Accounts receivable is money owed to your practice.
When you treat a patient and they owe a balance, that goes to accounts receivable (AR). AR grows when collections slow. AR shrinks when you collect.
Managing AR is managing cash flow.
Understanding Your AR
Total AR: Total amount owed by all patients.
Current (0-30 days): Recently incurred. Usually collectible.
31-60 days: Overdue but recent. More collection effort needed.
61-90 days: Significantly overdue. Risk of becoming uncollectible.
90+ days: Very old. High risk of write-off.
Best practices: Keep most AR in the 0-30 day range. Minimize 90+ day AR.
AR Aging Report
Analyze your AR by age. The distribution tells you how well you are collecting.
Good practice:
- 60% in current (0-30 days)
- 20% in 31-60 days
- 15% in 61-90 days
- 5% in 90+ days
Bad practice:
- 30% in current
- 20% in 31-60 days
- 20% in 61-90 days
- 30% in 90+ days
The bad practice has old, uncollectible AR piling up.
Collection Strategy
Current (0-30 days): Send statement. Light follow-up.
31-60 days: Call patient. Send second statement. Offer payment plan.
61-90 days: Call again. Email patient. Consider small discount for immediate payment.
90+ days: Consider write-off or third-party collection agency.
Patient Payment Plans
Patients often cannot pay the full balance immediately. Offer a plan:
- “You owe $500. We can set you up for 3 payments of $167 monthly.”
- “You can pay $200 today and $300 in 30 days.”
Payment plans reduce patient write-offs and improve AR collection.
Reach Manages AR
Reach remote team members trained in collections:
- Send statements (automated)
- Call overdue patients
- Offer payment plans
- Update AR as payments come in
- Flag accounts ready for write-off
- Escalate to practice manager if needed
A dedicated collections specialist can improve your AR by 20-40%.
Performance Metrics
AR as percent of monthly revenue: Total AR divided by monthly revenue
Target: 1-2x monthly revenue (e.g., $100k monthly revenue, $100-200k AR)
Collection rate: % of billed amount collected
Target: 95%+
Days AR outstanding: How long AR takes to collect
Target: 30-40 days
FAQ
**Q: What percentage of AR becomes uncollectible?**
A: Best practices: 2-3%. Poor practices: 10%+.
**Q: Should I use a collection agency?**
A: Consider it for 90+ day AR. But prevention (good collection strategy) beats collection agencies.
**Q: How often should I review AR?**
A: Weekly. Monitor aging report. Identify problems early.
**Q: What if a patient refuses to pay?**
A: Small claims court is an option. But usually not worth the effort for single small balances.
**Q: Can I write off AR?**
A: Yes. But write-off should be last resort after collection attempts fail.