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Many optometric practices carry more debt than is necessary from patients and from insurance
companies, and in some cases, accounts receivable is really out of hand. This burden can be
very hard on practice cash flow, so it's smart to work on bringing accounts receivable (AR)
How much money should be in AR?
Let's set a goal for accounts receivable. Most practice's will have some unpaid balances for
services and products because of two reasons: 1) If any insurance plans are billed, that
outstanding amount is placed in accounts receivable and 2) many office management systems post
a sale when items are ordered, so that amount appears as accounts receivable until products
like glasses and contact lenses are picked up yet (even though the office policy may not
require the balance be paid until the item is dispensed). The average monthly total of those
two sales categories represent the minimum AR that we can expect. On the other hand, if the
office billed 100% of all charges, and if 30 days were allowed to patients and insurance
companies to pay the bill, the maximum AR that we would expect would be equal to one month's
gross revenue. So, as a general rule, your AR should be less than one month's gross. How
much less depends on how much insurance billing occurs.
How to lower AR
The biggest factor in controlling accounts receivable is developing office polices about payment
and sticking to them. It's easy to want to bend the rules for good patients, or to attract
new business, but this is an area that I stand firm on... or rather my staff does. We require
payment in full for services at the time of visit, unless insurance has been approved in
advance. We always ask about insurance over the phone, and we state all exam fees and payment
expectations in advance. We require a 50% down payment for a product order to be placed,
with the balance due upon delivery. These polices are certainly not extreme, and I find
patients like knowing what's expected. I train my staff to not come to me for exceptions,
because that puts me in a bad light. If a misunderstanding occurs, we may apologize for not
explaining our policies clearly enough, but there are no exceptions.
In this age of increased insurance billing, I fear that optometric office staff members are
losing their skills for collecting payments in person. While it is becoming normal to never
pay cash in a general physician's office, optometrists dispense retail products, and from a
business sense, it is good for us to be comfortable collecting payments. We need not be
defensive about it. Patients expect to pay for services, and those who give you a problem
about it are the ones who will probably be delinquent accounts, so let them go elsewhere.
Every credit worthy person today has a Visa or MasterCard, and if they're not credit worthy,
why should you extend credit?
Other factors that reduce AR
- Stay on top of it. Appoint one staff member to review the AR report regularly. Call
patients and insurance companies that are more than 30 days due, take notes, and keep calling.
It is a tough job. This work should be monitored by the doctor or office manager every month,
or it will slip away.
- Send statements regularly. Even with good polices, some outstanding balances occur due to
insurance not paying as expected. Send bills at the same time of every month without fail and
charge interest on unpaid balances. Just notify people that you will charge interest by
printing it on your statements.
- Speed up eyeglass delivery time.
- Stock major brands of contact lenses so payment in full is made on the day of fitting.
- Reduce the number of insurance plans your office accepts.
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week
A Proud Supporter of
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Dr. Gailmard offers consulting services to eye care professionals through Prima Eye Group; information is available at www.primaeyegroup.com.
Please Note: The views expressed in Management Tip of the Week do not necessarily reflect those of the sponsor.
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