If your speech therapy practice has school district contracts, your AR aging report is your most important monthly read. Most practices do not have one.
Speech-language pathology practices that contract with school districts, charter networks, or early-intervention agencies live with a payment cycle that is genuinely brutal: 60 to 120 days from service to deposit, with quarterly billing in some districts and net-90 or net-120 terms baked into the contract. The clinical work is delivered in real time. The cash arrives four months later. In between, the practice runs on a working-capital cushion that nobody is consciously sizing.
The bookkeeping piece that most generalist bookkeepers miss is simple: contract revenue and contract receivables need to be tracked by district, aged honestly, and reconciled against contract terms every month. Without that, the practice never knows which districts are slow, which are at risk of nonpayment, or how much working capital the contract book is actually consuming.
Why school contracts are not regular AR
A typical commercial insurance EOB lands within 30 to 45 days of service. A typical patient cash payment lands the day of service. A typical school district contract operates by entirely different rules.
Quarterly or monthly invoicing tied to the district fiscal calendar. Many districts require invoices submitted on their schedule, not yours. If you provide weekly therapy from September through November and the district invoices on a quarterly cycle, your November service may not invoice until December, with payment terms running from invoice date.
Net-60 to net-120 contract terms. Districts are funded on state and federal cycles. They negotiate payment terms that match their own cash availability, not yours. Net-60 is common, net-90 is normal, net-120 is not unusual.
Documentation requirements that gate payment. Some districts require attendance logs, IEP service notes, and signed delivery confirmations attached to invoices. Missing documentation means held payment, not late payment. The cycle restarts.
Year-end and summer gaps. School-year service stops in June and resumes in September. Districts pay through the summer for spring services, but no new service is delivered. Your cash cycle has built-in seasonality your books should reflect.
The chart of accounts and AR setup
The minimum useful structure for an SLP practice with school contracts.
Service revenue (parent). Sub-accounts for "Cash-pay private therapy," "Insurance-billed therapy," and "Contract revenue (school and EI)." Within contract revenue, sub-accounts for each district or agency that materially matters (a district representing more than 10 percent of revenue gets its own line; smaller ones can roll up).
Accounts receivable by payer category. School contracts, insurance receivables, and patient receivables age very differently. Tracking them in separate AR categories lets you see the actual collections picture. Insurance AR over 90 days old needs a different conversation than school AR over 90 days old; both need to be visible.
Contract revenue recognition. For most school contracts, accrual-basis recognition is appropriate even if the practice files cash-basis taxes. Recognize revenue as services are delivered, not as invoices are paid. The result is a P&L that reflects what the practice actually did each month, not the lumpy cash arrivals.
Working capital reserve discipline. Practices with significant contract revenue need to know their average days-sales-outstanding and hold a cash reserve that covers at least one full payment cycle of operating expenses. We surface this number monthly so the practice owner can see the working capital consumption explicitly.
The AR aging report you actually need
Once contract receivables are tracked by district, the monthly AR aging report becomes the single most important operational tool in the practice. It should show.
Total contract AR by district. Sorted by amount outstanding, with each district's contracted payment terms displayed alongside.
Aging buckets: 0-30, 31-60, 61-90, 91-120, 120+ days. Anything in the 120+ bucket is a problem that needs attention.
Days sales outstanding (DSO) by district. The average age of receivables for each district, calculated as (district AR balance / district revenue) × days. A district running 105 DSO is meaningfully different from one running 65 DSO, even if both are technically within terms.
Contract terms vs actual. If a district is contractually net-60 but actually paying at 95 days, that gap is real and quantifiable. Either the contract terms aren't being enforced, the district has an internal AP problem, or your invoicing is delayed. The data tells you which.
Don't let cash-pay disappear into the contract noise
Practices that are heavy on school contracts often run a parallel cash-pay book of pediatric private therapy. The two streams have completely different economics: cash-pay deposits the same week, school contracts deposit four months later. Average per-session revenue is also different (cash-pay typically nets more after no contract write-downs).
If both revenue streams hit a single revenue line in the books, the practice cannot tell which side of the business is actually paying the bills, which side is funding the working capital deficit caused by school contracts, or what would happen if a major district contract dropped.
The fix is the same separation principle that runs through all the bookkeeping work we do for private practices: split the streams in the chart of accounts, surface margin and DSO per stream, and let the practice owner make decisions on real data.
Early intervention has its own quirks
EI billing operates somewhere between school district contracting and Medicaid. Reimbursement is often through state agencies or contracted regional providers. Documentation requirements are heavy. Rates are state-mandated, often below commercial rates. And the volume can be significant for practices that build EI as a referral channel.
For practices with both school and EI contract revenue, we track them as separate AR categories. The aging behavior, documentation requirements, and risk profile differ enough that lumping them together hides actionable patterns.
Tax implications
Cash basis vs accrual basis. SLP practices with significant contract AR should consider whether cash-basis tax accounting is still serving them. The accumulated AR is invisible on cash basis, which means the practice is paying tax cycles ahead of cash arrival. Accrual basis aligns the tax bill with the work, but adds complexity. We model the trade-off during onboarding.
QBI and SSTB phaseout. Speech therapy services are a specified service trade under Section 199A. The QBI deduction phases out for higher-income owners. We run the analysis at onboarding.
Reasonable compensation. S-Corp reasonable comp benchmarks against BLS wage data for speech-language pathologists, with adjustments for specialty (pediatric, voice, dysphagia, AAC) and the practice owner's actual mix of clinical and administrative work.
Key takeaways.
- School district contract AR ages on a fundamentally different cycle than insurance or cash-pay revenue. Track them separately or lose the operational picture.
- The monthly AR aging report by district is the single most important tool for practices with significant contract revenue.
- Average DSO by district tells you which districts are genuinely slow versus which have internal AP problems versus which have invoicing delays on your end.
- Cash-pay private therapy revenue should never share a line with contract revenue. The economics are too different.
Common questions
I just see a few cash-pay clients. Do I need this complexity?
No. Pure cash-pay private practices have simple books and can stay simple. The complexity exists to manage contract AR, which only matters if you have meaningful district or agency revenue.
Should I be on cash basis or accrual basis?
It depends on your contract AR balance and your tax situation. Practices with growing contract revenue often outgrow cash basis once AR becomes significant. We model the trade-off during onboarding.
How do you integrate with TheraPlatform or Fusion Web Clinic?
We pull billing and contract data from your practice software into QuickBooks Online so your clinical system stays the system of record for treatment, and QBO is the system of record for finance. Your contract AR aging report comes out of QBO, reconciled to your practice software monthly.
What about IEP documentation and audit trails?
That stays in your practice management software where the clinical record lives. Our work is the financial side: tracking the contract revenue, aging the receivables, surfacing the DSO. We do not touch the clinical documentation.
Should my SLP practice be an S-Corp?
Often, once profit clears about $80,000 for a solo. SLP services are SSTB so QBI phases out quickly, but self-employment tax savings on owner draws still make sense. We run the analysis during onboarding.
Keep reading
- Bookkeeping for Speech-Language Pathologists
- Hearing Aid Trials on Your Balance Sheet — sister vertical with very different revenue dynamics
- What Is Reasonable Compensation for S-Corp Owners?
- Why We Focus on Private Practices
See if we are the right fit
If your SLP practice has school or EI contracts and your AR aging is invisible, book a free 30-minute consult. Bring a recent month's deposits and a representative district contract. We will show you what cleaner books would look like.