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    Does your accounts receivable need CPR?

    Frustration and stress in the dental practice are clear indicators of management system shortfalls, but nothing screams “crisis” louder than a practice that is struggling financially. You have been looking at your production numbers and your collections numbers and they seem okay with a “little shortfall” each month in collections, so why are you stressed when you sit down to sign the payroll checks and pay the bills?

    The key statistics that every practice needs to monitor must include understanding the accounts receivable (AR) numbers. When you have a “little shortfall” from your collections each month, these account balances are aging on your accounts receivable. If your accounts receivable are growing, it is costing you more and more to collect each dollar.

    Benchmarks for measuring the health of your financial system through the accounts receivable are:

    1. The total of the accounts receivable should be no higher than one half of a month’s average production.

    2. The over-90-day account balances should be no more than two to three percent of the in-control goal amount for your AR. (If your software system ages beyond 90 days you will need to add all column totals from 90 and older together and then divide by the total to find your percentage.)

    3. Insurance claims should never be in the 90-day-or-older columns.

    Exceptions:  if the claim is the secondary it is possible it might age into the 90-day-past-due column. If you are filing both medical and dental claims it is likely that one of the claims may be aging beyond 90 days. And finally, if you are dealing with state or federally-funded Medicaid plans, it is possible the claims may be in the 90-day-and-older columns.

    When monitoring your AR statistics you will want to have it provided to you in a month-to-month comparison, it will assist you in seeing trends.

    Table one reflects an AR that is very high, well above the goal for this practice. From January to February, the total grew slightly, however, the expectation would have been for the AR to decline because the collections goals would be based on collecting over 100 percent each month to decrease this out of control AR.

    Continue to page two for more...

     

    Cindy Ishimoto
    Cindy Ishimoto has more than 30 years of experience in the dental industry, initially as an assistant and business auxiliary, then ...

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