As a practice, all your billable services get invoiced and experience a period of time before they are paid. That period is captured in your Accounts Receivable. At the highest level your AR is a dollar value that shows all open invoices. As you dig into your AR, you will find there are several elements you can take away to help you make decisions on the business side of your practice. Some aspects are Days in AR, rolling AR by days, AR by clinic, AR by payer, AR by patient. These data points help you make business decisions. Here are 4 way you should be using your AR reports to manage your practice.
1. Setting Goals and KPIs
Whether you outsource your billing or handle it in-house, your billing efforts need to be monitored. Tracking AR over time, in time buckets, and your average Days in AR give you the data you need to set goals. It is also the data foundation on which to set Key Performance Indicators. Your billers need to be held to standards and tracked.
2. Managing Your Cash Flow
Understanding your cash flow and knowing how to project future cash flow is an important piece of data as you make business decisions. Can I hire another employee? Can I afford to invest in new equipment? Knowing your future cash flow based on trending AR helps you answer and prepare for these types of questions.
3. Stop Trouble Before It Happens
There is more to your AR then just ‘getting paid.’ If you are paying attention to your aging AR you may be able to stave off trouble. Staying on top of your aging can help you control your bad debt, write offs, and delinquent accounts. You can take immediate action based on these reports. An example is noticing a local insurer is always above average in Days in AR. If you have a month when that insurer represents a larger portion of your invoicing, you’ll know to watch your cash outflow and make sure to push to get their Days in AR down during that period.
All the reports you look at should help you make business decisions. If you want to read more about how to monitor your AR, check out 2 Ways to Monitor AR. As you learn to read the AR reports you’ll find these reports can increase your efficiency and stability when used correctly.