“Quicksand “– It is not unique and can occur anywhere under the right conditions. A feeling of helplessness occurs as the victim struggles to get free.
As a professional dental consultant, I see you sinking in quicksand quite often. Sometimes you don’t even know it…you don’t see the quicksand but you feel like you are drowning and can’t breathe.
Let’s take a look at the deepest area of “quicksand” in your practice – Cash Flow!
Making a couple of assumptions at this point, I assume that you feel you are working as hard as you can and the production appears to be adequate; however, “Show me the money!”
Bills are not getting paid on time, retirement plan is not being funded and the staff wants raises.
- Accounts Receivables Over 90 Days
- Outstanding Insurance Claims over 60 days
- Internal Payment Plans Offered
- Over-The-Counter Payments
Accounts Receivables Over 90 Days
Somewhere in dental management history a vicious rumor was being spread that having a large A/R was good because it would guarantee cash flow for the future if the office were to close! “What were they thinking?” We all know that the older the outstanding balance becomes, the harder it is to collect it. The following chart illustrates how money depreciates over time:
Follow these guidelines for improved A/R:
- Establish a specific format for those patients who did not pay at time of service and are to receive a statement. For example:
- Send current statement within 1 week of treatment.
- 31 days – call account holder and send statement with message
- 45 days – call account holder and send statement with message
- 60 days – call account holder and send statement with message
- 90 days – turn over to collection agency and write off as bad debt. The A/R over 90 days should be no more than 12% of your total A/R.
- Send statements daily or weekly instead of monthly This will distribute cash flow evenly, as well as the preparation time.
- Always provide your patient a “Print out of Today’s Procedures” that includes an itemization of services provided. The increases perceived value for the patient. For example:
- Oral Cancer Screening
- Toothbrush and Floss
- TMJ Analysis
These procedures can be set up to generate automatically by your dental software to print on the Receipt of Today’s Procedures (Walk-out slip).
- When checking the patient out, the Business Coordinator should be aware of how much the patient is responsible for and the patient should also be aware. This information was given to them when the appointment was made!…and a copy of the treatment plan was presented! Here is the script:
- “Mrs. Jones, Dr. Brown delivered your beautiful crown today (KISS principal) and your portion is $500.” At this point, the Business Coordinator continues to look at Mrs. Jones and simply smiles. The next person that speaks will lose!
- Accounts Receivable totals should be no more than 1x your monthly net production. Keep in mind that some software programs include your credit balances with your debit balances. This will reduce your true A/R so be sure and add back your credit balances if this is the case with your software. Don’t let the computer fool you!
If you determine, after reviewing your Accounts Receivable Report generated by your computer, that you are above 1x your monthly net production (of course, this means that you need to know what your net production is!)…be patient.
It is impossible for your Business Coordinator to turn it around overnight. “She doesn’t know what she doesn’t know.” Maybe you have never given her guidelines such as these to follow. Monitor the statistic monthly and set a reasonable goal to achieve this healthy ratio of 1:1. Maybe 6 –12 months is reasonable. She may have old payment habits of patients that she will need to break.
Total Accounts Receivable – Credit Balances = Ratio
Net Production for the Month
$125,000 - $15,000 = 1.833
More “quicksand” solutions to come in the future. If you have any questions about this information or would like to share your solutions, feel free to contact Nancy Caudill at Nancy@mckenziemgmt.com or call toll-free at 1-877-777-6151 x 31.
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