Tag Archives: cash flow issues

Smarter Account Receivable Management

Unpaid claims are a fact of life for many medical practices. Unfortunately, the longer patient bills remain uncollected, the less valuable the receivable becomes to the practice. Keeping the percentage of unpaid patient bills to a minimum should be a priority for all physicians.

Your practice can take a variety of steps toward greater profitability, including speeding up collections and minimizing the denial of claims. It should also focus on cleaning up and writing off old claims.

Develop Accurate Reporting Procedures

Your practice should have procedures in place that generate up-to-date information on the status of each outstanding account. Your accounting staff should have a report that includes the date each bill was sent, the current balance, and the number of days delinquent.

Using the information on that list, your staff should contact delinquent patients on a predetermined schedule. However, you should also consider sending out fewer notices before past due accounts are sent to a collection agency.

Require Payments Up Front

Whenever possible, have your front desk staff collect patient copays, deductibles, and prepays at the time of service. Make paying up front easier for patients by accepting debit and credit card — and possibly even online — payments.

Focus on Accurate Coding

Since coding errors are the source of most denied claims, training staff to focus on accuracy in coding should be a priority. In addition, the submission of “clean” claims within a certain number of days after a service is rendered should be a goal of your staff.

Review and Write Off Old Receivables

Review your accounts receivable. You’ll probably discover that, for certain accounts, your practice loses money every time it generates statements, considering labor costs, postage costs, and envelopes. Write off accounts that are not worth pursuing because they are either too old or are for small amounts. And consider writing off other accounts that seemingly never will be paid because your office failed to send the bill in a timely manner or because the patient did not obtain the correct referral for the services your practice provided.

We can help your practice implement procedures that can reduce the number of uncollected bills. Please contact us for more information.

Monitor Cash Flow For a Healthy Bottom Line

If you want your business to grow and remain competitive, a solid financial plan and a well-conceived strategy can mean the difference between boom and bust.

The obvious place to start is with a cash-flow analysis.

Review your company’s cash flow statements to understand the cycle of inflows and outflows that stem from accounts receivables, inventory, accounts payable and credit terms. This helps identify any problem areas that need improvement.

A cash flow statement also highlights important distinctions, such as the differences between cash and sales or inventory. A ledger full of credit sales may look good on your Statement of Income, but that won’t help if you can’t pay your employees until you collect on those accounts.

By the same token, a warehouse full of inventory may represent great potential, but the electric company wants to be paid in cash, not with a gross of glow-in-the-dark shoe horns. Once you have analyzed your company’s cash flow statement, you need to create a cash flow projection.

This is an important cash management tool that lets you see when expenditures are likely to be too high or when you can expect a cash surplus and may want to arrange some short-term investments. The cash flow projection also provides a good idea of how much capital investment your business may need.

Cash flow statements and projections help your business in other ways, too:

  • If you are going to approach a lender for financing or potential investors for a cash infusion, they are going to want to see a cash flow statement based on generally accepted accounting principles (GAAP), as well as a cash flow projection based on industry averages, solid business assumptions, and market trends.
    The cash flow statement demonstrates how you manage your available cash. If you have borrowed from the lender before, the loan officer is going to want to see what you did with that earlier cash. If you managed the money well, your cash flow statement will provide the evidence.
  • If your business hits seasonal low-cash cycles every year, cash flow statements and projections will highlight those periods.With that information you can shop around for low-interest short-term financing to help keep your company running smoothly through those anticipated lean times. If your company hasn’t projected those cash crunch cycles, your choices become limited. You may wind up letting your bills slide and damaging vendor relationships, or you may be scrambling to arrange emergency financing that is likely to carry a high interest rate.

Knowing when you are approaching the threshold of a traditionally high or low cash period also can help you determine the timing for launching a product or service or the need to trim or expand your company’s staff.

Meantime, your company’s cash flow projection will show you, as well as potential lenders and investors, what to expect six months or a year from now. Cash flow projections are the key to making smart and profitable business decisions.

But, you may be thinking: My company has a Statement of Income. Why does it need a cash flow statement?