As dentists view their practices more as a business, the question arises, "How do I know if my practice is really financially healthy?"
To know this, consider the following standards that are being used by dental offices in Arizona and across the country to measure their proficiency in this area. And, be sure that these criteria are met simultaneously; it's not enough to achieve one or two and slip on another.As dentists view their practices more as a business, the question arises, "How do I know if my practice is really financially healthy?"
- Collect 99% or better of Net Production, after adjustments that is. Divide net collections by net production to find out this percentage. Because of the up and down nature of cash flow in the traditional dental office, this number should be tracked over a rolling 12 months, if at all possible.
- Accounts Receivable Ratio at 1 to 1¼ . Compare the total accounts receivable, including insurance receivables, to a rolling four month average of net production. That is, divide total accounts receivable by the last four months average monthly production.
- No more than 20% of total accounts receivable should be aged more than 60 days from date of last payment. Run the aged accounts receivable report that shows the date of last payment. Total the over 60 day aged accounts that have not made a payment in 60 days. Divide this number by the total of all accounts receivable for this statistic.
Compose a quick report for the practice that shows the levels of performance in all three of these areas simultaneously. If one or more of the areas are not within the recommended range, there may be a fault in the payment systems that may need attention. If the report shows a financially health practice, carry on!