Recording Payments
Short version: payor payments are not income, they are A/R relief. Record the payment when it posts in CentralReach, apply it to the invoice, send it to Undeposited Funds, then match the bank deposit to that batch. Reconcile Undeposited Funds monthly. And pick one rule for whether you book to the parent payor or the actual payee — then never mix.
What goes wrong first
An ACH from a Medicaid MCO lands in the bank feed. Somebody clicks Add, categorizes it to Therapy Income, moves on. Four seconds, two things broken.
Revenue is double-counted — you already recognized it when the claim was billed, so the same dollars are on the P&L twice. And A/R never clears, so the original invoice sits open forever and your aging report grows every month until nobody trusts it.
A payor payment is not revenue. The revenue happened on the date of service. The payment is the payor settling a receivable.
The recommended flow
Record it where the information is — in your billing system — and let the bank feed confirm it later.
- The remittance posts in CentralReach, claim by claim, against the right dates of service. This is where the detail lives and where it should stay.
- Record a customer payment in QuickBooks against the matching sub-customer, applied to the open invoices, dated the payment date on the remittance.
- Deposit to: Undeposited Funds. Not the bank account. This is the step people skip and the one that makes everything else work.
- The deposit hits the bank feed. Use Find Match, select the Undeposited Funds payments that make up the deposit, match. Never Add.
- At month end, reconcile Undeposited Funds. It should be zero, or hold only genuine in-transit items.
Why Undeposited Funds is not optional
Because payor deposits almost never match payments one to one. A single state Medicaid ACH routinely covers three or four regional plans, dozens of claims, and several remittance advices. A commercial payor might send one check that clears two weeks after the remittance arrived.
Undeposited Funds is the holding area that lets many payments become one deposit. Without it you either record one lump payment that cannot be applied cleanly to specific invoices, or you fabricate a split that ties to nothing.
| Recorded payment | Sub-customer | Amount |
|---|---|---|
| ERA 4471 | CareSource | 45,905.75 |
| ERA 4472 | Buckeye Health Plan | 16,586.02 |
| ERA 4478 | Molina Healthcare of Ohio | 323.76 |
| Bank deposit to match | 62,815.53 |
Shape taken from a real biweekly remittance: three plans, 345 line items, one deposit.
Three payments, three sub-customers, three sets of invoices cleared, one deposit in the bank feed. Undeposited Funds is the only mechanism in QuickBooks that handles that without fiction.
Parent or actual payee: pick one and commit
This is the decision that causes the most inconsistency in ABA books, usually because it was never made out loud. When the deposit arrives, do you book it to the parent payor — Texas Medicaid, Florida Medicaid, Aetna — or look up the actual payee and book it to the specific plan?
Recommendation: look it up, book to the actual payee
Your invoices are written to sub-customers. A payment received at the parent will not clear sub-customer invoices unless you have billing with parent turned on, which we recommend against for other reasons. So booking to the parent leaves the invoices open and creates an unapplied credit at the parent. You end up with a growing receivable and a growing credit that offset each other and describe nothing.
The lookup costs about thirty seconds. The remittance names the payer and CentralReach already has the payment posted against the right claims. Use it. One caution carried over from the customer setup: match on the payer, not on the display label, and require a unique match — the same payer often shows up under several nicknames.
The parent-level shortcut, honestly described
Some practices consolidate at the parent on purpose: billing with parent on, one customer per funding source, invoices and payments all at that level. It is faster and internally consistent, which matters more than people think.
What you give up: per-plan aging, per-plan collection rate, and the ability to say which specific MCO is the slow one. For a practice with one dominant payor and no plan-level performance concerns, that trade can be reasonable. For anyone managing a Medicaid book across several regional entities, it is not.
Whichever you choose, the only unforgivable version is doing both. Mixed-level posting produces an aging report where some plans look current because their payments went to the parent and others look 90 days out because theirs did not. Write the rule down, put it in the SOP, apply it on every deposit.
The monthly Undeposited Funds reconciliation
Five-minute close task, catches almost everything. Run an Account Quick Report on Undeposited Funds as of month end. Every item is one of three things:
- Genuinely in transit. A check received on the 30th that deposits on the 2nd. Fine — it clears in the first week of the next month.
- A payment recorded that never arrived. The remittance posted, the money did not, or it went to a different account. This is the one worth finding: real cash you have not chased.
- A deposit that was added instead of matched. Somebody clicked Add, so the cash is recorded twice — once in Undeposited Funds, once directly in the bank. Cash is overstated. Find it and fix it.
A balance holding only the last few days of activity means the process works. A balance carrying items from three months ago means it does not, and the number grows quietly until someone reconciles it.
Three guardrails worth setting
- Bank rules that flag, not categorize. Build rules that recognize your payor ACH descriptors and pre-fill them for review rather than auto-adding them to an account. Auto-categorization is what puts payor money into income accounts at 4pm on a Friday. In one file we rebuilt, QuickBooks' own learned categorization had been quietly pre-filling every Medicaid deposit to Commissions & fees — $2.09 million of revenue booked as negative expense.
- An unidentified deposit goes to 9999 Suspense, not to a guess. A branch deposit with no descriptor and no remittance behind it is not revenue until someone confirms what it is. Park it, list it, ask the owner. A guess that lands in revenue is much harder to find later than a suspense balance nobody can ignore.
- Never Add a deposit that has an open invoice behind it. Make Find Match the default habit. If no match is available, the payment has not been recorded — go record it, then come back and match. Adding it is not a shortcut, it is a reconciliation task you deferred and made harder.
Two things that are not payments
An overpayment is a liability, not negative A/R. When a payor pays more than the claim, the excess is money you owe back. Netting it inside the receivable understates both the A/R and the refund, and when the payor recoups it six months later it looks like a surprise. It was not.
A recoupment inside a remittance is often not cash at all. Payors routinely pay a claim and reverse it in the same remittance — the two lines net to zero and the claim simply reopens. Only a clawback against an earlier payment is real cash leaving. Post the lines as they appear, then read the net.
If you are doing this by hand instead
Practices running the manual export-and-journal-entry method do not have invoices to apply payments to. The equivalent of Undeposited Funds there is a Payer Receipts Clearing account: it holds the gap between a payment posted in your billing system and cash hitting the bank, and it should equal your unreconciled payments. Same idea, different architecture — a defined balance you can prove instead of a plug. The full manual method is written up separately.
Where the sync fits
Qlarity syncs CentralReach billing data into QuickBooks so revenue is recognized by date of service and open A/R is real. Payments are the other half of that loop: the invoices only mean something if the cash that settles them lands against them.
Post payments in CentralReach, mirror them to the sub-customer through Undeposited Funds, match the deposit, reconcile the holding account monthly. Do that and your A/R aging is a collections tool instead of a pile of stale invoices nobody wants to open.
