciliation is just a number.
What to do this month
- Save the five reports you need (bank statement, payment posting by deposit date, clearinghouse ERA list, arrived visits by provider, adjustments by code) as named report templates so the close does not start with a hunt.
- Run the bank-to-payments reconciliation for last month and list every difference with an explanation. Chase anything you cannot explain.
- Run the AR roll-forward for last month. If it does not tie, find out why before doing anything else.
- Turn on the period lock in your practice management system and agree who holds the ability to reopen a period.
- Put the five-day calendar on the shared calendar for the first week of next month, with an owner for each day.
