> ## Documentation Index > Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt > Use this file to discover all available pages before exploring further. # Set up bookkeeping and consolidation > Chart of accounts for a PC and an MSO, intercompany accounts and monthly elimination, accrual versus cash for healthcare revenue, and when per-entity QuickBooks breaks. Bookkeeping for an MSO-PC group is ordinary accounting plus two things: **intercompany accounts that must tie between entities**, and **revenue that must be recorded net of contractual adjustments**. Getting the chart of accounts identical across PCs is the single highest-leverage decision. ## Prerequisites * Separate bank accounts per entity * An executed MSA with the fee mechanics specified * A bookkeeper or CPA with healthcare experience ## Chart of accounts ### The rule that matters most **Every PC uses the same chart of accounts, with the same account numbers meaning the same things.** Then consolidation is a mechanical roll-up rather than a mapping exercise, per-PC unit economics are comparable, a new entity's books are a template copy, and investors can be given per-entity detail without translation. Divergent charts of accounts across entities make consolidation manual forever, and it is very hard to fix retroactively. ### PC chart, the healthcare-specific parts | Category | Accounts | | ----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | | **Revenue** | Gross patient service revenue · Contractual adjustments (contra) · Bad debt / patient write-offs (contra) · **Net patient service revenue** | | **Accounts receivable** | Patient AR · Insurance AR · Allowance for contractual adjustments · Allowance for doubtful accounts | | **Liabilities** | Patient credit balances (refunds payable) · Payer overpayments payable · Unclaimed property payable | | **Direct expenses** | Clinical compensation · Clinical benefits and payroll taxes · Malpractice insurance · Clinical supplies · Licensure and credentialing | | **Intercompany** | **Management fee expense** · Intercompany loan payable · Intercompany interest expense | ### MSO chart | Category | Accounts | | ---------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **Revenue** | **Management fee revenue**, by PC | | **Expenses** | Non-clinical compensation · Benefits and payroll taxes · Occupancy · Technology and software · Marketing · Professional services · General and administrative | | **Intercompany** | Intercompany loan receivable · Intercompany interest income | | **Assets** | Equipment · Leasehold improvements · Intangibles (brand, IP) | ## Revenue: net, not gross The most common first-close error. | Line | Example month | | -------------------------------- | ------------- | | Gross charges | \$84,200 | | Less contractual adjustments | (\$39,850) | | **Net revenue** | **\$44,350** | | Less expected patient write-offs | (\$1,900) | | **Net realizable revenue** | **\$42,450** | Your chargemaster rate is not what anyone pays. Booking charges as revenue overstates the business by the contractual adjustment rate, commonly 40–60%, and every metric built on it is wrong. **Accrual vs cash.** On accrual, revenue is recognized when the service is performed, at the amount you **expect to collect**, with a receivable for the difference. Cash basis is simpler and materially less useful — it tells you nothing about AR, and investors and lenders will want accrual. Your CPA sets the estimation method. ## Intercompany accounts * PC: Management fee **expense** ↔ MSO: Management fee **revenue** * PC: Intercompany loan **payable** ↔ MSO: Intercompany loan **receivable** * PC: Intercompany interest **expense** ↔ MSO: Intercompany interest **income** **Intercompany balances must be equal and opposite.** If the PC's management fee payable and the MSO's receivable diverge, one entity booked something the other didn't, and that divergence compounds every month until someone reconciles it, usually during diligence. Management fee revenue and expense are the same dollars viewed twice. Consolidated revenue including both is double-counted, and it is one of the first things a quality-of-earnings review catches. Same for loans and accrued interest. ## The three views | View | Shows | Who wants it | | ---------------------------------- | --------------------------------------- | -------------------------------------- | | **Per-entity** | Each PC and the MSO standalone | Operators; fee-coverage checks | | **Consolidated with eliminations** | The whole business, intercompany netted | Lenders, auditors, the board | | **MSO standalone** | The management company alone | **Investors**, the entity they can own | Produce all three monthly from the start. See [How investors read MSO-PC financials](/concepts/finance/how-investors-read-mso-pc-financials). ## When per-entity QuickBooks breaks QuickBooks per entity works to roughly three to five entities. Past that the friction shows up as: * Manual consolidation in a spreadsheet, every month * No automated intercompany elimination * No consolidated cash view * Growing close time — a week added per entity is not unusual * Version-control problems on the consolidation workbook The options past that point: | Option | Fits | | --------------------------------------------------------- | ----------------------------------------------------- | | QuickBooks per entity plus a dedicated consolidation tool | 5–10 entities | | Mid-market ERP with native multi-entity | 10+ entities, or institutional reporting requirements | | Outsourced accounting with multi-entity capability | Groups without internal finance depth | Migrate before the close time becomes unmanageable, not after — a migration during a fundraise is a bad time. ## Hiring the bookkeeper Not a generalist. You want someone who has seen: * Net revenue recording with contractual adjustments * AR aging and allowance estimation for healthcare * 835-based cash reconciliation * **Intercompany accounting between related entities** * Multi-entity consolidation with eliminations Ask directly: *"Walk me through how you'd record a month of patient service revenue, and how you'd reconcile it to the bank."* A candidate who talks about gross charges is the wrong candidate. ## Verify it worked * [ ] Identical chart of accounts across all PCs * [ ] Revenue recorded **net** of contractual adjustments * [ ] Contra accounts in place for adjustments and write-offs * [ ] Patient credit balances recorded as a **liability** * [ ] Matched intercompany account pairs on both sides * [ ] Intercompany balances reconciled monthly and equal-and-opposite * [ ] Eliminations applied on consolidation * [ ] Three views produced monthly * [ ] Bookkeeper has healthcare and multi-entity experience ## Common failure modes | Failure | Consequence | | -------------------------------------------------- | ---------------------------------------------------- | | Divergent charts of accounts across PCs | Manual consolidation forever | | Booking gross charges as revenue | Overstates the business by 40–60% | | Credit balances recorded as revenue | Overstates revenue; hides a liability | | Intercompany balances never reconciled | Compounding divergence, found in diligence | | No eliminations | Double-counted consolidated revenue | | Cash basis only | No AR visibility; unusable for lenders and investors | | Outgrowing per-entity QuickBooks and not migrating | Close time grows until it breaks | ## Related topics - [Your first month-end close](/start/first-90-days/first-month-close.md) - [Banking and books for entity #3 (and #4, and #12…)](/start/second-state/banking-and-books.md) - [Move money between PC and MSO (the right way)](/guides/banking/move-money-mso-pc.md) - [Produce investor-grade financial reporting](/guides/banking/produce-investor-reporting.md) - [Prepare for taxes across entities](/guides/banking/prepare-for-taxes.md) - [Intercompany money movement](/concepts/banking/intercompany-money-movement.md) - [How investors read MSO-PC financials](/concepts/finance/how-investors-read-mso-pc-financials.md) - [Intercompany loans between MSO and PC: structure and example clause](/reference/legal/intercompany-loan-note.md)