6 min read · Published
Three different questions
How much did we bill, how much have we received, and how much is still outstanding are three separate questions. Many practices can answer only the first with confidence.
That matters because the gap between billing and banking is where private practice income is actually lost — not usually through a single large failure, but through accumulated small ones that no single report surfaces.
How the numbers diverge
An account can be raised and never sent. Sent and never followed up. Partly paid and treated as closed. Refunded without the original account being adjusted. Disputed and quietly abandoned.
Every one of those states looks identical in a system that only records that an invoice was issued. The practice sees healthy billing and a disappointing bank balance, without a mechanism to explain the difference.
- Billed — the value of accounts raised in a period
- Received — the value actually banked, which excludes unpaid and partly paid accounts
- Outstanding — accounts raised but not settled, which should be aged rather than aggregated
Why ageing matters more than the total
An outstanding balance is not a single figure with a single meaning. An account thirty days old is normal; the same amount at a hundred and eighty days is a different problem requiring different action.
Aggregating them into one 'outstanding' number removes precisely the information needed to act, which is why ageing is the useful view rather than the total.
The operational consequence
The practical implication is that reconciliation is not an accounting chore performed for the accountant once a year. It is the mechanism by which a practice discovers what it actually earned.
A practice that reconciles continuously knows its position. One that reconciles annually finds out about last year's collection failures too late to do anything about them.