Need Money? Look Here
Dr. Greg Williams—Case Study #531
It is interesting to note that when times are good, a dentist owner can fall short when it comes to being a business owner.
Dr. Williams now understands what a poor business owner he has been. His practice ran on automatic, but it worked fine for eight years because times were good—even great!
What Dr. Williams Had to Learn:
What Dr. Williams Discovered about His Practice:
His Accounts Receivable Report revealed that the ratio of A/R to Net Production was close to 2x his net production. Industry standards are 1x or less. Interestingly enough, he was given an A/R report each month that revealed his A/R ratio was 1.3 and he was okay with that. The fact was that his true A/R was 1.8 because the A/R report that was being generated by his Financial Coordinator included $35,000 in credit balances. This was reducing his true A/R by $35,000! She didn’t know any different and he didn’t either.
How Dr. Williams “Turned over Rocks”:
1) $20,000 in outstanding insurance claims is an example of cash sitting on a tree ready to be picked. All it takes is someone to pick it. The Financial Coordinator should be making telephone calls to the insurance companies at 15–20 days past due if the claims are submitted electronically and still outstanding.
What should the doctor do? Review the “Outstanding Insurance Claims Aging Report” monthly to confirm that the claims over 60 and 90 days are minimal. No days overdue would be the goal, but at minimum the Financial Coordinator should know exactly what the delay is on each claim that is not paid.
2) Accounts Receivables over 90 days should be addressed in the following manner:
What should the doctor do? Ask for a copy of the Accounts Receivable Aging Report each month and take a few minutes to review it with the Financial Coordinator. Discuss where the breakdown was that caused any accounts to become delinquent. Unless the patient gives you a bad check or credit card, the responsibility falls on the Financial Coordinator. About 2% of all net production should be written off as bad debt. Any more than that is a sign of breakdown. Be sure to review your Adjustments Report along with the Aging Report to see how many dollars are indeed being written off to bad debt.
Need extra cash for the practice? Contact McKenzie Management to learn about turning over rocks in your practice.
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