From the moment an invoice goes out the door, the accounts receivable (A/R) clock starts ticking. Most standard invoices are due on net 30 terms, which means the practice should receive payment within this timeframe. Unfortunately, this is not always the case — especially when patient financial responsibility is involved.
Keeping track of due (and past-due) accounts is essential for good financial management. When monitoring aging invoices, you often must take different actions depending on how outstanding each invoice is. Appropriate actions can be segmented into three benchmarks: 30-, 60-, and 90-day windows.
30 days: The optimal A/R window
The first 30 days after an invoice is sent are crucial. This is the typical payment window. It establishes the responsibility of the patient to pay in a timely manner. Collecting in less than 30 days can help you achieve a healthy cash flow.
During the month in which they send an invoice, providers should consider the following:
- Timely and accurate invoicing: Prompt invoicing establishes clear expectations and can minimize any confusion or disputes about what’s owed.
- Convenient payment options: Convenience and flexibility empower patients to fulfill their financial obligations on time.
- Regular follow-up on outstanding invoices: Promptly identifying issues allows for swift resolution and helps prevent payment delays.
- Automation and technology: Leveraging automation and technology can reduce administrative burdens, minimize errors, and expedite payment collection.
60 days: Communication and collections
As the A/R aging period progresses from 31 to 60 days, healthcare providers face the task of payment collection. They must navigate this period with urgency and thoroughness to increase their chances of successfully collecting what’s owed. Top considerations include:
- Assessing the reasons for delayed payments: This assessment can help remediate minor errors impeding payment.
- Implementing collection strategies: An organized and systematic approach enhances the likelihood of recovering outstanding payments.
- Negotiating payment arrangements: Offering flexibility and working with patients to develop manageable installment plans can facilitate repayment.
- Maintaining open communication: Effective communication strengthens the provider-patient relationship and encourages timely payment while reducing the risk of bad debt.
90 days: Minimizing bad debt potential
As the A/R aging process reaches 61 to 90 days, providers encounter a critical window for minimizing the potential of bad debt. This period represents a threshold where funds can become uncollectable if not addressed promptly. Here’s what providers should consider during this timeframe:
- Escalating collection efforts: By taking incrementally aggressive steps to urge patients to settle their outstanding balances, providers increase the chances of recovering funds.
- Evaluating credit terms and policies: This window is an opportune time for healthcare providers to evaluate and reassess their credit terms and policies.
- Acting on potential bad debt: Identifying accounts unlikely to pay can lead to options such as settlements, financial assistance, or legal proceedings (if necessary).
- Outsourcing debt collection: Engaging a reputable collections agency can help providers maximize their chances of recouping funds to reduce the impact of bad debt on the balance sheet.
Check your A/R aging statements
In A/R management, benchmarks are compasses for guiding an organization toward financial success. By implementing best practices during the key windows — 30-, 60-, and 90-day periods — healthcare providers can fortify their revenue cycles, streamline operations, and foster healthier cash flows. More importantly, breaking down A/R aging into these segments can reduce the effort required to manage outstanding invoices, resulting in a healthier bottom line.
Learn more about how to optimize RCM at trubridge.com.