Give employer contracts their own revenue line, because they pay, grow and end differently from individual members, and you can't see any of that if it's all lumped together.
Why employer money behaves differently
An individual member pays for themselves, usually by card, usually every month. If one leaves, you lose one membership.
An employer contract is a different animal. One business pays for a group of employees. The payment might come by check or bank transfer instead of through your membership platform. It might come monthly, quarterly or once a year. The headcount can change from one invoice to the next. And when the contract ends, a whole group leaves on the same day.
That's why I wouldn't mix the two in one revenue line. Your individual panel and your employer business are two different parts of the practice, and you want to watch each one on its own.
What gets hidden when it's lumped together
Here's a made-up example. Say you have 300 individual members at $75 a month, which is $22,500. You also have one employer contract covering 60 employees at $60 each, which is $3,600 a month. Total membership revenue is $26,100.
Now say the employer doesn't renew. Revenue drops to $22,500. If both sit on one line, that $3,600 drop looks like a bad month across the whole practice. You'd go looking for problems with individual members when nothing changed there at all.
It works the other way too. If your individual panel is shrinking slowly and a new employer contract covers the gap, one combined line looks flat and healthy. You'd miss the slow leak until the contract ends.
Mixing them also throws off revenue per member. In the example, individual members bring in $75 each and employer members bring in $60. Blend them and you get $72.50, a number that doesn't describe either group.
How I'd set it up in the books
This doesn't take much. A few changes in your chart of accounts, which is the list of categories your bookkeeper sorts every transaction into.
- A separate revenue account for employer memberships, apart from individual memberships.
- If you have more than one employer, a way to tag revenue by employer, so you can see each contract on its own.
- A simple list of each contract: start date, renewal date, rate per employee, billing schedule and current headcount.
- A way to track what each employer owes and what they've paid, if you send invoices.
- Member counts split the same way, individual and employer, so the math lines up with revenue.
Our DPC chart of accounts guide shows where these lines fit.
Watch the timing on prepaid contracts
Some employers pay a quarter or a year up front. That's great for cash. It can make one month look huge on your P&L and the next eleven look thin, depending on how it's recorded. Whether the books spread that payment over the months it covers is a cash or accrual choice you make with your CPA. Either way, your bookkeeper should record it the same way every time, and you should know which way it is.
The same goes for headcount changes in the middle of a term. If an employer adds ten people in March, the books should show when that money was earned and when it was paid, so you aren't guessing later.
What to check this week
Pull up last month's P&L. Can you see your employer revenue on its own line? Can you say which employers paid, how much, and for how many people? Do you know when each contract renews?
If any of those answers is no, that's the place to start. Ask your bookkeeper to split the revenue line and build the contract list. Put the renewal dates on your calendar 60 days ahead so a renewal doesn't sneak up on you. And look at how much of your total revenue comes from your largest employer. If losing that one contract would put you under your break-even, that's a risk worth planning around now, while things are fine.
Common questions
What if an employer pays through my membership platform like everyone else?
You can still split it. Your bookkeeper can match those payments to the employer and record them in the employer revenue account instead of individual memberships.
Should I count employer-sponsored members in my panel size?
Yes, they're your patients. Track them as their own group too, so you can see your panel with and without each contract.
Do I need a separate bank account for employer money?
No. Separate revenue accounts in the books do the job. A separate bank account adds work without making the numbers clearer.
Want to see your employer contracts clearly?
We keep your books on a DPC chart of accounts, reconciled every month, with your numbers by the 15th. If that's what you want, apply to work with us.