Bad Debt

End of Month Statements and Account Receivable (Bad Debt)

Each Hospital is responsible for

• Local financial policy • Managing client financing and Accounts Receivable (AR) • Managing monthly client statements (Printing, mailing, and collection) • Managing collections/collection agency and bad debt Bad Debt • Any unpaid client balance 90 days past due is considered “Bad Debt” • At 90 days past due, Accounting removes this debt from the hospital’s revenue in their next financial statement • Accounting will deduct the bad debt from the revenue line in each month’s Statement of Operations and include this Bad Debt as a negative line item in the Revenue by Category Report • But if you collect AFTER either through an agency or on your own it can be added back by using an MCR and Bad Debt Accounting code. • RULE OF THUMB: When writing the hospitals personal financial policy, it is best to offer as little deferred payments as possible. When required, the goal should be to have the balance on deferred payments paid in full by 90days of service to avoid the bad debt appearing on the hospital’s financial statements.

Bad Debt – Found in Revenue by Category Report each month

Bad Debt appears as a negative revenueline item each month

National Veterinary Associates

RevenuebyCategoryvs.PriorYear For the period ended September 30, 2017 114-Merrimack Veterinary Hospital

10/23/17 12:14 PM

Month-to-Date Year-to-Date

Actual Actual Actual Actual 09/30/17 % 09/30/16 % Variance 09/30/17 % 09/30/16 % Variance

REVENUES

Professional Services

Office Visits/Consultations 26,909 13.89% 24,502 13.08% 2,407 82,697 13.06% 76,316 13.43% 6,382

Vaccinations 13,656 7.05% 12,331 6.58% 1,325 41,026 6.48% 37,191 6.54% 3,835

Procedures 6,016 3.11% 8,259 4.41% (2,243 25,130 3.97% 25,636 4.51% (506

Surgery 6,740 3.48% 10,786 5.76% (4,046 25,055 3.96% 24,180 4.25% 875

Anesthesia 4,717 2.44% 6,111 3.26% (1,394 19,936 3.15% 14,152 2.49% 5,784

Dental 11,517 5.95% 11,869 6.34% (352 42,933 6.78% 31,895 5.61% 11,038

Hospital 3,374 1.74% 3,109 1.66% 265 11,461 1.81% 9,381 1.65% 2,081

Pharmacy 33,200 17.14% 29,530 15.77% 3,669 97,903 15.47% 92,383 16.25% 5,520

Laboratory - In House 18,363 9.48% 16,222 8.66% 2,141 53,098 8.39% 52,204 9.18% 894

Laboratory - Referral 21,714 11.21% 22,170 11.84% (457 71,926 11.36% 62,744 11.04% 9,183

Radiology/Ultrasound 7,166 3.70% 11,125 5.94% (3,959 28,402 4.49% 27,348 4.81% 1,054

Heartworm&FleaProducts 11,037 5.70% 9,880 5.27% 1,157 35,880 5.67% 32,351 5.69% 3,529

Sales Discounts (3,954) -2.04% (5,229 -2.79% 1,275 (20,203 -3.19% (9,300 -1.64% (10,903

Bad Debts (1,318) -0.68% (6,104 -3.26% 4,786 (5,752 -0.91% (23,214 -4.08% 17,462

159,136 82.17% 154,561 82.51% 4,575 509,494 80.48% 453,267 79.74% 56,227

Bad Debt FAQs

1. How should I collect payment on an account more than 90days past due? Whether the payment comes directly from the client or from a collection agency, you should deposit the payment via MCR using the bad debt accounting code 67530. Then in the client’s accounting in your practice management software, make an “account adjustment” not a payment in the appropriate amount with notes on the check number. 2. What are the ramifications if I haven’t been applying BAD Debt payments as outlined above? This recouped revenue is never seen again in your revenue category on future Statement of Operation reports 3. What if a client is making incremental payments on the account which go past 90 days? Any remaining balance on the account past 90 days will be categorized as Bad Debt at 90 days.

4. When does repaid Bad Debt appear again in my revenue? The month you collect and deposit it via MCR it appears in your revenue (offsetting that month’s Bad Debt deduction) This is then also reflected in your YTD moving forward throughout the year. 5. Are held checks considered PIF? First when even possible you should avoid holding checks as it is not legally binding in any way. Second, these checks SHOULD NEVER be postdated as it is actually illegal to accept post-dated checks. If the held check increments go past 90 days, then yes any remaining balance post 90 days will be reflexed in your Bad Debt. 6. I have a held check code in AVImark. Why would this be there? It was likely created by a former hospital leader at your practice or predates NVA. It is always best to avoid taking held checks as deferred payment whenever possible. 7. Shouldn’t Bad Debt be reflexed in AVImark (or any PM software)? Yes, and it is. All PM software allows you to run reports to find account balances over 90 days. Any balance over 90 days has or will hit your BAD Debt category. 8. What happens to DVM production when the balance is re-categorized as Bad Debt? Nothing because your DVM has already been paid for the services and revenue 60 to 90 days earlier.

9. What if the client agrees to pay off Bad Debt via credit card? As per Tom Ho, the HM should collect payment via credit card and apply payment to clients account in the practice management software. Then accounting makes corrections for the recouped revenue on the back end.