Medical and MedSpa
Bookkeeping

Running both an MSO and a PC gives your medical practice or medspa flexibility, but it also adds real accounting complexity. Clean bookkeeping is the only way to keep the structure working the way it was intended. When the two entities stay aligned, you get predictable cash flow, accurate reporting, and a financial foundation that scales.

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How the MSO and PC Operate in the Real World

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The PC handles clinical work and employs the licensed providers. The MSO manages operations, administrative staff, overhead, marketing, and everything that supports the practice. These entities function together operationally, but their books must remain completely separate.

Each entity needs its own bank accounts and its own financial statements. When expenses, payroll, or revenue blend across companies, the bookkeeping quickly becomes unreliable and the structure loses its purpose.

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Management Fees and the Flow of Money

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The management fee is the primary financial link between the two companies. The MSO charges the PC a fee for operational and administrative services. This fee must be:

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• Documented

• Invoiced

• Paid on a predictable schedule

• Recorded consistently on both sets of books

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When management fees are inconsistent or delayed, the books fall out of sync and cash flow becomes harder to read. A set monthly rhythm keeps both ledgers aligned.

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Shared Operating Costs and Reimbursements

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Most of the operating expenses flow through the MSO. The PC then reimburses its share based on the agreement set by counsel. These reimbursements must be entered on both sides as intercompany transactions. If they are missed or entered inconsistently, one company ends up absorbing costs that do not belong to it.

This affects profitability, taxes, and your ability to interpret your financial statements. Clean reimbursement entries keep the MSO and PC aligned and maintain the integrity of both sets of books.

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Payroll Across Multiple Entities

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Payroll is often the source of the biggest mistakes. Clinical providers belong under the PC. Administrative and operational employees belong under the MSO. Shared staff require a consistent and traceable allocation method.

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Misallocated payroll can distort profitability for both entities and create confusion during tax planning or financial reviews. Clean payroll bookkeeping requires consistent entry and reconciliation so the numbers stay trustworthy.

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Intercompany Accounting and Why It Matters

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Intercompany activity is the backbone of an MSO and PC structure. Every reimbursement, fee, transfer, or shared expense must appear on both ledgers. When these entries match, the intercompany accounts reconcile easily at month end. When they do not, the balance drifts and becomes difficult to correct over time.

This is one of the most important parts of multi-entity bookkeeping. Clean intercompany accounting keeps your financials accurate and prevents small errors from turning into long-term problems.

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Monthly Bookkeeping Requirements for an MSO and PC

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Both entities must close their books on the same schedule. Each month should include full reconciliations, management fee entries, correct payroll allocations, reimbursement entries, and intercompany balancing.

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When both companies close cleanly and consistently, your reporting becomes far more reliable. You get a clear picture of each company’s financial health and how the two entities work together.

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The Most Common Bookkeeping Problems in MSO and PC Structures

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Most issues come from inconsistent processes rather than technical errors. The most common problems include missing reimbursements, payroll coded to the wrong entity, inconsistent management fees, personal expenses in the wrong business, and intercompany accounts that never reconcile.

These issues make the books hard to trust and create confusion for owners, advisers, and tax professionals. Clean processes prevent these problems and keep the structure stable.

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What Clean MSO and PC Financials Should Look Like

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When the bookkeeping is done correctly, the MSO and PC structure works the way it was designed. The entities stay aligned, intercompany balances match to the dollar, and each company’s profitability is clear. Cash flow becomes predictable, and the practice gains a financial foundation that can scale into new locations or service lines without creating chaos.

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For MSO and PC bookkeeping, a clean structure requires:

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• Accurate recording of management fees between entities

• Consistent reimbursement entries for shared expenses

• Correct payroll allocation across MSO and PC

• Full reconciliation of intercompany accounts every month

• Separate bank accounts and financial statements for each entity

• Standardized monthly closing procedures

• Clear documentation for all intercompany movements

 

Ready to get your MSO and PC books in order?

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If you’re ready to bring structure and clarity to your MSO and PC bookkeeping, we’re here to help.
Chief Bookkeeping Officer works with med spas across the country to simplify accounting, clean up reporting, and keep both entities aligned. Schedule a free consultation below to get started.