5 overlooked profit killers in dental practices

Even when dental practice owners rely on practice management software and their tax CPA, gaps still arise in their knowledge and access to a consistent view of their monthly financial health. Most dental practice owners are more familiar with operational numbers, such as patient flow, production versus collections, and case acceptance.

Other than reviewing their annual tax return with their CPA, when do dentists really know how well their practice is performing financially? Operational reports from practice management software are helpful for understanding patient scheduling and production workflow, but a consistent monthly analysis of financial performance can help identify hidden profit leaks.

When I work with dental practice owners, I see that most dentists lead with their gut rather than factual data, which can result in significant leaks in profitability. The good news is that every profit killer I discuss is fixable, if not preventable, with clear data, a proactive strategy, and a trusted accounting advisor.

Each profit killer affects cash flow, which is the number one complaint that keeps dentists and dental office managers up at night. With a few small tweaks to your financial protocols, you can make proactive, data-informed decisions before a cash crunch or compliance issue. Here are five of the most common and costly culprits, along with practical examples and solutions.

1. Untracked insurance write-offs

Most small practices rely on one overworked staff member to manage submission, posting, follow-up, and appeals of insurance claims without a thorough review process. This makes untracked write-offs and revenue leakage a common problem.

It’s crucial to track lost income from uncollectible insurance payments and from the patient for services provided. The most common reasons for write-offs are missed claim deadlines, perceived overtreatments, and late appeals on denied claims.¹ Practices often lose revenue because the staff doesn’t have time to follow up on claims.

An example: a general dental practice lost $110,000 in one year because the staff failed to reconcile variances and wrote off differences without verifying explanation of benefits against the contracted fee schedule. Some claims were incorrectly adjusted while others were not, resulting in lost revenue and patient refunds not being issued.

To combat this, reconcile insurance collections at least once a month, if not more frequently, to address any variances. This means comparing what you billed, what the carrier adjusted, and what was actually paid.

Your accountant can help you pull the correct reports from your practice management software to track the numbers clearly. Focus on your top revenue-producing procedures and calculate the true write-off percentage accurately. While the write-off percentage varies across the industry, the ideal rate is 12%, according to The Dental CFO.²

Another possible solution is revenue cycle management (RCM) services. RCM services free up time by offering expertise and automation that most dental practices can’t maintain with existing staff. They closely monitor denials and underpayments and appeal claims that don’t match the contracted rates. RCM services can determine if an insurance carrier consistently underpays, allowing the dentist to clearly see the financial impact. Armed with this data, it’s easy to decide if it’s time to drop the plan to protect practice profitability.  

2. Patient and insurance credit balances: A hidden liability

Overlooked credit balances owed to patients or insurance carriers often remain hidden until a reconciliation is performed. Small practices may rely on only one employee to post payments and handle follow-ups.

Identifying this hidden liability is important because most states’ escheatment laws (unclaimed property) require unrefunded patient credits and insurance overpayments to be refunded after a specific time. Failure to comply with unclaimed property guidelines can result in fines or audits. Each state has its own timelines, and dormancy periods can vary.

According to the Texas Unclaimed Property website, escheatment reports must be filed annually by March 1, and the “last contact between the holder and the property owner” can range from one to 15 years, depending on the type of unclaimed property. The website also provides a link to a due diligence letter for businesses to stay compliant.³

Credit balances can understate the amount owed to the practice (accounts receivable) and skew cash forecasting reports, leading to unexpected payouts on top of payroll and regular monthly expenses.

Work with your accountant to review credit balances monthly to determine if the credit amount is accurate. For active patients, the credit can be applied to future services or refunded. For inactive patients, document all contact attempts by email or registered letter for compliance purposes.

Reconcile EOBs cautiously to identify when an insurance carrier has paid more than the contracted amount. Overpayments from carriers must be handled carefully since those funds legally belong to the carrier, not the practice. Carrier overpayments cannot be applied to other patients and must be returned to avoid possible insurance fraud. Many states require refunds to carriers be made within 30 to 60 days to avoid penalties and interest.

3. Forecasting revenue from unscheduled treatment plans

Cash flow forecasting should be based on production that’s been completed and billed, excluding treatment that’s only been accepted. While accepted treatment can be tracked to show possible future income, until the work is performed and payment or insurance reimbursement received, these unearned amounts in a forecast can overstate expected revenue and create a false sense of available cash.

The average dental practice leaves an estimated $1 million of annual revenue on the table due to accepted yet unscheduled (and unpaid) treatment, according to Henry Schein One’s third annual Benchmark Study.⁴

For example, a thriving practice estimates $1.2 M in revenue for the first quarter based on production and accepted treatment plans. Based on the expected inflows, the practice made additional principal payments on equipment loans to reduce debt. However, actual collections totaled $815,000, 33% short of the expected inflows. To meet payroll expenses, payment of several vendor bills had to be postponed, which put a strain on the vendor relationships.

To mitigate a cash shortfall, ensure that accepted but unpaid treatment plans are separated from production goals and completed treatments. To help the accountant keep cash flow projections accurate, practices should focus on completed production, timing of insurance reimbursements, collections history, and payments patients have agreed to pay.

4. Not tracking provider-level production and collections

Tracking production and collections by provider turns revenue numbers into actionable insights. It provides clarity on performance and ensures fair compensation. It also helps dentists make better decisions about staffing and scheduling.

Production per provider is tracked by assigning each procedure to the correct provider in the PMS, generating provider-level reports and reconciling them with the accounting system. In QuickBooks Online or Xero, your accountant can maintain the GL accounts that are split between doctor production and hygiene production to ensure the PMS reports can be tied back to the accounting records. This provides data on who’s driving revenue, whether scheduling is comparable, and whether production goals are being met.

Provider-level reporting also ensures fairness and accuracy, particularly when associates or hygienists are paid based on production. You can evaluate each provider’s schedule and review their case mix to ensure comparable procedure assignments. Be sure to set clear monthly targets and consider tying bonus guidelines to key operational metrics, not collection amounts.

Putting this into practice, one dental office discovered one associate was producing $40,000 less per quarter. Upon further investigation, the issue was unfilled cancellations and weak case acceptance. After adjusting the scheduling and providing additional coaching, the associate’s production increased by 25% over a two-month period.

5. Misreported income from third-party financing and prepayments

Third-party financing and prepayments (such as orthodontic plans, cosmetic work, and annual membership plans) are often misclassified as revenue, which can inflate income in one month while underreporting it in other months. These types of advanced payments represent income received before services are rendered. In standard accounting, prepayments are treated as a liability in the books until the work is performed. If the prepaid work is not performed, the funds must be returned. It’s imperative to record revenue when it’s matched to service completed as it can risk inaccurate tax filings and disrupt financial planning.

A pediatric practice posted all membership fees as income in the month they were collected. This distorted the monthly financial reports and created problems if a family canceled before the annual membership ended. Because the practice recorded the full amount as revenue, there was no easy way to track what services were still owed or how much money needed to be refunded.

To prevent this in your practice, adopt a clear policy that separates “money received” from “revenue earned” and only record revenue when treatment occurs. Third-party financing and prepayments should be posted to a liability general ledger account as either unearned revenue or patient prepayments, respectively.

When treatment is completed, you can transfer the amount for the procedure from the liability account into the revenue account. Upon patient approval, finance companies deposit the treatment amount upfront, less their service fee. Don’t make the mistake of combining the two amounts when recording the receipt of funds. The total amount financed should be posted to unearned revenue, and the service fee should be recorded as an expense. While essentially two separate parts of the same transaction, together they will match the amount deposited in the bank.

The bottom line

You can’t manage what you don’t monitor. From not checking insurance write-offs to misclassifying revenue, the warning signs are clear that profit may be slipping through your practice. Stay alert and have practical protocols in place to provide better financial visibility. PMS reports show you part of the picture, but they don’t tell you the whole story. When you combine operation reports with a focused monthly review of your accounting reports, you can control hidden money loss.

By consistently monitoring these five areas, profit leaks can be prevented before they become financial emergencies. Most importantly, you’ll gain peace of mind that the numbers are working as hard as you are.

Editor's note: This article appeared in the November/December 2025 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.

References

1. Traeger S. Dental revenue: 5 factors that will make or break the cash flow of your practice. Dental Claim Support. Accessed July 13, 2025. https://www.dentalclaimsupport.com/blog/dental-revenue-at-your-practice

2. How to review and reduce insurance tax write-offs for dentists. The Dental CFO. March 27, 2025. Accessed July 13, 2025. https://www.thedentalcfo.com/blog/how-to-review-and-reduce-your-dental-practice-write-offs

3. What is unclaimed property? ClaimItTexas.gov. Accessed September 1, 2025. https://www.claimittexas.gov/app/what-is-ucp

4. Average providers are losing hundreds of thousands in unscheduled treatment. Henry Schein One. Accessed August 5, 2025. https://www.henryscheinone.com/insights/blogs/average-providers-are-losing-hundreds-of-thousands-in-unscheduled-treatment/