Managing Accounts Receivable
RECOMMENDED PROCEDURES MANAGING ACCOUNTS RECEIVABLE
- Obtain detailed demographic and credit information from your customer/client/patient when establishing a credit account (most valuable is a social security number)
- Obtain a signed agreement with your customer/client/patient detailing your payment terms and conditions including collection cost reimbursement on past due accounts
- Send prompt and accurate periodic invoices
- Review your accounts receivable aging schedule at least monthly
- Contact your patient/client/customer – maintain an open dialog with the debtor to ascertain when payment will be remitted or the reason for any delay. Communication is key.
- Send outstanding balances to a third party collection agency after 90 to 120 days from the date of sale or service if no reasonable contact has been made by the debtor regarding payment of the debt. According to industry surveys, the likelihood of collecting on accounts decreases dramatically with the length of the delinquency. Beyond 120 days, you’ll be facing the law of diminishing returns. As the provider you will expend considerable time, effort and money to collect comparatively few dollars. On an account that is 90 days past due, the probability is that you will only collect $.70 of every dollar, after 180 days $.50, and after one year $.23. The sooner you get a third party involved to collect, the greater your chances of receiving payment.
billing procedures recommended by CSRS
Have your client, customer, patient sign a financial agreement outlining the products to be sold or services to be performed including any terms you wish to enforce. It should also include payment terms regarding how much is to be paid, when it is to be paid, and what happens if it is not paid.
- Invoice your patient/client/customer at the time of sale or service. The invoice should contain payment terms including penalties and charges for non-payment;
A sample clause to include is “In the unfortunate event your account becomes past due and is placed with a collection agency or an attorney, (client, customer, etc.)shall be responsible for a collection fee equal to 35% of any outstanding balance due.”
- Send a second invoice to the debtor within 30 days, asking for “Immediate Payment”;
- Send a third invoice within 60 days, noting the balance is “Past Due” and “Immediate Payment is Required”.
- The fourth invoice should note the account is “Seriously Past Due” and “Demand Full Payment within 15 Days”. Notify the client that “if the account is not paid within 15 days, it will be referred to our collection agency”.
- Within 120 days from the date of service, send the outstanding balance to third party agency for immediate action.
- Devise in-house billing procedures that you are comfortable with, follow them, and then remit to a 3rd party for collections if debtors do not respond to your efforts.
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