In my world, a month to 1.5 months on the books of A/R is an OK thing. In fact, 1 to 1.5 months is healthy in a practice.
I don’t believe, like most “consultants” that A/R is a bad thing – something to run from. Horsepucky.
Charge interest and late fees on our A/R. Otherwise, you’re letting people borrow money from you for free…Good deal – can I borrow money for free from you? Would you loan a bank free money? Would they, you? Why then would you lend it to your pts? OK. We’ve got that straight.
Let me back up. I’ve come to the realization that some of you may not be fully aware of what I said just above, about “1.5 months on the books” of A/R.
If your average production is $50,000 per month and you have $75,000 in A/R that is 1.5 months on the books – 1.5 times the average production in A/R. If you have 1 month on the books, you’d have $50,000 in A/R.
If that A/R is beyond there, WARNING!
My hope is that some of you will pick up on this and keep your own A/R active and under control! A runaway A/R is what will kill you – not a healthy, active A/R that is “worked” (I’ll explain that later).