Bookkeeping Setup¶

Bookkeeping is the act of recording every dollar that moves through your business. Done well, it takes a few minutes a week. Done poorly — or not at all — it creates an expensive clean-up at tax time.

What Bookkeeping Actually Is¶

Bookkeeping is not accounting. The distinction matters:

• Bookkeeping = recording transactions, categorizing them, reconciling accounts. Day-to-day data entry.
• Accounting = interpreting those records, preparing tax filings, advising on strategy. Higher-level analysis.

A bookkeeper (or software) handles the first. A CPA handles the second. In a small DPC practice, you may do some bookkeeping yourself, outsource the rest, or use software that automates most of it.

The Three Realistic Options¶

Option 1: DIY with software¶

• Best for: Solo practice, <100 patients, tight budget, comfortable with computers
• Tools: any entry-level accounting package, for example Wave (free tier), QuickBooks Online Simple Start (about $38/month), Xero Early (about $25/month) or FreshBooks Lite (about $23/month); see the comparison table below
• Time commitment: 30–60 min/week
• Cost: $0–$50/month

You connect your bank and credit card, transactions import automatically, you categorize them, and the software generates P&L and balance sheet reports. Modern tools make this genuinely manageable.

Option 2: Software + part-time bookkeeper¶

• Best for: Growing practice, 100+ patients, limited bandwidth
• Tools: cloud accounting software (whichever your bookkeeper works in; QuickBooks Online and Xero are the most common) + contracted bookkeeper
• Time commitment: 15 min/week reviewing
• Cost: $25–90/mo software + $150–500/mo bookkeeper

You still own the numbers, but someone else categorizes transactions, reconciles accounts, and closes the month. You review reports and ask questions. This is where most practices end up.

Option 3: Full-service bookkeeping firm¶

• Best for: Multi-physician practice, employees, complex revenue streams
• Tools: Firm chooses software (usually QuickBooks Online or Xero)
• Time commitment: Minimal weekly; 30 min/month reviewing
• Cost: $300–$1,500/mo depending on transaction volume

The firm handles everything including payroll, 1099s, and sales tax (where applicable). You get a clean monthly packet.

Bootstrap path: Most practices start with Option 1. Move to Option 2 when weekly bookkeeping starts to feel like a distraction from patient care. See Bootstrap Low-Tech Toolkit for the absolute-minimum starter approach.

Software Comparison (Quick Reference)¶

These four are examples, not an exhaustive list; Zoho Books, Sage and others serve the same need. The kit does not recommend one. Prices were checked on 2026-09-22 and change frequently; the linked pages are current.

Monthly Bookkeeping Workflow¶

Whether you DIY or outsource, the rhythm is the same. Once a month:

1. Import transactions (usually automatic from bank feeds)
2. Categorize each transaction into its chart-of-accounts bucket
3. Reconcile each account against the bank statement — the ending balance in your books should exactly match the bank's ending balance
4. Review reports: P&L, balance sheet, cash position
5. Close the month — most software has a "lock prior period" function. Use it so past numbers don't change.

If a transaction doesn't fit a category, don't force it — ask your bookkeeper or CPA. A questionable category now becomes a messy amendment later.

What to Do Daily / Weekly¶

Not much. That's the point.

• Daily: Nothing required. Maybe glance at your bank balance.
• Weekly: Categorize new transactions (5–10 min) if you DIY.
• Monthly: Full close and reconciliation (30–60 min, or handled by bookkeeper).
• Quarterly: Review against budget; meet with CPA if needed.
• Annually: Year-end close; tax filing.

Common DPC Bookkeeping Pitfalls¶

1. Misclassifying membership revenue¶

If you use accrual accounting, pre-paid membership is deferred revenue (a liability), not income, until you deliver the care. On cash basis, it's income the day it's collected. Pick one and be consistent; the cash method is available to most small practices, including those that dispense medications (see Accounting Basics and Tax Planning Basics).

2. Not separating dispensing from membership¶

Dispensing revenue and dispensing cost should be tracked separately from core membership revenue. Otherwise you can't see whether dispensing is actually profitable.

3. Running lab pass-throughs through income¶

If you bill patients for labs at your wholesale cost with no markup, you're not really earning income — you're collecting on behalf of the lab. Your CPA should help you structure these as pass-through or reimbursement to avoid inflating revenue artificially. Note that labs and medications billed separately must be offered to members and non-members alike if your members are to keep HSA eligibility (IRS Notice 2026-05, Q&A-11/12); see Tax Planning Basics.

4. Forgetting processor fees (Stripe, Square, Hint, Atlas.md and others)¶

Processors typically deduct fees before depositing. Your bank shows $980; the processor actually collected $1,000. Bookkeeping should capture both the gross revenue ($1,000) and the processing fee ($20) — not just the net $980. Most accounting packages handle this if you connect the processor feed directly rather than relying on the bank feed alone.

5. Skipping reconciliation¶

If you don't reconcile, small discrepancies accumulate for months, and by the time you try to clean them up you have to re-audit a year of transactions.

Setting Up Your Accounting Software¶

The sequence is the same in QuickBooks Online, Xero, Wave, FreshBooks or any comparable package:

1. Create the company file with your legal business name and EIN
2. Select your tax entity type (sole prop, LLC, S-Corp, etc.)
3. Choose cash or accrual accounting
4. Import or customize your chart of accounts (see Accounting Basics)
5. Connect bank, credit card, and payment processor feeds
6. Categorize the first 60 days of transactions — this is the slowest part
7. Reconcile against the first statement
8. Run your first P&L and balance sheet

If this feels overwhelming, one session with a bookkeeper to set it up is money well spent. A one-time setup typically runs a few hundred dollars (roughly $200–$500) and saves weeks of confusion.

When to Hire a Bookkeeper¶

Signs it's time:

• Weekly bookkeeping takes more than an hour
• Categories feel like guesses
• You're avoiding looking at your books
• Your CPA is asking questions you can't answer quickly
• You've missed reconciliations for two months in a row
• You're adding employees, payroll, or 1099 contractors (check the current IRS reporting threshold for Form 1099-NEC; it changed for payments made after 2025)

See Working with Accountants & Bookkeepers for how to find one.

Key Takeaways¶

• Bookkeeping is recording; accounting is interpreting. You need both, not necessarily from the same person.
• Modern software makes DIY genuinely viable for a solo DPC practice.
• Monthly reconciliation is non-negotiable. Weekly categorization prevents the backlog.
• A one-time setup session with a bookkeeper is usually worth the money.
• The goal isn't perfect books — it's books accurate enough to make decisions and file taxes.

Next¶

• Reading Financial Statements — what your software produces
• Cash Flow Management — the question your books are supposed to answer
• Working with Accountants & Bookkeepers — hiring help
• Tax Planning Basics — cash vs. accrual, record retention and the tax rules your books feed

Read through and figures checked on 2026-09-22.