CHAPTER 18

Accounts Receivable

Key Terms

Accounts Receivable

Better Business Bureau

Billing Cycle

Collections Agency

Embezzlement

Fair Debt Collection Practices Act

Accounts receivable is defined as the money owed to a business for services rendered or products that are sold and not paid for at the time of service. Each time clients are allowed to charge a service, profit for the veterinary practice decreases; essentially the practice has paid for the entire visit, receiving nothing in return. Every practice should institute a goal of not allowing accounts receivable to exceed 1% of the yearly gross revenue. Amounts over 3% deserve the full attention of the entire team. A practice policy can be instituted, and all members of the team must follow the policy to begin to control the accounts receivable. If a client becomes upset that he or she cannot charge the services rendered, the team should discuss how valuable that client is. A bigger loss occurs to the practice from the collection process. Valuable time should be spent on clients who will pay for, and who value, the service they receive.

Discussing finances with a client can be emotional. It is important to discuss this sensitive issue in an exam room, away from other clients and staff members. Clients may be embarrassed that they cannot afford the best care or are in a financial bind that is beyond their control. They can express anger, sadness, or fear toward the staff; team members should know not to take the expression personally. It is simply the responsibility of the team to offer the best medicine to every client regardless of finances. Conservative options can be presented as alternatives and should be documented in the record. This may alleviate some of the emotions of the client.

Compassion is an important aspect of the veterinary profession. The veterinary health care team loves animals, which is what makes team members enjoy their jobs. There will always be a charity case that a team member wants to help. Many veterinary practices have instituted a flex or indigent account. Some practices have given this account a special name and determine as a team which clients can use funds in this account. At times, wealthy clients want to donate money to help clients that cannot help their pets, and this is the perfect account to receive such donations. It allows the books to balance at the end of the day and generates a receipt for those who have donated. Clients must meet requirements for team members to consider the use of this account. Team members can develop guidelines, which may include such items as owner compassion, decreased finances, exceptional pet(s), and an intense owner-patient bond. These clients will truly appreciate the services and may eventually donate back to the fund once they are economically stable.

PRACTICE POINT

Create a flex, indigent, or charity account to help special clients in need of financial assistance.

Checks returned for insufficient funds are a common problem for practices that do not use a check machine. Practices may try to collect these balances themselves or hire an outside collection agency to collect the funds. Returned check fees must be applied to the client account to recoup bank charges, lost time, and money (Figure 18-1). If a collection agency collects the delinquent amount, service fees will be deducted from the check total once it has been collected. Most companies add a $30 service fee for returned checks. A notice that is clearly visible to clients must be posted indicating all fees that will be added to a client’s account if a check is returned.

FIGURE 18-1 Sample insufficient funds notice.

PRACTICE POINT

Automatic check machines prevent returned checks.

ACCEPTING PAYMENT ON ACCOUNTS RECEIVABLE

Two methods are available to record transactions when clients have paid on their account. Some clinics use a manual method of recording and tracking transactions, and others may use veterinary practice software.

Manual accounts receivable must be managed well to prevent internal embezzlement. All charges, statements, billing cycles, interest, account aging, and payments are calculated and recorded separately, generally on individual ledger cards. Aged accounts can be flagged with different colored flags, and appropriate notices can be sent to clients. When a payment is received, a receipt should be given to the client, and a copy should be given to the accounts receivable manager, who will then update the ledger manually. This allows record keeping and payment handling to be separated.

A computerized accounts receivable management program has a large advantage over manual management. All calculations, interest, and statement fees are automatically calculated and added to the client’s account. This eliminates errors associated with calculations and can decrease employee embezzlement. Clients simply pay on their accounts, a receipt is produced, and a new balance is listed.

INSTITUTING A NO-CHARGE POLICY

Signs should be clearly posted for clients to see throughout the clinic regarding a no-charge policy. Signs should say, “Full payment is required at time of service” (Figure 18-2). Although some practice owners believe this message is simple and to the point, it is unfortunately not adequate. Estimates must be given to all clients, regardless of client “status,” for all services that are expected to be rendered for that patient. Team members can print out an estimate, verbally review it with owners, and explain all procedures and medications the pet will be receiving. The client should sign the estimate; this gives the practice legal documentation that the client accepted the services that the veterinarian has recommended. Clients need to clearly understand that a deposit of at least half of the estimate is required before procedures are performed, and the remainder is due when the animal is released from the hospital.