Managing The Dollars
Which money metaphor best describes the financial state of your practice these days? Put your money where your mouth is – cash up front practice, eh. Another day, another dollar – clearly a collection problem here. Cash cow – well, aren’t you the lucky one. While some of you may be laughing all the way to the bank, others are on the verge of losing their shirts. And oftentimes, the difference between the two comes down to how you manage the dollars as much as the dentistry.
In last week’s article we discussed two key factors that are critical to creating steady cash flow in the practice:
But having those in place is only part of the equation. When it comes to implementing your practice’s financial policies, you need one more key element:
Certain people are simply not cut out for the position. Effective collections requires someone who is assertive, polite, tactful, confident, and goal oriented. The person asking for payment must understand it is her/his job to collect from patients and be accountable for the results. But they can’t do it without your support. If your friends and family are regular exceptions to the payment policies, you are undermining your practice’s ability to maintain an effective financial policy.
Now that you have the policies, procedures and people in place, you need to determine if you’re poised for the poor house or livin’ large. In other words, what’s the status of your accounts receivables? It can be ugly. It’s a task that many dentists just don’t want to face. After all, it can be pretty disconcerting to realize you have $150,000 or more in uncollected fees eating away at your bottom line, dollars that could be used for doctor and staff training, new equipment and technology, retirement, perhaps even a salary increase or bonus. Ignorance is expensive. So get the numbers. Face the facts. And tackle the job. Here’s how:
1. Generate an aged accounts receivable report monthly that lists every account with an outstanding balance and date of last payment.
2. The AR report also should “age” the receivables showing the “current” column, which is revenues produced in the last 29 days that have not been collected, as well as a breakdown of accounts that are 30, 60, and 90 days past due.
3. Total all monies over 90 days delinquent. The percentage should not be over 10% of your total accounts receivable.
4. Examine the charges in the "current" column of the report. These are uncollected monies produced in the past 29 days. Because the practice should have a minimum of 45% over-the-counter collections for the month, there should be no more than 55% in the current column awaiting insurance reimbursement.
5. Always run the report with credit balances because credit balances need to be added back to the total accounts receivable.
If the total exceeds your monthly production, it's a red flag indicating problems in one or more of the following areas:
Insurance System. The financial coordinator should know the amount anticipated from the insurance company. However, the patient should be expected to pay the bill and receive reimbursement from the insurance company.
Billing. Don’t wait to send bills once a month. Include a self-addressed envelope and state the date that payment is due. Consider electronic billing and a vehicle for patients to pay online. Bills that are 30 days past due should include a personalized delinquent message. For example, “Dear Mrs. Jackson, we did not receive your payment on Sept. 15 as requested. If you are experiencing financial difficulty, please contact our office. Otherwise, we ask that you take care of this account balance by March 1. Sincerely Julie Moore, Business Manager.
Remember, patients that balk at the notion that you deserve prompt payment are also more likely to be the last minute cancellations and no-shows that wreak havoc on both your schedule and your bottom line. The vast majority of your patients are more than willing to meet your prompt payment expectations, as long as you communicate your policy clearly and in advance. And that, you can bank on.
For more information on this topic, visit my blog: The Lighter Side
Interested in speaking to me about your practice concerns? Email firstname.lastname@example.org
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