Accounts receivable
"Accounts receivable in most small animal hospitals should never exceed 2.5 percent of the yearly gross income. For equine and other large animal hospitals, 4 percent to 5 percent of gross revenue is the norm," says Gary Glassman, CPA, a Veterinary Economics Editorial Advisory Board member and partner with Burzenski and Co. PC in East Haven, Conn. Most practices struggle because they lack good procedures to ensure collection, he says.
"Accounts receivable in most small animal hospitals should never exceed 2.5 percent of the yearly gross income. For equine and other large animal hospitals, 4 percent to 5 percent of gross revenue is the norm," says Gary Glassman, CPA, a Veterinary Economics Editorial Advisory Board member and partner with Burzenski and Co. PC in East Haven, Conn. Most practices struggle because they lack good procedures to ensure collection, he says.
"Make sure you print an accounts receivable aging from your veterinary software each month," says Glassman. "Look at the total and the amount over 90 days. If it's greater than 30 percent of total accounts receivable, you lack good internal-control procedures."
To improve accounts receivable, Glassman says, get clients to sign payment agreements up front. "Equine and large animal practitioners should maintain client credit card numbers on file and seek their permission to charge the card when services are performed," he says. "Then, be proactive and follow up when clients don't pay. I find it helps for hospital administrators and owners to be involved in the collection process." These guidelines can help you stay on top of unpaid bills:
- Send clients statements of open balances at 30, 60, and 90 days. Place a handwritten note on each statement asking them to pay, so they know you're personally looking at their balance.
- At 60 days, indicate they're past due and will be considered for collection soon.
- At 90 days, make the statement harsher and let them know they'll be turned over to a collections agency at 120 days. Glassman says to consider sending this letter certified.
- At 120 days, turn them over, says Glassman. "You can't make idle threats. You must follow through." He recommends that you find a collection agency with a good track record and look for attorneys or local credit bureaus that do medical collections. "Keep in mind, prepaid services may not always be the best choice because you're paying for a service you haven't received yet."
Gary I. Glassman
