What do I look for? Precisely where the Practice is now.
When? The very first day
It seems the most obvious place to start. It is. But numerous times a practice doesn’t really know what is happening in terms of invoicing and billing. That, if you think about it, is crazy. It may well be the practice principals think they are owed too much money but seldom do they consider the three most fundamental question of all before they may reach their conclusion.
In any event “think” is not good enough. You need to know. You MUST answer three fundamental and parallel questions FIRST.
How much are you owed?
Do you know how much? How can you be so sure it is the total amount you are owed? Does it include every single piece of work undertaken in the practice?
In other words, is there a sales ledger (sometimes known as a debtors ledger)?
You would be surprised how many times I’m told the figure is £X based on a sales ledger the practice accountant produced four or even five months ago for the last financial year end of the practice. All that does is confirm the position a number of months ago. That is not good. The data should be no more than 30 days old i.e. if it’s Nov 26th today then that data should be no older than October 31st.
Therefore you need to ensure the information really does confirm how much you are owed. Does it?
If the data is “out of date” then that may indicate it too is inaccurate. For example: if the sales ledger indicates most of the money is overdue then the supplementary question of “who says?” springs to mind. For certain, taking the above example of a report being between four or five months old, some of the amounts WILL have been paid either in full or partially. How many have been paid? Have such amounts been allocated to the sales ledger? Was such an allocation accurate?
Therefore you must make sure the information you are looking at is the most recent that is available. Is it?
For example, I recently reviewed the sale ledger of a private practice covering three surgeons who were firm of the opinion they were owed “a fortune” by the various private medical insurance companies. Yet when the analysis was completed between 20-30% of the overdue balances were actually down to shortfall and excess payments. They aren’t due from any insurance company; they are due from patients.
Therefore you must make sure you really do know who owes you the money. Are you sure?
Look at it this way: you may have the greatest sat nav on the planet in your car but if it cannot confirm precisely where you are, don’t bother telling it to route to Glasgow. Or London. Or Birmingham. It won’t get you there!
Tomorrow: we’ll look at how invoices are being raised now, what they contain and how they are sent out.