Understanding Your Metrics for A More Profitable Practice: Accounts Receivable

When it comes to running a profitable dental practice, cash flow is everything. Even if your production and current collections look strong, if your Accounts Receivable (A/R) are overdue from poor collection months prior or you have a large portion of insurance payments stuck it can quickly discourage any practice owner. If you ignore your A/R numbers you can find yourself lacking cash flow very quickly. 

What is Accounts Receivable?

Accounts Receivable (A/R) is the total amount of money owed to your practice by patients and insurance companies. Simply put, it’s the money you’ve already earned but haven’t collected yet.

Why Does This Metric Matter?

High or aging A/R means your money is sitting in someone else’s pocket (the insurance companies or your patients) instead of in your bank account. That impacts:

• Your ability to cover payroll and expenses on time.

• How much you can reinvest in your practice for new technology or training.

• Your ability to pay out team bonuses or incentives. 

• The overall financial health of your business.

The longer balances sit unpaid, the less likely they are to ever be collected.

How to Track and Benchmark

Run your Accounts Receivable report monthly. The majority of your balances should be in 0-30 days. 

Benchmark: A healthy practice will have less than one month’s total production sitting in A/R.

Anything higher is a red flag and points to a collections or systems breakdown.

How to Lower Your A/R

If you’ve already implemented a solid payment policy and are moving toward a statement-less system (see our blog on Collections here), your A/R should already be easier to manage. The best way to get your A/R numbers looking good is to ensure the patients never get onto the A/R report in the first place. So first ensure you have the above collections protocols in place then working on sitting up the safeguards and structure for your A/R system. Here’s how:

1. Build a Robust A/R Protocol

Every office should have written steps for how to handle:

• Patients with outstanding balances and an upcoming appointment.

• Family members with unpaid balances (do you see the scheduled patient before the balance is addressed?).

• Missed payments after insurance adjustments/payment.

• When to send statement if a balance is due (should be immediate -better yet, have their card on file)
•  When to follow up with a patient who does not pay at the time of an appointmt

Having a protocol means your team isn’t guessing or making case-by-case decisions, or exceptions—they know exactly what to do every time, and you hold them accountable to that.

2. Work A/R Weekly

Don’t wait until balances are months old to address them. Make A/R management a weekly task for your team. Delegate what the front office staff can do and what should be left for the office manager. Break it down every month like this:

• Week 1:Review overdue insurance claims and follow up.

• Week 2: Contact patients with overdue balances.

• Week 3: Send out past due letters and emails. 
• Week 4: Turn over 90 day plus accounts to 3rd part collections. 

Document every attempt so nothing slips through the cracks.The longer an account goes untouched, the less likely you’ll ever collect it.

3. Safeguard During Schedule Prep

A great habit to build is checking for unpaid balances during schedule prep.

• At the one-week confirmation mark, have your team review each patient’s account for balances.

• Be prepared: If that patient comes in for their appointment. Overdue balance should be collected before. 

A/R doesn’t have to be overwhelming. With the right payment policies, weekly systems, and scheduling safeguards, your Accounts Receivable will stay under control—and your cash flow will stay steady.

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