Money Makes the World Go Round

Money”, the first line the song “Money” is “money makes the world go round.”  How true is that statement?

The sad fact is many practice owners don’t heed that message.  The key to money is specifically tracking and managing to make the money go round.

Here are three simple measures to help understand where your money is…

Days in A/R:

Since cash is king, do you know how long it is taking to convert you’re A/R to cash?  The best number to measure for this is Days in A/R, defined as the number of days it takes your business to be paid.

To calculate Days in A/R the simple steps are:

Month End AR x 30/Est Postings (Payment + Adjustment) = DSO

Take your month end A/R and multiply by the number of days in the month.

Take this number and divide by the postings for the month; this is payments plus all adjustments.

Example: Charges: $78,500, Total Payments: $58,568, Ending A/R: $42,530

(48,530×30) / 58,568 = 24.9 days to pay

Everyone wants money in the bank faster, so once you know your average days in A/R, how can you improve that number?

Expected Collections:

Most owners look at the net revenue (after the payment has been posted) but they do not look at the expected revenue and compare that to the actual.  This comparison will help you determine if you have unseen billing/collections issues.  Expected collections are the payments the practice expects to receive for a date of service based on the contract between the practice and the payer.  Every owner should know what the major insurance contracts are to pay for an expected service.  Knowing the number of treatments and the known amount of reimbursement, a savvy owner can quickly determine expected collections for a given month.

Cost Per visit:

Every business owner should know their average reimbursement per visit but many do not know their cost per visit.  This is a key number to help you determine if you are making profit or not!  The simple way to determine this number is to take the expenses for a given month and divide by the number of treatments in that month.  Monitor this number over a 3-6 month period of time, does it change significantly?  How can you get this number to normalize?

Money makes the world go round!  Once you know where the money is, it makes the life of the business owner easier.  Start tracking these numbers on a regular basis and you will live happily ever after!  Do you struggle with these and other numbers? If so, click here to schedule a FREE Consultation to learn more.

Andrew Vertson, PT, DPT, ATC
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