How long does it take to collect what you're owed? The longer you wait, the less likely you are to collect it! In this episode, Kirk Behrendt brings back Ariel Juday, one of ACT’s amazing coaches, to break down accounts receivable percentage, where your numbers should be, and what to do if they're not in the ideal ranges. To learn how to collect what you're owed as quickly as possible, listen to Episode 928 of The Best Practices Show!
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Main Takeaways:
Quotes:
“People that owe you money don't like you. You might think they like you, but they don't. They're avoiding you like crazy. You see a patient at the grocery store. They can see you, and they go, ‘Oh my gosh, there's my dentist. I owe my dentist money. I'm going to avoid them.’ It naturally, whether you like it or not, starts to break relationships. So, it's very important to create a healthy relationship between you, your patients, and how they pay in your practice.” (2:51—3:21) -Kirk
“The first [impact of AR percentage] is that cash flow. We need to have a healthy cash flow in. We have to pay the lights, we have to pay our utilities, we have to pay rent. Then, most importantly, we have to be able to pay our team. You also want to be in a comfortable place. If you have to invest in new equipment or new technology or growing the practice, we're going to need money in the bank account to do that. We also know that when we have that cushion, our stress levels are down.” (6:06—6:35) -Ariel
“Like you said, it's not necessarily the person. It could be a process [that's lacking]. We may be inputting our insurance incorrectly, so we're getting inaccurate estimates. So, we don't even know what to tell the patients. Or maybe our team hasn't been in alignment on collecting the patient investment at the time of service. Or maybe we’ve gotten to that point that we’ve trusted that admin team member for so long to handle the finances, and they’ve become a little more comfortable and they're not honoring the original financial policy. Maybe they're becoming a little bit more lenient with those patients that have been coming for a long time. So, in the beginning, we may be starting off setting our team up for failure. On the back end, once we know that a balance is there, we may not have someone or the process to follow up with it, or it may be a weak follow-up. The lack of accountability — maybe everyone is responsible for doing it. We all know, it's like, ‘Well, did you call that patient? Did you send a letter?’ I will say, sometimes we do fall into that comfortability of sending a text message. ‘Oh, I sent them a text.’ It's like, if we can get them on the phone, maybe we can collect. But obviously, no one likes to make those phone calls. But it’s that lack of accountability or that confidence. What do I say when I do get them on the phone?” (6:56—8:27) -Ariel
“In dentistry, you have to teach people how to treat you. You have to teach them how to show up and teach them how to pay so that they're not giving you the rules. You're establishing the rules upfront. You're going to find that your best patients respect your rules, they honor you, they like you, and they respect you. Meaning, they pay on time. We see it from people all the time that don't really create a solid relationship upfront. Their bills that they send out get sent to the bottom of the pile. People now know, more than ever, that they have to pay for things that they're obligated to pay for. So, if you don't have a tight system on this, it’s going to show up in these percentages.” (8:50—9:35) -Kirk
“Zero to 30 days, that's current, healthy and expected. We want to see 65% total aging in that bucket. That means we've just produced it and we're waiting on insurance. Maybe patients aren't completed with treatment just yet. So, you want to see a majority of that there. As we get to that 31 to 60 [days], now it's overdue. It's mildly concerning. We want to see about 20%. We don't want to see anything more than 20% there for it. As we go down, 61 to 90 [days], I want to see 10% or less. This is where people will think that I'm crazy. But 91-plus days, you want to see it at 5% or less because, like I said, those are very hard to collect on, and we want the least amount of balances to be in that bucket. Now, with that said, 5% could seem unrealistic for a lot of us if we’re running those numbers. So, take this benchmark and just make progress toward them. If we’re at 50% in 91-plus days, you're not going to get to 5% overnight — and that's okay.” (9:43—10:57) -Ariel
“[When it’s going well], it means that they have really good alignment on their financial policies. They have good systems in place. So, there are specific team members, typically an admin team member, who is running weekly follow-up reports on insurance claims, following up with those, touching those claims and finding out every seven to 14 days of what we need to do. We have a really good daily process for collecting patient balances when they're coming in the door, and aging accounts are rare. So, if you're looking at those outstanding, they may have a handful of claims because it’s an ortho claim, or they are under review, or getting a peer review, whatever it may be, and the team member can tell you the name of the patient and what the claim is and what the status is. So, they really don't have an issue on these percentages because their collections are 99% to 100% on a weekly basis.” (11:27—12:28) -Ariel
“What other profession do you go into and say, ‘Hey, this is what I'm worth, and this is how long I've worked, and this is what I should be paid, but I'll only take 95% of that’?” (13:01—13:12) -Ariel
“[When it’s not going well], it's likely they don't have a good function accountability chart. So, there's no one person that really owns the follow-up. We can have multiple people who assist with it and make those phone calls, send claims, or send statements. But we really need one person to own it. Sometimes, it’s a lot of, ‘Oh. Well, we all do it,’ or we don't have a good system for consistency and we do it when we have time, or we send statements periodically or monthly and there's no enforcement. Sometimes, it's a lack of having team members and we're not putting an emphasis on this particular aspect. But really, it's going to help your cash flow, and it's unpredictable if we don't have someone who really sits down and takes ownership of it.” (13:49—14:46) -Ariel
“The very first step is to develop a clear financial policy with your team and ensure that we're all on the same page. Even if you say, ‘I have a financial policy,’ go back and review it with your team to ensure that we are still following it the way that we had intended originally. Sometimes, we need to get back to reviewing a system we put into place. We just assumed that it was holding up. Then, make sure that that policy is also being reviewed with your patients so that they know their expectations. They know, ‘When I'm scheduled and I'm coming in, I'm getting this treatment done, and this is my investment.’ That way, you don't have to keep acquiring past due balances. We can stop it from the beginning and say, ‘Okay, even those balances that are past due, we’re going to start fresh today and start collecting.’ That's step one.” (15:59—16:50) -Ariel
“We really need a weekly task list of someone following up on those AR balances. We have to make sure that we're doing it weekly, sending statements, following up on those insurance claims. Like I said, one person should really own this. Now, if you say that's too much for one person, I'm okay with splitting it and saying one person owns patient aging and one person owns insurance aging. Those are some checks and balances that teams like to do. But you still know who to go to for what.” (16:52—17:21) -Ariel
“When you put a patient in the schedule that owes you money, you can count on two things: the balance is going to grow, and they're not going to show up.” (17:57—18:05) -Kirk
“Let's be honest. No one likes to pay bills. So, I would say don't reschedule [patients] without having those conversations. That's why I also sat with them first. That way, if they said, ‘Oh, I didn't know,’ or, ‘I can't afford that today,’ we weren't just going to go ahead and add on to that previous balance that they already had. So, does that mean some patients ended up leaving? Yes. But if they would have stayed, we would have been doing the work for free anyways. So, it was a choice that the doctor and I had. We made an agreement that we were okay with that because it was a very small percentage of patients that came in and did not end up paying their bill.” (19:07—19:51) -Ariel
“Put these processes in place. Talk to your team and get on the same page. Remember, this all can be done in a very empathetic, friendly manner. We don't have to be harsh. I know Barrett talks about [being a] bulldog. It's like, you can be firm in your system and your processes, but you can be very friendly about it. Patients will not be upset by you trying to collect their past due balances.” (20:13—20:39) -Ariel
“If you get the accounts receivable percentage right, you're going to see it fixes other things. Like Ariel said, you don't need to be mean about it. You don't need to be a bulldog. All you have to do is be clear and consistent with patients, and you're going to see it has an incredible impact on the relationship and how they pay for the great services that you provide.” (21:03—21:25) -Kirk
Snippets:
0:00 Introduction.
2:27 Why this is an important topic.
3:21 AR percentage, explained.
5:41 How AR percentage impacts the practice.
9:35 AR benchmarks, explained.
10:58 What it looks like when AR percentage is going well.
12:29 Collect 100% or more of your net collections.
13:34 What it looks like when AR percentage is not going well.
15:24 How to improve your AR percentage.
20:08 Last thoughts.
Ariel Juday Bio:
Ariel has a master’s in healthcare administration and several years of dental experience in all aspects of the administrative roles within the dental office. Her passion is to work with dental teams to empower team members to realize their full potential in order to better serve patients, improve office systems to ensure a well-functioning team/office, and to help everyone have fun in the process!