Key Takeaways

• Extending credit is common in dental practices, but unmanaged credit risk can quietly strain cash flow and staff resources.
• A simple, objective credit risk rating system helps teams apply billing decisions consistently and reduce emotional judgment.
• Written payment agreements are essential for larger balances and extended payment plans.
• Ongoing monitoring, documentation, and a defined collections process prevent small issues from becoming costly write-offs.
• Proactive credit policies protect the practice while maintaining professionalism and patient trust.

For many dental practices, extending credit is a routine part of delivering care. Whether receiving in-house payment plans, waiting on insurance reimbursements, or billing third‑party payers, timely collections are essential to maintaining healthy cash flow.

Flexibility is valuable, but extending credit without clear guidelines can quietly create financial strain. Even a small number of slow‑pay or unpaid accounts can place pressure on your cash flow and add stress to your front office team.

The objective isn’t to eliminate flexibility. It’s to manage credit risk with intention, professionalism, and consistency so your practice stays healthy while preserving patient trust.

Implement a Simple Credit Risk‑Rating System

Not every account carries the same level of financial risk. Establishing an internal risk‑rating structure helps your team determine:

• Which patients or accounts are eligible for billing
• How much credit you are comfortable extending
• When an account should shift to partial payment or prepayment

Ratings should be based on measurable, objective criteria such as:

• Payment history
• Frequency of late payments
• Outstanding balances
• Insurance reimbursement patterns

A defined system reduces emotional decision‑making and ensures your team applies policies uniformly.

Use Written Payment Agreements for Larger Balances

For significant treatment plans or extended payment arrangements, a written agreement is essential. This document should:

• Identify the financially responsible party
• Outline payment terms, due dates, and expectations
• Specify consequences for missed or late payments

If an account becomes delinquent, a signed agreement offers important leverage, particularly if third‑party collection support becomes necessary.

Monitor Payment History on an Ongoing Basis

Once credit is extended, active oversight protects your practice. Adjust terms promptly when an account:

• Pays late consistently: Reduce the credit limit or shorten terms
• Misses’ payments repeatedly: Require partial or full prepayment for future services

Adjusting terms isn’t punitive; it is a safeguard that prevents growing exposure and unnecessary write‑offs.

Document All Billing‑Related Communication

Accurate documentation creates continuity and protects the practice. Train your team to record:

• What was discussed
• What the patient or payer committed to
• Any explanations for delays or nonpayment

Patterns often emerge over time. Documentation also helps ensure consistency when staff members change or when multiple team members interact with the same patient.

Establish a Clear, Step‑by‑Step Collections Process

Review your accounts receivable aging report monthly and ensure your team understands the specific actions taken at each stage:

• 30 days past due
• 60 days past due
• 90+ days past due

Defined escalation steps help prevent accounts from aging unnoticed and maintain accountability across the team.

Recognize Early Warning Signs of Credit Risk

Many problem accounts show red flags early. Train your staff to recognize signals such as:

• Smaller invoices being paid while larger balances remain open
• Avoiding calls, emails, or follow‑up conversations
• Requests for increased credit despite poor payment history
• Failure to provide updated insurance or contact information
• Reports on personal financial strain

Catching these signs early allows you to adjust terms before balances grow unmanageably.

Protect Your Practice While Supporting Your Patients

Even long‑standing patients may encounter financial challenges. A well‑structured credit and collections system allows your team to differentiate between accounts needing short‑term flexibility and those requiring firmer boundaries.

By staying proactive, consistent, and well‑documented, your practice safeguards its cash flow without compromising professionalism, compassion, or patient trust.