Closing on a Dental Practice: Reconcile the Money

Make the closing statement explain every dollar

Closing on a dental practice requires a payment account that matches the agreed transaction. A correct price at the top of a page is only the beginning. The buyer also needs to see adjustments, credits, separate fees, payments made earlier, and the source of the remaining funds. The seller needs a traceable account of what is paid to others and what reaches the seller.

Use the statement prepared for the actual transaction. This guide's tables are original teaching worksheets, not required settlement forms. Counsel, the closing professional, lender, and accountant determine the applicable process and approve their respective parts. The buyer's job is to identify an unexplained difference before authorizing money.

Begin with the latest signed economic terms. Record the version and date of the statement being reviewed. If two drafts are circulating, identify the changes before treating either total as the payment instruction. A familiar attachment name can hide an old credit or an updated payoff.

The closing timeline explains the sequence of transaction work. This article owns the narrower settlement decision: whether the money account balances and each amount has the right basis, recipient, and timing.

Separate the price account from the funding account

The price account explains what the buyer owes for the agreed purchase after applicable adjustments. The funding account explains how that amount and separate uses will be paid. Keeping them distinct prevents a financing choice from changing the apparent price.

For example, a lender contribution does not reduce the purchase price. It supplies funds toward it. A documented deposit may reduce the amount still to be sent because it was funded earlier. A seller credit may change the amount owed under the agreed terms. These entries serve different purposes even when each appears as a subtraction in a worksheet.

Do not make the totals balance by creating an unexplained adjustment. A difference is evidence that something needs review. Keep it visible until the team identifies whether it is a missing item, wrong sign, duplicate, stale amount, or genuine disagreement.

Establish the cutoff before prorating charges

A proration divides an agreed charge between the parties using an agreed basis. Before calculating, identify the item, period, amount, cutoff, payer, and allocation method. Ask counsel and the accountant how the actual agreement treats it. The invoice date alone does not determine responsibility.

Suppose the seller paid a charge that covers time after the buyer's agreed responsibility begins. The parties may have agreed that the buyer reimburses a defined share. The direction of that credit differs from a charge the buyer will pay that partly belongs to the seller. Write the direction in words before entering a positive or negative number.

Avoid assuming every monthly item uses the same day count. The agreement may address a specific method, or the team may need to resolve one. A change in the closing date can change a proration and require another calculation. Do not quietly reuse a number prepared for the earlier date.

Keep estimates marked. If an actual bill will arrive later, record the permitted reconciliation method and who will obtain it. A closing estimate is not proof that the final amount has been settled, and a later bill does not itself establish a right to collect from the other party.

Match old receipts and patient credits to the agreed owner

Cash that arrives near closing can belong to different economic periods. Keep the service date, receipt date, allocation, and contractual ownership questions distinct. A payment deposited after closing does not automatically become buyer revenue. Equally, a balance on an old report is not proof that the seller will collect it.

Open Dental distinguishes report dates, provider selections, and unearned-income options. Preserve the settings used for any settlement report. Open Dental: Report options

Use the practice's actual system documentation and accountant's reconciliation. A vendor manual explains report behavior; it does not decide ownership under the purchase agreement. The receivables guide covers that ownership and collection discussion in more detail.

Patient credits and unfinished care deserve their own treatment. Identify the agreed economic allowance and the separate clinical, refund, and legal obligations. Avoid netting all positive and negative patient balances merely because that produces a smaller number. The parties need a supported basis for what is assumed, retained, transferred, or reconciled.

Use appropriately limited information in the shared settlement file. The financial account should not become a broad distribution of identifiable clinical records. Coordinate patient-level access through the responsible privacy and clinical reviewers.

Trace payoffs without paying the price twice

A payoff can be a direction to apply part of the seller's proceeds to an obligation. That does not necessarily make it an extra buyer cost. The agreement and closing instructions determine the treatment. Ask the closing professional to trace where each payoff sits in the sources and uses.

Check the named creditor, obligation, amount, stated validity period, and required release process with the responsible advisers. A payoff amount can change with time or other facts. Do not treat an old estimate as current simply because the account number is familiar.

Separate payment evidence from release evidence. Money can reach a creditor while a document or record needed to complete the release remains outstanding. Give that later step an owner and a clear source of confirmation. The appropriate professional must assess what the buyer and lender require before closing.

Apply similar care to transaction fees. The FTC advises reviewing invoices and establishing clear approval procedures. Use that control when an unexpected closing charge appears. FTC: Business scams

For a disputed fee, preserve the invoice and claimed basis. Ask who incurred it, who authorized it, and how the agreement allocates it. Do not erase it from the file or send it merely because another payment is ready.

Reconcile an invented closing from both sides

This fictional example uses a $780,000 purchase price. Assume the documents give the buyer a $6,500 seller credit for specified matters and require a $2,400 reimbursement to the seller for an agreed prepaid charge. These are supplied arithmetic assumptions, not recommended transaction terms. No other purchase adjustments apply.

The adjusted purchase account is $780,000 minus $6,500 plus $2,400, or $775,900. Assume a verified $20,000 earlier deposit is fully available and credited, and the lender actually provides $700,000. The buyer must then provide $55,900 of new funds toward that purchase account.

Now assume the buyer owes $14,000 in separate closing costs outside that account. The new buyer cash requirement is $69,900: $55,900 plus $14,000. Including the earlier deposit, the buyer's own cash used across these stated items is $89,900. The deposit appears once in that total.

On the seller side, assume the closing instructions apply $92,000 of the $775,900 purchase amount to a creditor payoff and $19,000 to seller fees. Also assume $15,000 is placed in an agreed holdback, with no release at closing. The resulting immediate seller disbursement is $649,900.

The seller side reconciles because $92,000 plus $19,000 plus $15,000 plus $649,900 equals $775,900. The payoff and seller fees are distributions of that account in this example. Adding them again to the buyer's $69,900 new cash requirement would count those uses twice.

This account does not estimate seller taxes, establish the buyer's reserves, or prove that a lender permits the structure. It assumes the stated funding and approvals actually occur. Use a separate working-capital forecast for the buyer's operating needs.

Test changed facts before approving the new total

A good sensitivity changes a real input and traces every affected result. In the first independent variation, assume the seller payoff increases by $3,000 while all other example terms stay unchanged. Immediate seller proceeds fall from $649,900 to $646,900. New buyer cash remains $69,900 because the adjusted purchase account has not changed.

In a separate variation, assume actual lender funding falls by $25,000 to $675,000. If the buyer supplies the entire difference and the transaction otherwise remains permitted, new buyer cash rises to $94,900. Seller proceeds remain $649,900. These are different economic problems; one reduces the seller's distribution and the other creates a buyer funding gap.

The last variation changes the purchase account itself. Increasing the reimbursement by $900 raises both buyer funding and seller proceeds by $900, with other inputs held constant. Each scenario is separate. If several inputs change, recompute the complete account rather than adding selected totals together.

When a gap appears, identify who can resolve it and what new evidence is required. A corrected worksheet cannot supply cash that the buyer lacks. A lender estimate cannot be treated as a disbursement commitment simply to make the numbers balance.

Verify the destination as carefully as the amount

A balanced statement can still direct money to the wrong account. Keep payment destination review separate from the arithmetic review. Use the transaction's verified communication and approval process, and restrict bank information to those who need it for the transfer.

The FBI advises verifying payment requests and changes through a trusted route, and warns about pressure to act quickly. If fraud is suspected after transfer, contact the financial institution immediately. FBI: Payment fraud

Record which version of the instructions was checked, by whom, and when. A last-minute change should reopen the relevant check. Do not use contact details supplied only by the suspicious change message to establish that the change is legitimate.

Keep initiation, receipt, and approved application of funds distinguishable in the closing record. A bank confirmation of a sent payment should not be described more broadly than it supports. The deposit guide develops the custody and release questions for money already held.

Carry true-ups into a specific later account

A true-up reconciles an estimate using the process the parties actually agreed. Give each later item its own record: original estimate, governing provision, actual evidence, proposed correction, reviewer, and settlement status. State the due date or trigger identified from the documents, not a generic interval copied from another deal.

Do not confuse a proposed correction with money received. If the parties disagree, preserve both positions and the supporting records. Ask counsel to address the agreed dispute process and any notice requirement. A spreadsheet difference alone does not establish entitlement.

Later consideration changes can require tax follow-through. IRS: Form 8594

Send the accountant the final settlement record and later changes for analysis. Keep the allocation discussion linked to this file. The accountant determines which amounts affect reporting and how; the closing worksheet should not silently make that determination.

Common mistakes that obscure settlement

One mistake is showing a deposit twice: once as a price credit and again as an extra transaction use. Another is applying a promised deposit that never arrived. Reconcile the actual held balance to its agreed treatment before approving the remaining funding.

Wrong signs cause another class of errors. Write who reimburses whom beside a proration. Check that a seller credit reduces the buyer's obligation in the manner agreed. A correct amount entered on the wrong side can create twice that amount in error compared with the intended result.

Avoid counting an assumed payoff as both seller debt settlement and a separate buyer purchase cost. Also avoid treating a holdback as immediate seller cash. Its eventual release depends on the actual arrangement, and it may require later accounting.

Do not let settlement coordination become an unplanned disclosure. Keep initial outreach seller-blind and identifying buyer information behind an NDA. Time staff involvement around needed work and duties. Required notices, patient privacy, and clinical authority follow their own review paths.

Summary

The final review should let the buyer trace every use and funding entry, while the seller can explain each deduction from proceeds. Retain the approved statement and confirmation records, and give open estimates or disputed items a responsible owner and later process. The first ninety days guide addresses the operating controls that follow transfer. For help organizing the commercial settlement questions with Jason Taken at HedgeStone Business Advisors, book an intro call and bring the amounts you cannot yet explain.