Cash or accrual, which method suits a small transportation company?

Either can work. Cash books count a trip when the money lands, so they are simple and match the bank. Accrual books count it when the ride is finished, so they show what each payer owes and what the month really earned. Plenty of small companies keep cash books for taxes and track open payer balances on a side list. The method is set on your first return, and changing it later generally requires IRS approval.

How many revenue accounts does a NEMT business need?

One for each payer you want to judge on its own. A company with state Medicaid, two brokers, a dialysis center contract, and private riders would set up five revenue accounts. That makes it easy to see how much each payer brings in, how slowly it pays, and how much of the business rides on one contract.

Do I record the bank deposit or the full amount a broker paid?

Post the gross amount the broker paid for the trips, then post anything it took back or withheld as a separate line, so the entry adds up to the deposit. Posting only the net deposit hides denials, takebacks, and penalties, and those are the numbers that tell you which trip records need fixing.

My card processor deposits less than I charged. How do I post that?

Processors usually pay out in batches after keeping their fees. Book the full fares as private pay revenue, the fees as a processing expense, and any refunds against revenue. Those three lines together equal the payout that reached your bank.

What is the retention period for books and trip records?

For federal taxes, generally three years after filing, at least four years for payroll tax records, and longer for van purchase records and a few other cases. Medicaid work can require more. The WellTrans Indiana provider agreement, for example, requires records for the full contract term plus ten years. Follow whichever rule runs longest.

If I have an accountant, do I still need a bookkeeper?

Usually, yes, or someone in your office doing the job. An accountant typically handles tax returns, depreciation, and year-end advice. The weekly posting of payments, bills, and payroll, and the monthly bank reconciliations, are day-to-day work. When those are current, year-end becomes a short handoff instead of a cleanup project.

NEMT Bookkeeping: Accounts, Posting, and Month-End

Set up the books before the first ride

Most bookkeeping trouble in a transportation company traces back to a setup nobody finished. These five choices take an afternoon and save months of cleanup.

Setup item	What to do	Why it matters
Business bank account	Open one and run every deposit and every business bill through it	IRS Publication 583 puts this among the first things a new business should do. A van repair on a personal card becomes a question at tax time.
Accounting method	Pick cash or accrual with your accountant	The method is set on your first return, and switching later generally needs IRS approval (Publication 538)
Double-entry books	Use accounting software that records each transaction twice	Publication 583 calls double-entry self-balancing, since each entry hits one account as a debit and another as a credit. It also produces a balance sheet for van loans and unpaid receivables.
A revenue line per payer	Create the payer accounts in the next section	Shows which payers carry the company
A tag for each van	Set up classes or locations named for each vehicle	Turns one profit report into one per van

Cash or accrual for a transportation company

The two methods differ only in timing. Cash books count income on the day the money arrives. Accrual books count it on the day you earn it, even when the payer settles a month later.

Question	Cash method	Accrual method
When does a trip count as revenue?	When the payment arrives	When the ride is completed
How does a slow broker affect your profit report?	The month looks worse than the work	It does not, because the trip already counted
Where do unpaid trips show up?	Only on a side list you keep by payer	In accounts receivable on the balance sheet
Trips the payer never pays	No deduction, because they were never income	Deductible as a bad debt once uncollectible
Eligibility	Most small companies. C corporations, and partnerships with a C corporation partner, must pass an inflation-indexed gross receipts test.	Any business

The bad debt row comes from IRS Publication 334: a cash-basis business cannot deduct money it is owed but never reported as income. Cash books still need a list of open balances by payer, because nothing else in them shows what each broker and facility owes you. The accounts receivable guide covers how to work that list.

A chart of accounts built for NEMT

The chart of accounts is the set of named, numbered buckets every dollar gets sorted into. Number related accounts together, and split revenue and vehicle costs finely enough to answer the questions owners actually ask.

Number	Account	Why it earns its own line
1000	Operating checking	Every deposit and bill runs through here
1010	Payroll checking (optional)	Keeps net pay and tax deposits apart from operating cash
1100	Accounts receivable, by payer (accrual books)	Shows who owes you and how old each balance is
1500	Vehicles and equipment	Vans, lifts, ramps, and securement systems at cost
1510	Accumulated depreciation	Offsets 1500 as the vans are written down
2000	Accounts payable	Repair shops and vendors you owe
2100	Payroll taxes payable	Tax withheld from drivers plus your matching share, until deposited
2300	Vehicle loans	One subaccount per van loan
3000	Owner equity and draws	What you put in and take out
4010	Revenue: Medicaid fee-for-service	Trips paid directly by the state
4020	Revenue: Broker A (one account per broker)	Each broker’s volume and payment speed on its own
4030	Revenue: Health plans	Plans that pay you directly
4040	Revenue: Facility contracts	Hospitals, dialysis centers, senior living
4050	Revenue: Private pay	Fares paid by riders or their families in card, check, or cash
4900	Payer takebacks and penalties	Recoupments and withheld penalties, so they never hide inside revenue
4910	Refunds to riders	Private pay refunds and credits
5000	Driver wages	Your largest cost per trip
5010	Employer payroll taxes	Your matching FICA share, plus federal and state unemployment tax
5020	Contract drivers	Kept apart for Form 1099-NEC reporting
6000	Fuel	Tag to each van
6010	Repairs, maintenance, and tires	Tag to each van
6020	Vehicle insurance	Tag to each van if the policy lists them
6030	Registration, permits, and inspections	Tag to each van
6040	Depreciation or lease payments	Your preparer needs these per van if a vehicle is deducted at actual expense
7000	Office wages	Dispatch, billing, and management
7010	Card processing fees	What each card payment costs you
7020	Software, phones, and office	Fixed monthly overhead
7030	Other insurance	General liability, workers’ compensation
7040	Interest	Van and business loan interest

Then tag every fuel receipt, repair invoice, and driver shift to the van that used it. Your software may call the tag a class, a location, or a project. With it, one profit report becomes a report per vehicle, and the cost per mile calculator can do the rest.

Posting money in, payer by payer

Every payer pays differently, so each one gets a posting habit. The rule behind all of them: post from the statement that explains the money, not from the bank line that shows the total.

A broker or Medicaid payment

Along with each payment, brokers and state programs send a statement that splits the money into paid legs, denied legs, and corrections to earlier weeks. The figures in this example weekly broker payment are invented.

Statement line	Amount
51 trip legs billed	$2,295.00
2 legs denied (missing signature)	not paid, $90.00
49 legs paid	$2,205.00
Adjustment taking back a leg paid last month	minus $35.00
Net deposit	$2,170.00

On cash books, the entry is:

Account	Debit	Credit
1000 Operating checking	$2,170.00
4900 Payer takebacks and penalties	$35.00
4020 Revenue: Broker A		$2,205.00

The two denied legs never became income. Keep them on your open-balance list, noting the denial reason, until they are corrected and resubmitted or written off. On accrual books, the $2,295 was booked as a receivable when the trips were completed. The payment clears $2,205 of it, and the $90 stays open until it is resolved. The trip reconciliation guide shows how to match every completed leg against statements like this one, and how to bill NEMT brokers explains the statements themselves.

A facility check

Facilities usually pay a monthly invoice by check or bank transfer. On accrual books, post the invoice to accounts receivable when you send it and clear it when the check clears. On cash books, post the check to facility revenue when it arrives. Either way, write the invoice number on the deposit so you can match a short payment to the trips it skipped. The facility billing guide covers invoice terms.

Card payments from private riders

Card processors usually deposit in batches and keep their fees first, so the bank line never equals the fares. Post the gross fares, the fees, and any refunds as separate lines. An example daily payout:

Account	Debit	Credit
1000 Operating checking	$1,038.53
7010 Card processing fees	$36.47
4910 Refunds to riders	$65.00
4050 Revenue: Private pay		$1,140.00

Posting only the $1,038.53 would understate revenue and hide what cards cost you. It would also leave your books short of the total your processor reports to the IRS. Businesses paid directly by credit, debit, or gift card receive a Form 1099-K from their card processor, the IRS says, however few or small the payments. Match that form to account 4050 at year-end.

Money going out: payroll, vans, and small purchases

Payroll

Money you withhold from drivers is not yours. IRS Publication 15 treats withheld federal income tax, and the portion of FICA taken from each driver’s check, as trust fund money. If it never reaches the Treasury, anyone responsible who willfully failed to pay it over can be held personally liable for the entire unpaid amount. Book them as a liability on payday. An example with made-up amounts:

Account	Debit	Credit
5000 Driver wages	$6,000.00
5010 Employer payroll taxes	$459.00
1000 Operating checking (net pay)		$5,021.00
2100 Payroll taxes payable		$1,438.00

The $1,438.00 is the employee Social Security and Medicare withheld ($459.00), federal income tax withheld ($520.00), and your matching share ($459.00). Account 2100 should drop to zero each time you make a tax deposit. If it keeps growing, deposits are being missed.

Vans and equipment

A van goes to account 1500 at its full cost, and the loan goes to 2300. The monthly payment then splits into principal, which reduces the loan, and interest, which is an expense. Your accountant handles depreciation at year-end. See NEMT business taxes for the choices that affect how fast a van is written off.

Small purchases

Not every purchase has to be depreciated. Under the IRS de minimis rule for tangible property, a company that has no applicable financial statement (an audited one, for example) can deduct items of $2,500 or less, measured per item or per invoice, provided its own books expense them too. The election is made each year on the tax return. For a company without audited statements, the expensing policy can be unwritten, but it has to be applied consistently and already exist when the tax year begins. Securement straps, a tablet, or a replacement seat belt extender can then go straight to expense.

A weekly and monthly routine

Books stay easy when the work is spread out. Close each month within about ten business days, while drivers and dispatchers still remember the details.

When	Task	What it catches
Weekly	Post each payer statement with takebacks and penalties on their own line	Denials and penalties before they pile up
Weekly	Post card payouts as gross fares, fees, and refunds	Processing costs and refunds hidden in net deposits
Weekly	Compare completed trip legs with invoices and claims	Finished rides nobody billed
Weekly	Enter bills and receipts, tagged to their van	Van costs that land in the wrong month
Monthly	Reconcile each bank and credit card account to its statement	Bank charges and errors. Publication 583 recommends doing this every month.
Monthly	Review open balances by payer and filing deadline	Claims about to age out. WellTrans in Indiana, for example, rejects any invoice received over 90 days after the ride.
Monthly	Confirm account 2100 is back to zero after tax deposits	Missed payroll tax deposits
Monthly	Record vans bought, sold, or parked for good	A van list that no longer matches the lot
Monthly	Read the four reports below and note one action from each	Problems that only show up in totals
Monthly	Move money for taxes into a separate savings account, then back up the books	A short tax bill in April
Year-end	Match each Form 1099-K to private pay revenue, and send the books to your accountant	Gaps between your books and what the IRS already knows

Four reports to read every month

A closed month is only useful if someone reads it. These four reports answer most owner questions.

Report	What it shows	Action
Profit and loss by payer	Which payers carry the business and which barely cover driver time	Price, renegotiate, or grow the payers that earn their keep
Profit and loss by van	Which vehicles lose money after fuel, repairs, and insurance	Change the van’s trips, fix it, or replace it
Receivables aging by payer	How much each payer owes and for how long	Follow up on anything past normal terms
Takebacks and penalties by payer	What denials and late pickups cost you	Fix the trip-record habit behind each one

The cash flow guide shows how to turn the aging report into a forecast of when money will actually arrive, and the payer mix guide covers what to do when one payer dominates the revenue report.

How long to keep the paperwork

Each record follows whichever retention rule runs longest. For NEMT companies, that is often a broker contract rather than the IRS.

Record	Minimum to keep	Source
Books, bank statements, receipts, and payer statements	3 years after filing in most cases. 6 years when unreported income tops a quarter of the gross income shown on the return. 7 years for a bad debt claim.	IRS Publication 583
Employment tax records	Four years or more, counted from the due date or the payment date, whichever comes later	IRS Publications 15 and 583
Van purchase, improvement, and sale records	Until the limitation period runs out for the tax year in which you sell or scrap it	Publication 583
Mileage logs	As long as the tax records they support. Record miles when the trip happens or soon after, and a log updated once a week still qualifies as timely.	IRS Publication 463
Medicaid trip and payment records	Whatever your state program and payer contracts set	42 CFR 431.107 and your agreements

Under 42 CFR 431.107, a Medicaid provider agreement commits you to keeping records that show how much service you furnished. It also commits you to producing those records, together with your history of payment claims, whenever the Medicaid agency, HHS, or your state’s Medicaid fraud control unit asks. Broker contracts often add more. WellTrans’s Indiana agreement requires records for the entire contract term and ten years after it, with copies due on three days’ notice. Publication 583 also reminds owners to check whether an insurer or lender needs records longer before throwing anything out. The documentation guide lists what a complete trip record includes.

Keeping the books close to the trips

The month-end close goes fastest when every payment is already tied to the trips it covers. In HealthRide, each finished ride becomes an invoice at the rate that payer pays. Every payment you receive, whether a card charge, a check, or money from a broker or insurer, is recorded against the invoice it settles, so one ledger always shows who still owes you. Invoices export in the format QuickBooks imports directly, so the close starts from numbers that already agree.

Bookkeeping for NEMT companies: accounts to set up and a simple monthly routine