When it comes to purchasing a dental practice that’s already up-and-running, presumably you’re doing so because it’s an already viable business that has its own built-in client list and is already making money.
There are a ton of things to factor in when it comes to buying a dental practice. You’ll want to make sure that the staff stick around, the patients stay, and ultimately you don’t want to come in and rock the boat too soon. In fact, where you can, you want to improve the practice, educate the staff and elevate the client experience.
But the one thing that many tend to forget about is how to handle dental accounts receivable for a practice you’re purchasing.
Are You Purchasing Dental Accounts Receivable?
When it comes to buying a practice, one of the things you need to think about is are you purchasing the dental practice accounts receivable?
If you’re purchasing the accounts receivable as part of the sale your new dental practice, then you’ll want to make sure the funds are collectable. You aren’t going to want to pay full value for receivables that you’re only going to collect 40 percent of.
If you’re not purchasing the accounts receivable, you’ll need to make sure to set up a good tracking and reconciliation process so you can give the previous owner the funds back while not negatively affecting your books.
In either case, deciding whether you are going to purchase the accounts receivable will dictate how you end up handling it.
If You Decide to Purchase the Dental Accounts Receivable
Not all account receivables are recoverable, therefore when it comes to purchasing it you won’t want to be paying the full price.
If there is $100,000 in accounts receivable, chances are it is not all recoverable. So you won’t want to be paying the full $100,000 for it. Instead, aim to pay somewhere in the 50 to 70 percent range, depending on the quality of these accounts
If You’re Not Purchasing the Accounts Receivable for the Dental Clinic
If it comes down to it and you are not planning on purchasing the dental accounts receivable, then everything that comes into the practice from that $100,000 (or however much it is) has to be tracked and transferred back.
Let’s say you start in your new clinic on June 1st. Your financial takeover is going to be a bit more complex than walking in, hooking up your bank account and notifying insurance companies that you’ve arrived. It’ll take a few weeks to actually get into the new groove.
To mitigate the risk, especially when it comes to dealing with insurance payments, you need to make sure you’re tracking and reconciling your bank account for every single payment received (cash, check, plastic and insurance payments.
Handling Your New Dental Accounts Receivable
While dental accounts receivable will likely be a pain and tedious, it doesn’t have to be a complex challenge. Not if you have a good game plan.
Here are a few things you need to take into consideration when dealing with the accounts receivable for a newly acquired dental clinic:
Notify Insurance As Soon As You Can
One of your biggest challenges is going to be getting the insurance payments straightened out. So it’s important that you notify insurance as soon as possible.
That said, even if you notify insurance right away, chances are the payments will still go back in the old account. So you’ll need to ensure that you’re reconciling the payments to your bank account line, by line—it’s a pretty tedious process.
You will also need to request the bank statements from the former practice owner starting at the sale date for the next three-or-so months so you are able to compare the deposits they’re getting against the clinic's accounts receivable.
Insurance payments are a challenge because the companies pay in lump sum payments and you will need to look at payment details to ensure the reconciliation is correct. So your first few months will be a bit of fiscal pain, regardless of whether you’re purchasing the dental accounts receivable or not.
Create a “New” Provider in Your System
One of the easiest ways we’ve found with Shift Accounting clients is to set up a “new” provider codes for all your doctors if you are not purchasing the dental accounts receivable.
This way you’ll have two different providers for the same doctor—before the sale and after the sale. You will better be able to distinguish between the money that comes in after the transition so you can get a real handle on managing your dental accounts receivable.
Making Good Accounts Receivable Decisions
Whether you purchase the accounts receivable for your new dental practice is up to you, but to handle each situation with ease you’re going to need a good game plan!
Questions about dental accounts receivable? Reach out to us here at Shift Accounting, we help our clients make good financial management solutions and successfully.