Quick Answer

If your team is reallocating prepayments in Open Dental every month, it's because deposits collected before the work is done default to unearned income, often as a hidden split. The fix is to go to Setup, Allocations, and turn on the toggle that allows prepayments to attach to treatment planned procedures. Then remove hidden splits from your Pay Split Unearned Types. Once the payment is attached to the planned procedure, Open Dental moves it onto that procedure automatically when the procedure is completed... no manual transfers, no month-end cleanup.

How to Stop Reallocating Prepayments in Open Dental Every Single Month

This is one of the questions I answer more than almost any other, in Facebook groups, on calls, everywhere. It usually sounds something like this. We take a deposit, a prepayment, a check at the time of consult, whatever you want to call it, before the work is actually done in Open Dental. How do we allocate that money? Because right now, my team is going back in and fixing the allocation every single time, running an income transfer over and over, or doing this whole painful reallocation pass at the end of every month just to make the ledger make sense again.

If that's you, I want to walk you through why this is happening, and more importantly, the actual setting that stops it from happening in the first place.

Why This Keeps Happening By Default

Here's the root of it. When you collect money for a procedure that hasn't been completed yet, there's no finished procedure in the system yet to attach that payment to. Open Dental doesn't know what to do with it, so by default, that money goes into unearned income, and it often lands in what's called a hidden split.

Hidden splits are exactly what they sound like. The money is technically in the system, technically accounted for, but it's not sitting in plain view on the ledger the way a normal payment against a completed procedure would. It's tucked away, waiting for someone to manually go find it and tell the system where it actually belongs. That's why your team keeps ending up back in these accounts, running income transfers, or doing a giant reallocation sweep at month-end. The system was never told what to do with that money up front, so someone has to keep telling it, over and over, by hand.

The Setting That Actually Fixes This

There's a setting in Open Dental that changes this entire workflow, and most practices never turn it on because nobody ever told them it existed. It's under Setup, Allocations, and it's the toggle that allows prepayments to be attached directly to treatment planned procedures.

Turning this on does two things at once. First, it lets you allocate a payment to work that hasn't happened yet. Instead of that deposit floating around unattached, you can go into the treatment plan tab, select the specific planned procedure, and attach the prepayment directly to it right when you collect it.

Second, and this is the part that actually solves the reallocation headache, it disables the hidden split for that money. Instead of the payment burying itself somewhere your team has to go dig for later, it shows up directly on the ledger as an allocated prepayment. You can see it. Your front desk can see it. It's accounted for the moment it happens, not discovered three weeks later during a reconciliation panic.

One More Setting Worth Cleaning Up While You're In There

While you're setting this up, go to Setup, Definitions, Pay Split Unearned Types, and take a look at how your prepayment types are configured. If any of them still have hidden splits turned on, that's worth removing so everything stays consistent and visible going forward.

This is also a good moment to rename your unearned income types so they actually mean something to whoever's looking at the ledger. A generic label like "unearned income" tells your team nothing about what kind of money they're looking at. Something like "prepayment deposit" or "treatment plan deposit" tells them immediately what they're dealing with, and makes it a lot easier to spot when something's actually off versus when it's just a normal prepayment doing exactly what it's supposed to do.

What Happens Automatically Once the Work Is Done

Here's the part that makes this whole setup worth the five minutes it takes to configure. Once you've attached that prepayment to a planned procedure, and the patient comes back and that procedure actually gets completed, Open Dental handles the reallocation for you. It automatically generates a transfer that moves the money from that allocated prepayment, sitting in its unearned income type, into an allocated payment against the now-completed procedure.

No manual reallocation. No one has to remember to go back in and fix it. No end-of-month scramble trying to match deposits to finished work. The system does the handoff the moment the procedure status changes, because you told it up front exactly what that money was for.

Why This Is Worth Fixing Now, Not Eventually

This is exactly the kind of setting that feels small until you calculate how much time your team is actually spending on it. Every deposit that goes in unallocated is a small task someone has to remember to circle back to. Multiply that by every prepayment your practice collects in a month, and that's a real, recurring chunk of somebody's time going toward cleanup that shouldn't need to exist in the first place.

Turn on the treatment plan prepayment setting, clean up your unearned type definitions, and train your team to attach the payment to the planned procedure the moment they collect it instead of leaving it sitting unallocated. It's a five-minute fix that saves hours over the course of a year, and it's exactly why this question keeps coming up in every Facebook group I'm in. Once someone actually explains it, it stops being a mystery.

FAQs: Prepayments in Open Dental

Q: Where do I turn on treatment plan prepayments in Open Dental?
A: Go to Setup, Allocations, and turn on the toggle that allows prepayments to attach to treatment planned procedures. While you're in setup, check Setup, Definitions, Pay Split Unearned Types and remove any hidden splits so every prepayment stays visible on the ledger.

Q: Will turning this setting on fix the prepayments already sitting in unearned income?
A: No. The setting only changes how prepayments work going forward. For anything already sitting unallocated, run the Unearned Income report and use income transfers to attach old deposits to the procedures they were meant for. Clean up the old stuff once, and the new setting keeps it from building back up.

Q: What if the patient's treatment plan changes after they pay?
A: The prepayment doesn't disappear. It stays in unearned income until you attach it to the updated planned procedure or process a refund. This is also why clear unearned type names help... your team can see at a glance which deposits need attention.

Q: Which paysplit setting should we use with this?
A: We recommend pairing it with Rigorous. Rigorous requires every patient payment to be allocated to a procedure, an adjustment, or an unearned income type, so nothing slips through unattached. Turn on the prepayment toggle, remove hidden splits, and your ledger stays clean from the moment money comes in.

Q: What if our system has thousands of duplicates?
A: That's more common than you'd think, and it's fixable. At that scale, a structured cleanup works better than picking away at it. SKF's Comprehensive Software Exam includes a review of your insurance setup, so it's a good first step if you're not sure how big the problem is.