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Establishing an Accounts Receivable System by Sandy Pardue

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The most effective way to handle money management is by implementing a step-by-step accounts receivable (A/R) system. It's great to produce high numbers, but it's a waste of time if you aren't getting paid. If you fail to establish a solid A/R system, you will lose money through nonpayment, late payments and staff time spent on collection efforts.

The first action is to clearly define when and how accounts are going to be paid, as well as the payment options you will offer. All of the actions within the A/R system require written policies and procedures to give your team members direction on how to carry them out. You will need to appoint a financial coordinator whose main purpose is to collect payments for the dentistry that is delivered. This person should be informed of the practice's monthly collection goal of 98 percent to 99 percent.

If your practice is not currently collecting at least 98 percent to 99 percent of adjusted production, the problem is most likely in one or more of the following areas.

Financial policy
Your practice should establish a firm financial policy. It should be in writing and include payment options (see the section below). Post it on your website and give it to new patients and existing patients making financial arrangements.

Payment options
All of the payment options you offer should be listed on a professional financial arrangements form so patients can choose how they want to pay. Each option should be clear and easy to understand.
  • Pay as you go: The patient pays in full using cash, check, or credit card on all visits as treatment progresses.
  • Easy pay—credit card payment option: Three equal installments are paid by credit card. One-third of the payment is due at the first appointment; one-third is due 30 days later; and the remaining one-third is due 60 days from the initial appointment.
  • In-office financing: Interest-free for up to 90 days, based upon credit approval.
  • Advance-payment discount (receive discount): Five percent bookkeeping courtesy discount for payment in full by cash or check at the start of treatment, resulting in a one-time payment.
  • Major service—two-payment option: A two-payment option for treatment with copayments of more than $300. Pay the first half at the first appointment and the second half at the subsequent appointment.
  • Third-party financing: by arrangement with a third-party finance company. It is an interest-free term loan (up to six, 12, or 18 months) with no down payments, no annual fee, and no prepayment penalty. Longer payment options are available with interest.
There should be a place on the agreement for the date, total fees, down payment, due dates and signatures of both the team member presenting the financial arrangement and the person responsible for payment. Always give a copy of the signed agreement to the responsible party, and keep a physical or scanned copy on file. In order for your systems to remain consistent, the following guidelines and policies should be in writing:
  • Payment options for patients with insurance
  • Payment options for patients without insurance
  • How to handle secondary insurance policies
  • Financial arrangement form
  • Third-party financing protocols
  • Discounts you will offer (pre-pay, senior citizen, staff/family discounts)
  • How to handle payments from transient and emergency patients
  • Financial policy
  • Collections policy
  • Billing system
Establish an exact protocol for sending statements each month. The financial coordinator is responsible for making sure these are sent and the protocol is consistently followed, whether they are outsourced or prepared in the office.

Studies have shown that collections come in more quickly if statements are sent between the 25th and 28th of the month. Some people tend to pay the monthly bills that come in first.

Send statements to everyone who has a balance, including those accounts with outstanding insurance. If you do not, the patients will get the idea that they do not owe you money. They need to be aware of the total cost and monies still owed.
    Your statements should include:
  • An exact due date, instead of, "Due in 30 days"
  • Account aging
  • Return envelope
  • Breakdown of services
  • No-charge or courtesy-discount procedures
  • Section to pay via credit card
  • Office address and phone number
  • How to pay online (if you have this option set up on your website)
  • A notice of any rebilling fees that may be added to past-due accounts
Any personal notes
Add "Return service requested" to the front of the envelope. If your patient has a new address, the post office will research and find it for you, for a small fee. This is helpful in keeping patient addresses up to date. If a statement is returned, it's important to resend it with the new address that same day.
    Custom nudge message(s) for the slow payer:
  • "30 days past due"
  • "60 days past due"
  • "90 days past due"
  • "Keep a good credit record"
  • "Payment would be appreciated"
  • "Avoid being turned over for collections"
  • "Save on rebilling charges"
Presentation of financial arrangements
The financial coordinator must be someone who has the right personality for the job. If you have the wrong person or he or she is not trained, the practice will suffer. It's impossible to change or retrain a personality. The ideal candidate would have banking experience, be motivated by goal setting, have good communication and listening skills, be good with numbers, and be organized and diligent with follow-through. He or she needs to feel confident asking for money owed to the practice. This person cannot over-sympathize with patients' financial situations and/or worry about them not being able to afford the treatment. A timid or shy applicant may not be the person for the job.

Always make financial arrangements before scheduling patients for treatment. It is almost impossible to take that appointment back after they tell you they don't have the money.

Insurance system
To improve collections from patients with insurance, verify benefits in advance and, when available, use online or phone predeterminations. This allows you to have more information about their benefits. You can use effective verbal skills such as, "Your insurance company says you will owe $50."

Utilize electronic claims to speed up reimbursements. Make sure you have included the full details that the insurance company will need for the claim, such as X-rays, narratives, etc. Send X-rays on crowns, implants, root canals (before and after) and SRPs. You will also need to include a perio chart for SRPs.

Generate an insurance aging report and track outstanding claims each week. Name a set day and put it on the insurance coordinator's checklist. Pay attention to the clearinghouse status report. Look for verbiage like "zero payment," "rejected," "holding claim" or "unprocessed." Many practices wait to receive the EOB (explanation of benefits) from the insurance company, and that will delay payment 30 days or longer.

Consider using direct deposit for insurance payments. This single action will help you get your money faster—you can have payments within a week or less. In addition to being fast, it helps prevent loss or simply waiting on the mail. Once claims are processed, you will receive notice from the insurance company.

Make sure your patients know your office policy regarding dental insurance.

Collection
The financial coordinator should be working past-due accounts on the aging report each month. Collect amounts due as rapidly as possible and give discounts and incentives for early payments. Use a plain envelope with a handwritten address for a collection notice so that the patient will be curious and open it.

I recommend sending three notices before sending an account to collection. If you are threatening collection on a past-due account, always follow through.

Become familiar with Fair Debt Collection Practices Act. State laws will vary. You can learn more about your state guidelines at your state attorney general's office. People there will help you with procedures for collections, nonsufficient funds (NSF) checks, and small-claims court.

Always note all collection efforts in your practice-management software.

Credits on patient accounts
An A/R area that gets little attention is patient credits. Many practices are unaware of the thousands of dollars owed to patients. These credits can make your A/R balance look better than it is.

I recommend looking at this report on a monthly basis. In most states, overpayments held as a credit are considered unclaimed property. Dentists need to comply with state regulations. You must have written documentation from the patient that you have his or her permission to keep this money as a credit. There is also a limited period of time you can hold the money, based on individual state regulations. I recommend that you familiarize yourself with the guidelines in your state.

We know that patients who are current on their accounts like your dentistry, but patients who are late tend to be more critical of the services they received. Having a plan for controlling this area of your practice can provide not only huge dividends, but also happier patients. Better control with good systems is a fast way to boost profitability and help ensure the long-term success of your practice.



Sandy Pardue is an internationally recognized lecturer, author and practice-management consultant. She has more than 25 years of experience in helping doctors with practice expansion and staff development. Pardue is known for her comprehensive and interesting approach to dental office systems, and offers a refreshing point of view on how to make a practice more efficient and productive.


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April 2024
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