Blog Throwback Thursday: Three Ways to Improve Your Practice Cash Flow By Clinicient, 03.30.17 FacebookTwitterLinkedin In this installment on our blog, we are reaching into our archives to bring you some of our best and brightest blogs from over the years. Stay tuned every Thursday for more blast from the past blogs and articles that continue to hold keys to your practice success. Your physical therapy billing software is your key to keeping a finger on the pulse of your cash flow. The simplest way to measure and manage your cash flow is with the days A/R metric. Simply put, days A/R (or accounts receivable days) is a measure of how many days on average it takes to collect the revenue for the services your clinic provides. Your accounts receivable is the total balance owed to you for services or products you provide, or the amount you should be expecting to receive. You should expect to see your A/R days at 45 or less in most situations and the best performing clinics with a relatively normal payer mix can see it as low as 20 – 30 days A/R. To calculate A/R days, divide your total accounts receivable by your average daily revenue. Your average daily revenue is usually calculated over the last 3 months, so to calculate it you need to take your total charges billed and divide by the total number of days in the 3 months. This will give you your days A/R. Here are three common causes of high A/R and how you can improve it and your cash flow: You don’t have a diverse payer mix. As with most things in our lives, it’s important to have balance. For a healthy practice, ensure you aren’t relying too heavily on only a few select payers (it’s best practice to have at least three) Just think what would happen if a payer who determines 50% of you’re A/R had a glitch and didn’t pay you for multiple days of service. Also, make sure you understand how long each payer takes to pay you (for example, workers compensation generally takes around 90 days). This way you can more easily predict your future income and plan for financial success. Slow patient collections. The best way to prevent this is to collect your patient balances while your patients are still in treatment. Stay on top of copays, and try to collect co-insurance and deductibles as quickly as possible. Also, make sure you have a policy on how you will respond to and pursue slow paying patients and apply it uniformly. When you can’t collect or if you are sending balances to collection, make sure and write them off in your A/R so you don’t lose track of what’s really collectible by your billing team. Billing errors and the resulting denials. These are usually preventable if you have good processes for collecting and verifying patient demographic and insurance information. Make sure you have a solid verification of benefits process in place with your front desk staff to prevent denials and write-offs. As always the most important thing to do is measure your days A/R regularly, look for changes and determine the root cause. If it’s something you can impact, take action! Staying on top of this measure and using your learning to improve your business processes is the best way to prevent cash flow issues.