Financial Systems: Accounts Receivable Chapter 15 Financial Systems: Accounts Receivable Copyright © 2011, 2006 Mosby, Inc., an affiliate of Elsevier. All rights reserved.

Bookkeeping Systems Two types of financial systems are used in the dental office. Accounts receivable (Chapter 15) Accounts payable (see Chapter 16) This chapter will deal with accounts receivable only.

Accounts Receivable This is the amount of money that is owed to the dentist (incoming money).

Accounts Receivable Includes all production Data are entered for: Treatment rendered to patients Payment received Calculations for new balances Computation of the data leads to determination of the amount of the current accounts receivable.

Accounts Payable Includes all financial obligations, or money that is owed by the dentist (outgoing money)

Financial Records Must be maintained for several reasons They provide: Protection for both the dentist and patient Information for tax purposes Data for business analysis

Financial Records Bookkeeping The recording of financial transactions Accounting The recording, classifying, and summarizing of financial and business records

Computerized Bookkeeping System A computerized bookkeeping system can be integrated into total records management. A single entry can be transferred to a: Financial record Patient statement Insurance form This information may be used to generate a variety of management reports.

Components of a Computerized Bookkeeping System Opening the program Usually a user name and/or a password are needed Locating account information A main menu leads to other menus One menu is accounts

Account Information Screen

Components of a Computerized Bookkeeping System Common account information includes: Name or ID number The provider Name, address, and telephone number Social Security number Date of birth, sex, and age Employment and insurance notes such as last update, last payment, etc.

Components of a Computerized Bookkeeping System Editing account information Information about existing patients will need to be edited if there are changes such as name, address, or insurance information. Adding a patient An account will need to be created for a new family. A spouse or dependent is usually added to an existing account because statements are usually sent to families.

Patient Information Screen

Components of a Computerized Bookkeeping System Posting transactions Clinical data are entered about treatment performed. A walkout statement and insurance claim form may be generated.

Transaction Screen

Sample Walkout Statement

Components of a Computerized Bookkeeping System Backing up data Must be done to prevent loss of information Can be done using a CD-ROM, DVD, external hard drive, or some other type of storage device An offsite backup service using the Internet can also be used to back up data.

Special Problems Credit balance When a payment is made in advance Nonsufficient funds (NSF) check Can try to resubmit Often the bank charges the depositor a fee. Collection agency fee Becomes a debit on an account Courtesy discount Becomes a credit on an account

Credit Balance Sample

Nonsufficient Funds Example

Courtesy Discount Example

Debit and Credit Cards Debit/credit card transaction terminals are provided either by the software company for the computer system or from the dentist’s bank.

Procedures to Enter Debit and Credit Information Open the Account window. Select debit or credit card. Patient enters PIN number on the same screen if paying by debit card.

Statements Indicate the charges, payments, and balances of accounts for the preceding month Usually sent once per month May be on the same day (first, fifteenth, thirtieth) May be on a staggered basis according to the alphabet (suggested for large practices to maintain a better cash flow)

Computerized Statements Itemized statement shows dates of payments and treatments for each member of the family during the month. Administrative assistant can add special messages or aging columns to statements to enhance the collection process.

Identity Theft Identity theft occurs when the thief uses a person’s personal identifying information to open new accounts or misuse existing accounts. The administrative assistant should be ever mindful of the potential of an unknown person in the practice using stolen credit cards or false information.

Establishing Financial Arrangements It is wise to create a written financial policy. It must: Conform to community standards Reflect the attitude of the dentist toward the patient's welfare Represent sound business concepts Be presented in written form to the patient Provide options to the patient Be adhered to at all times (Several problem scenarios are listed in the text.)

Types of Payment Policies Cash only Simplifies financial arrangements Places limitations on the dental practice Payment of statement in full Person is expected to make full payment within 10 days of receiving the statement.

Types of Payment Policies Extended payment Receiving partial payment over time Legally, if payments extend beyond four payments, a "truth in lending form" must be completed and signed even if there is no finance charge.

Using a Credit Bureau A credit bureau, or consumer reporting agency (CRA), reports a person's history of payment when credit was involved. Reports on accounts placed for collection as well as bankruptcies, judgments, and lawsuits After receiving a patient’s credit information, the dentist decides whether to extend credit. If a patient is denied credit, the Fair Credit Reporting act requires the patient be informed of the reason for denial of credit and the name of the bureau from which a credit report was obtained.

Aging Accounts Each month, the accounts receivable is aged. With a computer, this can be programmed into the system and is automatically produced when desired. The dentist must determine a policy about aging accounts so that these accounts do not become a drain on the practice.

Collection Procedures “An undesirable but crucial responsibility” Only a small percentage of patients present a payment problem.

Fair Debt Collection Practices Act Collection procedures are regulated by the Fair Debt Collection Practices Act of 1996. Usually these rules apply to collection agencies, but they should also be adhered to in office collection procedures.

Fair Debt Collection Practices Act When contacting a patient for collection of a debt, the debtor Cannot be subjected to harassment May not be called at work if employer or debtor objects and requests no calls May not be called before 9 AM or after 9 PM Is the only person who may be contacted about the debt owed

Collection Letters It is recommended to follow a sequence of: Reminder Notice on a statement Inquiry/discussion Personal office contact with the patient Urgency A more urgent call or letter

Collection Letters Ultimatum A notice of impending collection action Send only one ultimatum letter with a deadline date. Send by certified mail with a return receipt requested. If payment is not received by the designated date, the account must be turned over immediately to an attorney or a collection agency.

Sample First Collection Letter

Sample Urgent Collection Letter

Sample Final Collection Letter

Telephone as a Collection Instrument Provides a more personal contact with the patient There are several rules and suggestions regarding use of the telephone in the textbook. Remember, privacy is mandated in this form of collection.

Collection Agency Used if the patient did not respond to all previous collection attempts Make certain this collection agency is reputable and adheres to federal and state guidelines for collections.

Collection Agency A form is completed and sent to the agency containing: Debtor’s full name Last known address and phone number Total amount of account Date of last entry on account (credit or debit) Debtor’s occupation Business address and phone number Any other pertinent information

Collection Agency Once sent to collection, no further office collection activity should take place. Send no more statements. Indicate the transfer to the collection agency on the patient’s financial record, giving the date of transfer. Refer the patient to the agency if the person contacts the office. Report the amount to the agency when payment is received in the office. Rely on the agency staff members to do their job.