Bookkeeping for Allied Health Practices
Two things decide whether a clinic's books tell the truth, and neither is the volume of appointments. The first is how the practitioners are paid, because a percentage split recorded as though the whole fee were the clinic's revenue overstates the practice by the size of the split. The second, in Canada, is that most of what a clinic does is exempt from GST and HST while a good deal of what it sells beside it is not, and that line decides how much tax the clinic can recover on its own costs. Get both right and the rest is ordinary bookkeeping. Get either wrong and the statements describe a different business. One thing this page is honest about: most of its material is Canadian. The associate and receivable mechanics travel, but the exempt and taxable split has no US federal equivalent, and the closest thing, sales tax on retail products, is set state by state. Rather than pad a US section to look balanced, this page says where each part applies.
What's included
- Associate splits recorded so the gross fee, the practitioner's share and the clinic's share are each visible rather than netted into one figure
- Receivable ownership settled and reflected in the books, so it is clear whose money is outstanding and who carries the risk if it is not collected
- Contractor and employee classification questions flagged before the first payment rather than after a reassessment
- Exempt and taxable revenue tracked separately for Canadian practices, because that proportion is what governs input tax credits
- Retail product sales separated from treatment revenue, since they are taxed differently and margin behaves differently
- Prepaid packages and blocks of treatments carried as a liability until they are used
- Reconciled from the financial reports your practice management system produces. We work from day sheets, payments and receivables. We do not need, ask for, or receive access to patient records
Who it's for
- Physiotherapy, chiropractic and massage clinics paying practitioners on a percentage
- Optometry and dental hygiene practices selling products alongside treatment
- Clinic owners unsure whether an associate is a contractor or an employee
- Practices where nobody has settled whose receivable it is when an associate treats a patient
- Canadian clinics claiming input tax credits without a clean split between exempt and taxable revenue
How it runs
The actual sequence, start to finish.
- 01
Settle how practitioners are paid
Percentage split, room rental, salary, or a mix, and whether the split is taken off the gross fee or off what is collected. This is settled first because it decides what the clinic's revenue actually is, and a clinic reporting gross fees as its own income can look twice the size it is.
- 02
Decide who owns the receivable
When an associate treats a patient who has not paid, somebody is owed money and it is worth being certain who. It changes who carries the loss on a bad debt and it changes what sits on the clinic's balance sheet. It is usually answered by the associate agreement, and where the agreement is silent, that is worth knowing before it matters.
- 03
Split the revenue lines
Treatment, retail product and anything billed to a third party are separated at the point of coding. For a Canadian practice this is the step that makes the tax position calculable rather than estimated at year end.
- 04
Reconcile from the practice system
Day sheets, payments received and outstanding balances are taken from the reports the practice management system already produces and tied back to the bank. It is financial reporting only, and it is the only part of that system the bookkeeping needs.
- 05
Close the month with the splits agreed
Practitioner statements, the clinic's own margin and the outstanding receivable all agree before anything is reported. That is what stops an associate's share and the clinic's share being two numbers nobody can reconcile at year end.
What it costs
Priced by monthly transaction volume, then scoped for the number of practitioners being paid on a split. Every additional associate is another set of statements to agree each month.
Questions about bookkeeping for allied health practices
Do you need access to our patient records?
No, and we do not want it. Everything the bookkeeping needs is in the financial reports your practice management system already produces: the day sheet, the payments received, the outstanding balances and the practitioner splits. Clinical notes and patient files are not part of that and are not something we ask for. It keeps your obligations under health privacy law where they belong, which is inside your clinic, rather than extending them to a supplier who has no reason to be there.
Are our associates contractors or employees?
That is decided by the working relationship rather than by the title on the agreement or by whether they invoice you. Who controls the schedule and the treatment approach, who supplies the room and the equipment, whether the practitioner can profit or lose on the work, and how far they are integrated into the clinic all count. The question is worth settling before the first payment, because a reassessment can reach back over the whole period and cover both sides of what should have been withheld. In Canada that is a CRA determination and, for payroll purposes, the one that has teeth. In the United States the federal test is the IRS common-law test, and individual states apply their own and often stricter tests that we will not attempt to summarise here.
Most of what we do is exempt from HST. Why does that matter so much?
Because the exemption cuts both ways. Where a service is exempt you do not charge tax on it, and you also cannot recover the tax you paid on the costs of providing it. Most healthcare services delivered by a licensed practitioner are exempt, while the products a clinic sells beside them, orthotics sold retail, supplements, braces, eyewear frames and so on, frequently are not, and some practitioners are exempt while others in the same clinic are not. The proportion of taxable to exempt activity is what determines how much of your input tax you can claim back, so it has to be tracked as it happens rather than estimated once a year. This one is Canadian. There is no US federal equivalent, and sales tax on retail products is a state matter that varies too much for us to state.
How much of this page applies to a US practice?
The practitioner pay structure, the receivable question, the classification question at the federal level, and the prepaid package treatment all apply. The GST and HST material does not, because there is no federal US counterpart to it. Where a US practice sells retail products, the sales tax treatment is set by the state and we do not make state-specific claims. What is on offer for a US practice is bookkeeping and financial operations, on the same basis as everywhere else, and we do not file US returns of any kind.
We sell blocks of treatments up front. When is that income?
As the treatments are delivered, not when the block is sold. Until it is used it is money held against future appointments, which makes it a liability. It is worth carrying properly because prepaid blocks tend to be sold in bursts and used slowly, so a clinic recognising them on sale reports a strong month, then several thin ones that are actually doing the work.
More questions answered on the FAQ page.
Often paired with
Ready to talk about bookkeeping for allied health practices?
A free 20-minute consultation, no obligation.