Stop struggling with your AR
April 27, 2018
By Adam Reisch, CPA, CFP®, CCA, CGMA, Partner
- Accounts receivable: two words that can strike frustration and dread into the heart of any dental or health care practice. Between your patients’ out-of-pocket costs and your insurance reimbursement rates, getting paid can feel like a maze of uncertainty for any practice.
Poor accounts receivable policies can, in a worst-case scenario, force practices to write off procedures. At times, too much time has elapsed, or patients move out of the area and it becomes near impossible to collect. Additionally, a practice can quickly begin to act like a bank, effectively lending services but not getting paid for them, which can make you feel handcuffed from other uses of that cash.
If you’re currently struggling with your accounts receivable policies, or you’re determining ways to improve your rates of payment, there are steps you can take to improve in your practice right away.
Know your patients
For small, long-time, well-established practices, knowing your patients seems obvious. For larger practices, knowing your patients can be more of a challenge. However, when it comes to accounts receivable, knowing your patients is more than knowing their name and dental history; it means knowing their true costs for your services. What insurance do they have? What does it cover? Will they pay out-of-pocket? Is it better for them if they do?
Before your patient comes in for their next annual checkup, ask for their most recent insurance card or if they will be paying out-of-pocket. This simple step can save you and your patient significant headaches later. If they have insurance but will still have an out-of-pocket expense, discuss up front so they can arrange to pay the day-of or set up a payment plan. While sending a bill after-the-fact is always an option, establishing expectations ahead of time will go a long way in maintaining a good relationship with your patient and their account. Prioritize prepping the payment method ahead of time and save yourself and your patient the hassle later.
Improve your internal processes
Internally, several steps can be taken to improve your practice’s accounts receivable management. Establishing procedures and expectations with your staff for obtaining estimates from insurance companies upfront is an important first step. Your staff should be knowledgeable of each patient’s situation, or ask and learn, so they can accurately convey the cost of services to the patient and establish expectations for payment. This may mean a significant investment in training your staff on acquiring the necessary details from your insurance companies and other vendors, as well as guidance on how to handle or address each patient’s unique situation.
Additionally, by offering a variety of payment options and plans for your patients, you improve your ability to collect payment and maintain a congenial relationship. Consider what policies, procedures or technologies need to be established internally to provide payment plans, ACH payments, and alternative forms of payment such as credit card and pay-by-phone. In the current marketplace, your patients expect options, and investing in the technology to provide as many ways to pay as possible can greatly improve your accounts receivable’s success.
Consult objective but knowledgeable advisors
The time may come when you require outside assistance to get your accounts receivable in order for various reasons. Some of those triggers may be:
- You are consistently or often having to borrow from a line of credit.
- You are stressing about the timing of making any kind of purchase versus when the cash flow will arrive.
- You are looking to transition the practice.
In each of these situations, an objective third-party may be necessary to establish effective and efficient policies and procedures to improve your accounts receivable for cashflow, alleviate stress and set up the business for sale or exit.
An outside advisor can help you see where your policies are lacking and how they can be improved. They can also provide a clear, third-party perspective on your cashflow situation and what you can and cannot reasonably accomplish in your current state. Additionally, when it comes to selling a practice, the dental industry is unlike most others in that there is typically a lot of cash available during operation, but not a lot to buyout at the end. In all of these instances, an outside perspective can make a significant impact in improving your practice and setting you up for success.
Establishing an efficient and effective accounts receivable process improves cash flow, limits the amount of funds spent on lines of credit and interest, provides the ability to take money out of the practice and invest it elsewhere, and brings peace of mind to you and your employees. Take these steps and considerations in mind and prioritize your accounts receivable today to greatly improve your odds for success in the future.