Key Takeaways
- Your accounts receivable report reveals more than how much patients and insurance companies owe your practice.
- Aging balances can help identify problems with insurance claims, billing processes, and patient collections.
- An increase in receivables isn’t necessarily a problem, but consistently older balances deserve attention.
- Reviewing AR trends regularly can help improve cash flow and prevent revenue from slipping through the cracks.
Your dental practice had a productive month. The schedule was full, treatment acceptance was strong, and production numbers looked good. But when you review your bank account, the cash doesn’t seem to reflect all that activity.
One place to look for answers is your accounts receivable (AR) report. Most dental practice owners know this report shows how much money is owed to the practice. But it can also reveal problems with insurance processing, billing procedures, and collections that might otherwise go unnoticed. The key is knowing what to look for.
Start With the Age of Your Receivables
Your AR aging report typically groups outstanding balances by how long they’ve remained unpaid, often in categories such as current, 31–60 days, 61–90 days, and more than 90 days.
The total amount outstanding is important, but the age of those balances often tells a more useful story. For example, two practices might each have $150,000 in outstanding receivables. One has most of its balances in the current category, while the other has a substantial portion sitting unpaid for more than 90 days. Those practices may have very different collection challenges, even though their total AR is identical.
Older balances deserve attention because they can become increasingly difficult to collect. Insurance claims may require additional documentation or follow-up, while patients may be less likely to pay balances that have been outstanding for several months.
Rather than focusing only on the total, look at how much of your AR is aging into older categories and whether that percentage is increasing over time.
Separate Insurance Balances From Patient Balances
Not all receivables should be evaluated the same way.
Insurance balances may be delayed because of claim errors, missing documentation, coding issues, denials, or slow processing. Patient balances may reflect problems with payment expectations, treatment estimates, billing communication, or collection procedures.
If insurance AR is increasing, for example, it may be worth examining whether claims are being submitted promptly, how often they’re denied, and how quickly your team follows up on unpaid claims. If patient balances are growing, the issue may involve how financial arrangements are discussed before treatment or how outstanding balances are handled afterward.
Separating these categories helps you identify where problems are occurring instead of treating all unpaid balances as a single collection issue. It also allows you to determine whether the problem is primarily administrative, related to insurance reimbursement, or connected to patient payment practices.
Look for Trends, Not Just Individual Numbers
A single month’s AR report provides useful information, but comparing reports over time can reveal patterns that deserve closer attention.
For example, an increase in receivables may be expected if your practice has experienced substantial production growth. But if AR is growing considerably faster than collections, that could indicate a problem.
Similarly, a temporary increase in insurance balances may result from a payer processing delay. A steady increase over several months, however, may point to recurring claim submission or follow-up issues.
A few questions worth asking include:
- Is total AR increasing faster than production or collections?
- What percentage of outstanding balances is more than 60 or 90 days old?
- Are insurance or patient balances responsible for most of the increase?
- Are particular insurance companies consistently taking longer to pay?
- Are balances being written off because they are uncollectible or because adjustments weren’t recorded correctly?
The answers can help identify whether your collection processes are keeping pace with the work your practice is performing.
Don’t Overlook Adjustments and Write-Offs
Another important consideration is whether your AR report accurately reflects what the practice can reasonably expect to collect.
Contractual insurance adjustments, billing corrections, patient discounts, and write-offs all affect receivables, but they don’t necessarily mean the same thing.
For example, an insurance adjustment required under a participating provider agreement is different from writing off a patient balance because collection efforts were unsuccessful.
If adjustments aren’t recorded accurately or consistently, your AR report may overstate the amount you expect to collect or make it difficult to understand why balances are disappearing.
Regularly reviewing adjustments and write-offs can help you distinguish normal contractual activity from collection problems or administrative errors.
Turn Your AR Report Into a Management Tool
Your accounts receivable report shouldn’t be something you review only when cash gets tight. Establishing a regular review process can help you identify problems while there’s still time to address them. Your office manager or billing team may handle the day-to-day follow-up, but practice owners should understand the overall trends and know when something needs attention.
That doesn’t mean getting involved in every unpaid claim or patient balance. It means having enough visibility to ask informed questions, evaluate whether collection procedures are working, and recognize when changes are needed.
It’s also important to make sure the information in your practice management system is accurate and reconciles appropriately with your accounting records. Otherwise, you may be making decisions based on incomplete or misleading numbers.
A healthy AR report isn’t necessarily one with the lowest possible balance. It’s one that reflects timely billing, effective follow-up, accurate adjustments, and a reasonable relationship between the services you’re providing and the money you’re collecting.
Do you know what your dental practice’s receivables are telling you? Edwards & Associates works exclusively with dental professionals to help them understand their financial performance, evaluate cash flow, and identify opportunities to strengthen practice operations. Contact us to discuss how your financial information can support better business decisions.
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