7.8.11 Issue #487 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter

Nancy Caudill
Senior Consultant
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Clean Up Your Accounts Receivables
By Nancy Caudill, Senior Consultant McKenzie Management

In the dental business office, there are many systems and protocols that we as consultants review to determine the “health” of that system. This article is to address the area of Accounts Receivables.

What is Accounts Receivable?
According to one definition,it is: money owed to a company by a customer for products or services provided on credit. Does this apply in your dental office? Absolutely! You are a company and your patients are your customers, and unless they pay for their services on the day that you provide them, you are extending credit to them.

It is often confused as to whether the portion that the insurance owes is considered part of the Accounts Receivable…it absolutely is! In lieu of your practice asking the patient for payment, you have elected to ask for the payment from their insurance carrier.  However, it should be indicated in writing that the patient is ultimately responsible for the entire amount of the fee for the services provided. Somewhere along the way, unfortunately, patients do seem to forget this part.

What about the account balances that you see on your report that has a (-) in front of it, such as -$100.00? This indicates that the account has a “credit balance.” This was discussed on my last article. If these accounts are not excluded from your Accounts Receivable Report, your report will be incorrectly reduced by the total amount of the credit balances.

The Accounts Receivable Report
It seems that all the dental practice management software programs approach “the report” differently. Below is listed a few of these approaches:

  • Some allow you to easily click a button to exclude the credit balances
  • Some default to “all” so you must manually enter $.01 or more to exclude the credit balances
  • Some allow you to “filter” out the credit balances by entering a balance range of $.01 - $999,999.99

What is important is that when you generate your Accounts Receivable Report, it does not include the credit balances.

Current Balances
In most cases, these are balances that have been created within the past 30 days or less. Be warned, however, that if you are using a software that requires you to “close the month” on a monthly basis, your accounts will remain in Current. For example, a practice’s A/R reflected over $100,000, all in current. Upon further investigation, they  said that they did not “close the month.” As a result, all accounts remained Current. As you can see, this creates a major problem when attempting to determine which accounts are older and need attention.

Also, some software keeps all of the Outstanding Insurance Claims in Current, for some reason. Fortunately, there is also a breakdown available of the amount that is considered insurance so you can determine how much is actually current.  Remember, even though it is outstanding from the insurance company, it is still considered part of your A/R.

Another possibility is that all the credit balances remain Current if you include them in your report.

30 days
Excluding credit balances and insurance claims, the 30 days past due balances are part of the total amount that was posted to your patient’s account that is 30-59 days past due. Here is another interesting piece of information…if you are suppressing your statements because of claims outstanding, in some cases you have the option to not age the patients’ estimated portions until the claim is paid! In some cases, the patient portion will continue to age even though they are not receiving a statement. When the claim is paid and the statement is generated, all of sudden the patient has a balance that is 60 days past due. This doesn’t always make the patient happy.

60 days
By the time your patients’ balances are 60 days past due, your Financial Coordinator should have already made an attempt to contact the responsible party to inquire on the expected payment. McKenzie Management suggests that you start contacting your past due accounts at 31 days. This is a “courtesy call” to confirm that the patient is receiving their statement and the address is correct.  It is quite fine to offer to accept their payment by phone using their credit or debit card.

A follow-up call should also be placed at 45 days past due, attempting to make firm financial arrangements for payment of the balance on the account.

90 days
At 60 days past due, there is a serious problem with this patient’s account. After an additional attempt to collect by phone or letter, you, as the practice owner, have options.

  • Write off the balance.
  • Continue to collect with additional phone calls and statements.
  • Turn the account over to a collections agency after informing the patient of your action.
  • Ignore it and hope they pay.

Should you elect to ignore it but feel that it is a waste of postage and paper to continue to send statements, at least flag the account so it is not included in your “active” Accounts Receivable dollars at some point in the near future.

Your Financial Coordinator works hard to maintain a healthy A/R of 1x your net production. It is discouraging for her when she is working with accounts that are over a year old, the patient hasn’t been seen and no payment has been made. For her sake, write this account off so you see what your “true” A/R is.

If you would like more information on how McKenzie's Consulting Coaching Programs can help you IMPLEMENT proven strategies, email info@mckenziemgmt.com.

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