Cash Flow – an issue that is only discussed when there is not enough of it – or when there is a suspicion that everything is not well – be it a growing age analysis or writing off large amounts at the end of the financial year. At Collections Plus, Inc. we can help your business manage cash flow by managing how you collect and manage your accounts receivable. Contact us today for all your commercial collections needs.
The subject of Cash Flow Management has become an enigma to most medical practitioners – as it’s perceived to be outside the realm of understanding – and the fear of having to admit that it’s misunderstood results in capitulation on the subject which is then relegated to accountants who only see the paperwork after the fact,—when it’s too late or to practice managers or spouses who in many cases have not much more grasp on the subject than you do.
The truth is – it is not that hard to understand – and more importantly it’s not that hard to manage – and the results of improved cash flow can be exponential – all it takes is for you to take responsibility and be involved.
What is cash flow — the flow of funds into and out of the practice – your revenues and expenses.
I am focussing today on managing the incoming funds – your revenues.
All I will say about managing your outgoing expenses – the funds flowing out –is that it is not all about getting the “cheapest” solution or product – but about getting the product or service that will provide the most benefit to your practice – provide the most efficiency.
Two simple examples
A light-bulb might be cheaper, but if its lifetime is half of the one that costs 20% more – then the cheaper product is not the efficient choice.
If you choose a service provider that necessitates your staff having to fulfil additional tasks to get the job done – they might be cheaper – but the efficiency provided by a more expensive option needs to be explored.
The same consideration should be given to all your expenses, your staff cost, software cost even your choice of card machine – the cheapest is not always the most efficient.
When it comes to managing your incoming cash flow – your objective is to:
OPTIMIZE – Making sure that your incoming cash flow is as much as possible
ACCELERATE – Making sure that your incoming cash flow comes in as fast as possible.
CONTROL – Making sure that received funds are properly accounted for and end up in
YOUR bank account
That’s the WHAT — The question now becomes HOW – the Key here is your involvement or at the very least understanding – as the first speaker so eloquently stated – you are the CEO of your company – if you are going to delegate the responsibility – there needs to be a level of control of that delegation.
There are four simple pillars that you can easily implement that will provide with the necessary controls:
(1) Make sure you have adequate CHECKS AND BALANCES in place:
Making sure that your work is billed correctly, and that all adjustments to billing are authorized. If you do not bill correctly those funds are lost to you forever.
For funds received, there needs to be a paper trail that allows you to identify and find discrepancies in funds receipted and funds deposited. This paper trail needs to be OUTSIDE and INDEPENDENT of the billing system – otherwise you are checking the billing system against itself. In most cases the old fashioned manual receipt book is what is used.
Do not be afraid of your receipt book or your billing system — If you suspect there is a problem – pick up this book from time to time – you know how many patients you saw – does the number of receipts match the number of patients you saw? Does the amount billed match the work that was done? – take a random day and check the billing system?
At the very least you will be setting an example that these things are being looked at.
(2) IMPLEMENT POLICIES and EMPOWER YOUR STAFF to implement them:
The person managing your appointment book is a key person in your practice in that they need to set expectations with patients as to what to expect – when it comes to patient’s payment – but this job can only be done effectively if the practice has clear policies on this subject — and your staff is empowered to implement these policies.
You need to have policies in place for sensitive subjects like:
– What do you do is a patient tries to make an appointment and has an outstanding balance
– If there are medical aids that consistently do not pay – do you continue to accept them
– Are you allowing patients to “promise and EFT” – or was the patient adequately informed of payment options at the time the appointment was made.
– Is there a policy for how cash and cheques are deposited – or handed to you – your procedure needs to be documented and involve a signoff if you are taking the cash yourself– do not take cash out of the till – you are setting an example that that’s OK.
– Have a policy for billing adjustments – mistakes happen – and billing needs to be adjusted from time to time – but by reducing billing – you are potentially giving money away — be aware and review billing adjustments when they are fresh in your mind.
Policies are guidelines – your instructions to staff as to what you expect to happen – and guidelines need to be re-assessed from time to time – policies adjusted based on
Patterns identified on your age analysis – if you identify a pattern – and do not adjust your policies – you have only yourself to blame if you have to write off excessive debt at the end of the year.
(3) MAXIMIZE TOOLS TO COLLECT FUNDS in your practice
There are a multitude of tools available to you to collect funds and minimize outstanding debt. Maximise the ways in which you can collect funds from your patients – this gives your staff more options to present to patients – you do not want to fall back on allowing clients to EFT funds unless you have a relationship with the patient that deserves this trust
Tools that are available include:
– If you are claiming from medical aid – determine how much the medical aid will pay at the time of billing – there are systems available that will give you this information immediately.
– Have a card facility that gives you as many card options as possible – I know some cards are expensive – but not accepting American Express because the fee is 2% more – and then waiting 60 days for the money is false economy.
– If you are in a social-economic market where traditional cards are not prevalent – consider accepting store cards like EDCON and RCS.
– Have a card facility that allows processing of Card transactions over the phone easily on the PC screen.
– There will always be cases where there is the will to pay – but the money is just not available – in most cases you are allowing the patient to pay over time – there are debit order systems that allow you to be in control of this process – you no longer have to rely on the patient to send an EFT every month – and your staff will not have to chase these patients every month
– Credit Card preauthorization’s – a tool you have all experienced when you rent a car is also available to you – a simple swipe will reserve the funds on patients card and ensure funds are available once procedures are completed and patient is billed.
(4) Last – but certainly not least important – BE INVOLVED – it’s not hard – here is a guideline of simple things to review with your practice manager on a monthly basis:
– Your billing – does it match your expectations for the month – does all the work you did / patients you saw reflect on the billing – Are you aware of all billing adjustments made.
– Check that the total on your receipt book matched the total received according to your billing system – pick random days and check.
– Review practice policies – and review them in conjunction with your age analysis – focus on patterns that emerge from your age analysis– and adjust your policies accordingly.
– Make sure you have provided your staff with as many tools as possible to collect funds – review tools available and their implementation
By becoming involved – you will get to the point where conversations about cash flow do not revolve around the age analysis alone – but with understanding of the true health of your practice – you have the peace of mind that you are in control of your practice.
Source: Four easy steps to optimize the cash flow of your medical practice. | Peter Melchior | LinkedIn