What Type of Accounting Is Used Most Often by Physicians?
Choosing cash vs. accrual affects how clearly you see performance. Many solo and small practices use cash for simplicity, while larger groups adopt accrual to match production with collections.
Cash accounting basics for clinics
- Recognize revenue when cash hits the bank
- Simpler day-to-day and for taxes
- Less visibility into AR and payor delays
Accrual accounting basics
- Recognize revenue when services are rendered
- Track AR, adjustments, and contractual write-offs
- Clearer picture of margin and provider performance
Hybrid approaches
Some clinics keep cash for tax filings and produce accrual-style management reports monthly. If you do this, document the policy and apply it consistently.
How to decide
- AR cycles: Longer lags favor accrual
- Growth: More providers/locations favor accrual
- Reporting: If lender or investor reporting is required, accrual wins
Need help switching methods or producing accrual reports? Start your free month
FAQs
Do most practices use cash or accrual?
Small practices often use cash for simplicity; growing groups adopt accrual to manage AR and payor lags.
Why choose accrual for a clinic?
It matches revenue to services rendered and tracks AR and adjustments, giving a clearer picture of margin.
Is hybrid accounting acceptable?
Yes, if consistently documented-many clinics use cash for taxes and accrual for management reporting.
How do payor delays affect the method?
Longer AR cycles favor accrual so production and collections aren’t mixed.
Can you switch methods mid-year?
It’s possible but requires cleanup and CPA guidance to restate opening balances.
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