Different A/R Related Strategies When Buying a Practice

Acquiring a dental practice is a significant milestone in a dental professional’s career, offering new opportunities and challenges that can lead to personal and financial growth. One critical aspect of the acquisition process is managing the accounts receivable (A/R), which represents the money owed by patients for services rendered. 

A well-managed A/R can be a valuable asset for a dental practice, contributing to its financial stability and success. So to help you in your new venture, this blog post will discuss different A/R-related strategies when buying a practice and how to approach this critical aspect of the acquisition process.

1. Evaluate the Existing A/R Portfolio

Before acquiring a dental practice, it is essential to assess the existing A/R to determine its value and potential risks. Review the aging report, which categorizes outstanding balances by the length of time they have been unpaid. This report can give you an insight into the practice’s ability to collect payments from patients and identify any problematic trends, such as a high percentage of overdue accounts.

Additionally, review the practice’s historical collection rate – the percentage of billed charges that are successfully collected. This will give you an idea of the overall effectiveness of the practice’s revenue cycle management and help identify areas for improvement.

2. Establish Clear A/R Policies and Procedures

To ensure a smooth transition and maintain the practice’s financial health, it is crucial to establish clear A/R policies and procedures. This includes:

• Setting expectations for payment terms with patients, such as offering discounts for prompt payment or requiring upfront payments for specific procedures.
• Implementing a consistent billing and collections process, including sending invoices and statements promptly, following up on overdue accounts, and escalating collections efforts as needed.
• Regularly reviewing and adjusting fee schedules to ensure they are in line with industry standards and reflect the value of the services provided.

3. Consider Outsourcing A/R Management

Managing A/R can be a time-consuming and complex task, particularly for a dental practice owner who is also focused on providing quality care to patients. One strategy to consider is outsourcing A/R management to a specialized dental billing company. 

These companies have the expertise and resources to handle all aspects of billing and collections, freeing up time and resources for the dental practice owner to focus on patient care and practice growth. Not to mention, outsourcing can lead to improved collection rates and reduced overhead costs.

4. Addressing Past Due Accounts During Acquisition

When acquiring a dental practice with existing overdue accounts, it is essential to address these accounts as part of the acquisition process. This may involve negotiating with the seller to resolve outstanding debts before closing the deal or factoring the value of overdue accounts into the purchase price. 

In some cases, it may be necessary to write off uncollectible accounts, particularly if they are unlikely to be recovered.

5. Implementing A/R Best Practices

After acquiring a dental practice, you also need to implement the best practices for A/R, especially if you want to maintain good financial stability as you move forward. Examples of best practices include:

• Regularly monitoring A/R metrics, such as days in accounts receivable (DAR) and collection rates, to identify trends and areas for improvement. 
• Streamlining the patient registration and insurance verification process to reduce the likelihood of billing errors and denied claims.
• Offering flexible payment options, such as payment plans or third-party financing, to make it easier for patients to pay their bills.

The Bottom Line

A/R management is a critical aspect of a dental practice’s financial health and must be carefully considered when acquiring a dental practice. By assessing the current A/R status, determining the A/R value, developing a collection strategy, considering outsourcing options, and planning for the transition process, prospective buyers can ensure a successful acquisition and maintain the financial success of the dental practice.

At Ash Dental CPA, we pride ourselves on providing the highest quality service to our clients. We understand that buying a dental practice is a major decision, and we’ll do everything in our power to make sure you make the right one. Contact us today to learn more about how our CPA dentists can help you with your purchase!