How to improve your cash flow
By Jeffrey Elkin and Tammie Margotta

Adequate cash flow — money coming into and flowing out of a practice — is the most important factor in the survival of your practice. It is not enough for your practice to attract patients and choose you over that of your competitors. The sale must be billed and collected properly.

Slow collections are often symptomatic of more serious problems within a practice. The problem may not be poor services, but the result of poor submissions, collections, and follow-up practices with insurance companies and patients.

Statistics indicate that “old debts don’t die, they just fade away.” The likelihood of collecting an account diminishes from 97 percent at 30 days, to 45 percent at 12 months.

The obvious objective for a practice wanting to improve its cash flow is to accelerate collections. However, the periodic monitoring of accounts receivable is an important activity that is often considered a low priority as you are faced with the time-consuming, day-to-day pressures of helping your patients.

A solution to improving collections: Develop a method to analyze the status of your outstanding accounts. Here are some suggestions:

• Prepare an accounts receivable aging schedule. An aging schedule will direct attention to problem accounts on which the collection efforts should be focused, for example, on accounts in excess of 60 days. Do this at least once a month.

This schedule should identify the status of each open invoice as of a certain date. Organize the information alphabetically by patient, and summarize invoices according to age in days.

• Calculate your day’s sales outstanding (DSO). Divide total receivables at month’s-end by average daily collections (annual sales divided by 360 days). The result shows if patients and insurance companies are meeting your invoice terms.

Compare each month’s DSO to prior periods. An increase in DSO indicates deterioration in collections.

• Use effective invoicing procedures. Verify the accuracy of each claim. Make certain that credit terms are clear.

• Follow invoicing instructions. Insurance companies and patients often delay payment until discrepancies are resolved.

• Monitor patient payment trends. Watch for shifts in payment patterns, which are warning signs that may indicate deteriorating financial conditions or dissatisfaction with your product or service.

• Intervene, when necessary. The collection process is not a strictly clerical function. In difficult cases, it takes your intervention with patients or insurers.

• Offer discounts to induce early payments. Give patients an incentive to pay promptly.

• Systematically use ‘last resort’ techniques. Consider prepayment for delinquent patients and convert unsecured receivables into promissory notes. If these techniques fail, consider collection agencies or legal action.

Effective receivables management involves good record-keeping, constant monitoring, and your involvement.

Jeffrey Elkin and Tammie Margotta are with Coastal Medical Receivables, Inc., www.cmr-fl.com, a billing and insurance collectibles company devoted to the chiropractic community. They can be reached at 866-785-6700.

The information contained in this article is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.