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The 10 Rules of AR

All practices have accounts receivable that fall into the 30, 60, 90 and 120+ columns. It’s a fact of conducting business today.

Most practices tell me that they would like to get paid at the time of service however, we all know that it doesn’t always work that way! When a client does leave the practice without payment now requires a policy to be enforced to minimize lost dollars. As a guide to help you grade your own efforts, I am providing you with the 10% Rule of Accounts Receivable.

The 10% Rule of A/R suggests that your 90 day delinquency column and beyond should be less than 10% of your overall A/R Total. Or another way to view this is that your 0 to 60 days past due accounts should be 90% of your total A/R. When the 90+ day delinquency columns move above 10%, reflects that you’re holding onto accounts for too long. Or you may not have the time or resources dedicated to managing this area. This is only on accounts where arrangements have not been made and kept. If there are arrangements and they are kept, it is a totally different story.

Focusing internally on your 0 to 60 days past due accounts only, will drastically reduce the number of accounts ever reaching the 90 days and beyond timeframe. Calls placed to clients early in delinquency also offers you the chance to maintain the relationship before communication breaks down. Trying to focus on 90 day old accounts and beyond is not a good use of your time plus it sends the wrong message to your clients, of not enforcing your own office policies.

The 10% Rule of A/R is an easy guide to follow and gage your own efforts. It may help you determine if outsourcing is a more logical answer as well. Third party resources have the capability of reaching clients when they are most apt to be home. By outsourcing earlier in delinquency, allows the internal staff to focus on the 0 – 60 days past due accounts where it is more productive.

I encourage you to review your own A/R and check where the percentages fall and to adjust your own policies and procedures accordingly.

Written by Tim Olesky, Division Vice President with the TekCollect Corporation.

For more A/R strategy insights, and information about TekCollect’s benefits, contact Tim Olesky, Division Vice President, at 1-518-761-0028.