#25: The Build-Up Weekly

*Welcome to the 25th edition of The Build-Up, where we deliver insights and inspiration for dentists on every stage of the private practice journey. If this email was forwarded to you, you can click here to subscribe.

Dear friends and colleagues,

Is it Friday already? Time is flying - and I hope you’re all doing well.

After my last newsletter, I received an email with a specific request.

Soon after, I got another one. Then two voices became three. A chorus quickly formed. There was no mistaking the will of the readers.

You have spoken.

I have listened.

Here is the Halloween content you’ve all been waiting for:

It’s (a corner of) Andrea’s very haunted house!

We’re going to be diving into AR and credit balances in this newsletter.

The topic shouldn’t be spooky, but - at least for some doctors - diving into this topic is like entering a haunted house. If that’s you, you’re not alone!

Whether your AR is as high as Frankenstein's forehead or as low as a black cat's shadow on a moonless night, we’ve got you covered.

Read on for benchmarks, best practices, and - as always - a little encouragement.

Addressing AR and Credit Balances

How much is AR is normal? How do I check my AR and credit balances? How did my AR get so high? What can I do about it? What do I do with these patient credits? Help!

This was a busy week for me, and one of the challenges involved a deal in escrow with significant AR and credit balance issues.

I’ll do a separate write-up on how we typically handle AR in a practice sale.

But today, I wanted to simply recommend that all practice owners look closely at your current accounts receivable and credit balances!

This is one of those ‘preparing to sell’ items that can make a huge difference when it comes time to actually transition - but it’s also good practice for any practice owner at any time.

The AR is your money, after all. You earned it, so don’t miss out on depositing it in the bank account.

And the credit balances represent your patients’ money on your books. You owe them (and, even after a sale, they could still come after you, depending on how it is handled).

As a broker, excessively high AR and credit balances can make for difficult conversations with both the buyer and the seller, and it can be difficult to find a resolution.

So what is excessive?

The standard benchmark is that AR should not exceed one month’s average collections.

If your team is presenting a pre-payment option, my opinion is that one-half of one month’s average collections is a healthy figure for AR.

But of course, it’s more complicated than that. If you look at an aging report, the 90+ days old category should ideally be close to zero. And - again, ideally - you don’t want any patient balances over 30 days.

The longer the money sits uncollected, the harder it will be to collect.

The same goes for credit balances. If your patients are regularly pre-paying for treatment (something our clients have really astounding success with), your credit balances could be pretty high.

But you don’t want any credit balances on patients without scheduled appointments.

How do I check?

Ok, so you know where your AR is supposed to be. Now let’s check to see where it is. Here is how to run AR and credit balance reports on a handful of the most popular practice management software products.

Dentrix AR Aging Report: From the Office Manager, from the Reports menu, point to Ledger, and then click Aging Report. Select ‘Over 0’ for Minimum Days Past Due and only ‘Standard Aging’ for Select Report Types. Click OK.

Dentrix Credit Balance Report: From the Office Manager, from the Reports menu, point to Ledger, and then click Aging Report. Select ‘Over 0’ for Minimum Days Past Due and only ‘Credit Balances’ for Select Report Types. Click OK.

Eaglesoft Accounts Receivable by Responsible Party: Go to Reports, Financial, Accounts Receivable by Responsible Party, and then process the report.

Eaglesoft Credit Balances: Run the same Accounts Receivable by Responsible Party report. When you are previewing the report, Click on the Filter button at the top left of the Report Preview window. Then select Range of Account Balances and enter -999,999 in the first box and -.01 in the second.

Open Dental Accounts Receivable Report: In Standard Reports, in the Monthly section, click Aging of A/R. Select Any Balance, group by Family, and select All Billing Types, All Providers, and the clinic we are analyzing (if applicable). Do not select any of the checkboxes for Exclude Patients, Include Patients, or Only Patients. Click OK.

Open Dental Credit Balances Report: Start in the same place as the AR report. Select Any Balance, Group by Individual, Billing Types All, Providers All, Include Patients with Negative balances, and Only Patients with Negative balances. Click OK.

Once you have your reports, it’s time to check on the health of the practice by answering the following questions:

1. Is my total AR less than one month’s average collections?

2. Are most of my AR patient balances current (0 - 30 days old)?

3. Do all the credit balances attach to patients with scheduled appointments?

The goal is to be able to answer YES to every question above.

Now it’s time to collect.

It’s always good to assign one team member to the task of collecting money and give them some dedicated time and space.

Start with the patients with the largest balances.

Large unpaid balances often stem from unsettled insurance claims. When dealing with patients, explain the origins of their balances and establish a payment plan.

Next, go after the oldest AR.

For insurance-related balances, contact the insurance providers promptly to sort out the payment, ensuring it's addressed before any deadline.

For patient-related old debts, ascertain why they've remained unpaid and either pursue payment aggressively or consider writing them off. Long-standing debts are harder to collect.

Go through the credit balance list.

If all your credit balances are for patients with treatment scheduled in the next few weeks, then your job is done.

But if there are old credits, credits attached to inactive patients, or large credits attached to patients without any major treatment plans, then it’s time to address the issue.

Remember: it’s not your money.

Ideally, you get the patient back in for the treatment they’ve paid for and treat them. If it’s a smaller balance, make sure you apply it to their next prophy.

If you can’t reach the patient, here’s advice from the CDA:

Oddly enough, this article was published on March 16th, 2020. It has no likes.

Wrapping Up

Every successful practice has faced its share of financial hurdles, and AR issues are no exception.

If you’re looking at a large AR balance or a credit balance quagmire, here are a few final thoughts.

Educate and Empower: Sometimes, AR issues arise due to misunderstandings or a lack of communication. Take the time to educate your team and your patients about billing procedures, insurance claims, and payment expectations. A well-informed team and patient base can prevent many AR challenges.

Stay Positive: Financial hurdles can be daunting, but with perseverance and a proactive approach, they are always surmountable. Every challenge you overcome strengthens the foundation of your practice.

Reach Out for Help: If you’re overwhelmed, reach out to a consultant. They can provide you with tools, insights, and strategies tailored to the unique needs of your practice. Don't hesitate to seek guidance.

Know Your Value: Remember, as a dentist, you provide an invaluable service to your community. While managing the business side of your practice is crucial, never lose sight of the positive impact you make in your patients' lives every day.

You are not alone in this journey. Stay resilient, seek support, and keep pushing forward!

In Keeping with the Theme…

We took our little IPS mascot to the pumpkin patch last weekend.

Here’s George at the barn. 🥹

And with that, I hope you enjoyed the 25th edition of The Build-Up Weekly.

With best wishes to you and your families,

Trevor Kimball, PhD

p.s. please consider using the link below to share our newsletter. 🙂 

These Six Mistakes Can Cost You Six Figures

Download our free guide “6 Mistakes to Avoid for a Successful Practice Sale” here. It’s material that I’ve covered in this newsletter before, but - if you’re contemplating a practice sale - the advice in this guide is crucial.

And if you’re ready to have a conversation with a practice sales professional, get connected with your local Integrity Practice Sales broker here.

It’s worth having a conversation, no matter your current transition plans.

You never know what you’ll discover together.