Using income tax season to pad your bottom line

Income tax time is here again! The April 15th deadline congers up mixed feelings for tax payers.  Regardless of which side of the tracks you dwell this year, every consumer is making changes.  It’s only a question of whether you are making a budget or making plans.  Hopefully you’re not purchasing a single stamp on April 15th.  Last year 143 million returns were filed with 80% of consumers receiving a refund. This year the IRS estimates the average income tax return to be approximately $2000. In a perfect world, all your past due and delinquent patients and/or customers would march into your office and square up on the service/product they have received. But the reality is you are probably not on their priority list. Your competition for that money includes technological gadgets, Caribbean vacations, other creditors, etc.  In order to get on their priority list, it is important to understand you can’t wait until April 15th to be proactive. Most tax payers have a plan for that money before the check is even in their hand.

1. Develop a plan to increase patient/consumer contacts before April.

2. In your communication with them, get a commitment from the patient/consumer to resolve the balance with their income tax refund. Get your receivable included in their plans.

3. Set up a secure arrangement structured around the expected return date.  Get a credit card authorization or check by phone authorization for the respective date. You can always monitor the refund arrival date with the consumer through the IRS website.

4. Place calls on previously worked accounts as consumers will be more likely to communicate with you because they will soon have available resources.

Implementing these changes will obviously use up valuable time and resources.  If your office isn’t in a position to make these changes, then place the delinquent accounts into your collection agency early so they can provide you with a better recovery rate.  It’s no secret that collection agencies provide their clients the greatest return during the first quarter of the year. 

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Getting the Most from Your Aging A/R

According to the ACA, 80% of all monies collected by a third party collection agency are done off of their letters, not their phone calls. Thus, it would make sense to use an agency that charges a flat fee for a series of written demands in lieu of subjecting your accounts to a costly percentage. The overall concept behind collecting money from delinquent customers/patients is changing their mental disposition. The best way to change their mental disposition is to involve a third party. Sadly, not all accounts are collectible. To maximize recovery, use an agency that offers a two step process. The first step is a series of written demands that charges you a flat fee per account. The accounts that are not collected from this first step would then be sent on to the second step, which is traditional collection efforts that involve a percentage. If you follow this process, you will recover the most money possible for minimal costs.

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Medical Collections on the Rise. Is your practice prepared?

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I remember getting insurance when I first started working in the collection industry 13 years ago.  I was in my early 20’s, and didn’t really value the coverage because I felt invincible as we all do at that age.  However, I signed up for full coverage because it was so cheap. I had medical, dental and vision for a whopping $89 dollars per month.  I stayed with the same company for 13 years, and each year we would all pile into the manager’s office and listen to the corporate benefits coordinator try to explain why benefit costs were increasing another 10% each year. They could have saved time and money by just recording the first one and replaying it every year. By the time I left the company, my insurance cost had increased to $600 per month. Much had changed for me personally in those 13 years. I now had a family, thus family coverage opposed to the individual coverage. But, healthcare coverage certainly represented the largest cost of my disposable income. I know I’m not alone.  The evolution of insurance coverage has been forced to change in order to deal with 10% coverage hikes each year.  Let look at some ways insurance companies are accomplishing this feat.

1. High deductible Plans- patients are now obligated to pay more out of pocket.

2. Larger Co- Insurance Plans- opposed to the standard 80/20, plans are being adjusted to

70/30 and in some cases 60/40.

3. Higher Co- Payments- No explanation needed.

How does this affect a medical practice and their resources?  These changes have pushed medical collectibles on their patients to unprecedented levels.  Many practices are now in a situation where their patients’ balances comprise of 30% of the overall revenue.  This is up from 10% to 12% only five short years ago.  We can only guess as to how much this will increase from 30% in the upcoming years. But, in general the past is a good predictor of the future. It is vital that medical practices implement policies and processes that prepare them for the worst.  Every change made in Congress concerning Healthcare Reform will have an impact on your medical collectibles.

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Does Your Business have an effective Credit Policy ?

To develop a complete and effective credit policy that minimizes your company’s bad debt write off is essential for reducing cost and improving bottom line profit. An effective credit policy helps cultivate the necessary cash flow to maintain current business resources and grow to desired levels. Inefficient or poorly enforced credit policies force decision makers to cut expenses. Moreover, decision makers are constantly looking for areas within the business model to cut liabilities without compromising impact to their core operation.  Remember: A penny saved is a penny earned. Here are nine solid tips that will dramatically improve your credit policy.

  • Obtain complete contact information at the time of sale or service
  • Get customers to sign a credit application/contract at time of sale or service
  • Check credit references before providing products or service
  • Create a recovery plan that outlines what steps should be taken in the event of delinquency or an NSF check
  • Focus attention on accounts that start to become delinquent
  • Refuse more product or service to delinquent customers
  • Have validation of the debt ready to provide in a timely manner
  • Maintain consistent credit approval and terms with customers regardless of  relationship with them
  • Utilize a professional collection agency early in the delinquency

Implementing these tips will improve in-house time management and increase revenue. Keep in mind: The “collectability” of any account starts the day you extend credit and is parallel to the quality of your service or product, and parallel to the terms of your credit policy.

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