Dental Accounts Receivable: Aging Reports and Collections

Accounts receivable is money the practice has earned but not yet collected. Some AR is normal, especially insurance claims that are still processing. The problem is AR that ages, because every month a balance sits, the chance of collecting it drops. This guide covers how to read the aging report, the two ratios that summarize it, what targets to aim for and a routine that keeps AR under control.

Insurance AR and patient AR

Your practice management software can split receivables into amounts owed by insurance carriers and amounts owed by patients. Look at them separately:

• Insurance AR grows when claims are sent late, missing attachments or denied and not worked.
• Patient AR grows when estimates are inaccurate, patient portions are not collected at the visit or statements are not followed up.

Insurance AR is usually easier to recover because there is a claim, a payer and a process. Patient AR gets harder to collect with every statement that goes unanswered, so a rising patient balance deserves attention sooner.

How to read the aging report

An aging report groups balances by how long they have been outstanding. The table shows the kind of guideline ranges consultants commonly use. They are rules of thumb, not standards, and practices with more insurance or more large cases may run differently.

Watch the trend more than any single month. Total AR rising faster than production is an early warning, even if every bucket looks acceptable today. The report is also a snapshot: it changes every time a payment is posted, so run it on the same day each week or month when you compare.

A sample aging report, read line by line

Here is an illustrative practice producing about $120,000 a month, with $150,000 of total AR:

What this report says:

• Total AR is about 1.25 months of production, above the one-month rule of thumb.
• 20% of AR is over 90 days, above the 10–15% guideline.
• The patient side is the bigger problem: $18,000 of the $55,000 owed by patients is over 90 days, about a third. That points to estimates and time-of-service collection rather than claim follow-up.
• The $12,000 of insurance over 90 days still needs a claim-by-claim review, because some of it may be close to a filing or appeal deadline.

The first step is not more statements; it is finding out which accounts make up the 90-day bucket and why they stalled, because the answer usually points to one or two broken steps in verification, estimates or claim follow-up.

Two numbers that summarize AR

The aging report shows detail. Two simple ratios let you track AR over time and compare it with the size of the practice:

For days in AR, average daily production is the last three months of production divided by the number of days: in the sample, $360,000 ÷ 90 days = $4,000 a day. Some advisors use net production or collections instead of gross production in these formulas. Any version works if you use the same one every month; just do not compare your number to a benchmark built on a different definition.

These ratios connect directly to the dental collection rate. A net collection rate below the high 90s and a rising AR ratio usually describe the same problem from two angles. They also explain many cash flow squeezes: every extra $10,000 sitting in AR is $10,000 the practice has earned but cannot spend.

A weekly AR routine

1. Monday: run the insurance aging report; resubmit or call on every claim over 30 days.
2. Tuesday: work denials and requests for information; log the reason code for each.
3. Wednesday: review patient balances; send statements or text-to-pay links for anything new.
4. Thursday: call patients with balances over 60 days; offer a payment plan where appropriate.
5. Friday: review credit balances and the adjustment report; flag anything unusual for the office manager.

Assign each step to a named person and record notes in the patient ledger so the next person knows what happened. Most AR problems come from no one owning the follow-up.

Which balances to work first

When the backlog is large, work it in this order rather than alphabetically or by date alone:

1. Insurance claims close to the plan’s timely filing or appeal deadline. Filing limits are set by each carrier and your provider contract, so keep a current list at the front desk. A claim filed late can be lost entirely.
2. The largest balances in the 61–90 and over-90 buckets, where one phone call can recover the most money.
3. Claims with no response at all, which often were never received. Check the clearinghouse acceptance report before resubmitting.
4. Smaller patient balances, handled through statements, text-to-pay and the small-balance rule below.

How fast should insurance pay in Virginia?

Under Va. Code § 38.2-3407.15, a carrier generally must pay a claim within 40 days of receipt, unless its obligation to pay is not reasonably clear, and any interest owed on a late claim is to be paid without the provider having to ask. The definitions in § 38.2-3407.10 include prepaid dental plans as carriers. Self-funded employer plans are generally governed by federal law rather than state insurance law, so the rule may not apply to every patient’s plan. Even so, a clean claim from a fully insured Virginia plan that is unpaid well past 40 days is worth a call, and the denial log below will show whether one carrier is consistently slow.

Prevent AR before it starts

The cheapest balance to collect is the one you collect at the visit. That depends on accurate insurance verification and written estimates. Our guides to dental insurance verification and front-desk systems cover the process in detail.

A few prevention habits make the biggest difference: verify benefits before every appointment, present written estimates for any treatment beyond routine care, collect the estimated patient portion at check-out, and send claims with attachments the same day. When estimates are accurate, the balance left after insurance is small, expected and easy to collect with a card on file.

Patient balances: financial policy and payment plans

A written financial policy, signed by every patient, sets expectations: payment due at the time of service, accepted payment methods, card-on-file consent for balances after insurance, and what happens when a balance goes unpaid. For larger treatment plans, third-party financing or a short in-house plan with automatic payments keeps balances from aging. Avoid open-ended “pay when you can” arrangements, which tend to end in write-offs. If you plan to charge interest or finance charges on in-house plans, have an attorney review the terms first, because consumer-credit rules can apply.

When to write off or send to collections

Set a written rule, for example: three statements and two calls over 90 days, then a final notice, then a decision by the owner or office manager. When you write off a balance, use a specific bad-debt adjustment code, not a contractual code. If you use a collection agency, choose one familiar with health care and patient privacy, and decide in advance whether accounts sent to collections are dismissed from the practice.

Small balances deserve their own rule. Chasing a $12 balance with several statements can cost more than the balance itself. Many practices set a small-balance threshold below which the remaining amount is written off with a dedicated code after a set period. Review the total of these write-offs monthly; if it grows, the estimates are probably off.

For tax purposes, the IRS explains that cash-method taxpayers generally cannot deduct unpaid fees as a bad debt, because the fees were never included in income. A written-off balance is simply revenue never received.

Privacy and collection-law basics

• The HIPAA Privacy Rule’s definition of “payment” in 45 CFR § 164.501 includes billing and collection activities, so a practice can share patient information with a collection agency for that purpose. Share only what the agency needs, such as name, contact details, balance and dates, not clinical notes, and have a business associate agreement in place.
• The federal Fair Debt Collection Practices Act mainly covers third-party collectors. A practice collecting its own balances under its own name is generally outside its definition of a debt collector, but a creditor that uses a different name suggesting a third party is collecting can be treated as one. Collect under the practice’s real name.

This is general information, not legal advice; ask your attorney to review your financial policy and any collection agency contract.

Credit balances are a liability

A credit balance means the practice owes money back, usually because insurance paid more than estimated or a patient prepaid. Review credit balances monthly and refund them promptly, to the correct payer. Unrefunded credit balances that sit for years may become reportable to the state as unclaimed property under the Virginia Disposition of Unclaimed Property Act. Ask your CPA how the dormancy and reporting rules apply to your practice.

Credit balances also distort the aging report. Many systems net them against amounts owed, which makes total AR look smaller than the money actually outstanding. Ask your software for a report that shows debit and credit balances separately.

Make sure AR ties to your books

The AR total in your practice management software should be explainable from your accounting records: last month’s AR, plus production, minus collections, minus adjustments, should equal this month’s AR. If that roll-forward does not work, payments may be posted to the wrong period, adjustments may be missing, or deposits may not match what was posted. Our dental bookkeeping basics guide covers the monthly close where this check belongs.

Clean AR also matters if you ever sell or bring in a partner. In many practice sales the seller keeps the existing receivables, and the purchase agreement should say how payments that arrive after closing are handled. Buyers and lenders still read the aging report as evidence of how well the office runs, as our guide to how dental practices are valued explains.

Signs of a deeper problem

• AR over 90 days keeps growing despite follow-up.
• Large write-offs coded as contractual that do not match the plans’ fee schedules.
• Patient payments posted days after they were received, or posted to the wrong account.
• One person handles posting, deposits and adjustments with no review.
• The AR roll-forward does not tie from one month to the next.

The last three are classic signs that controls need tightening. An outside reconciliation can confirm whether the issue is process or something more serious.

Track denial reasons

Denied and delayed claims are the main source of aging insurance AR. Logging the reason for each one turns a frustrating task into a fixable pattern:

Review the log monthly. If one reason accounts for a large share of denials, fixing that single step in the process usually shrinks insurance AR faster than any amount of phone calls.

Calling patients about balances

Balance calls go better with a short, respectful script: confirm you are speaking with the right person, state the balance and what it is for, ask how they would like to take care of it today, and offer the practice’s approved options if they cannot pay in full. Document the conversation and any promised payment date in the ledger. Keep calls factual and private, and follow the practice’s HIPAA policies when leaving messages. Our OSHA and HIPAA basics guide covers the privacy side.

A monthly AR review checklist

• Total AR, AR ratio and days in AR, compared with the last three months.
• Share of AR over 90 days, separately for insurance and patients.
• The ten largest balances over 60 days, each with a named owner and next step.
• Claims approaching a filing or appeal deadline.
• Denial log totals by reason and by carrier.
• Credit balances and refunds issued.
• Bad-debt and small-balance write-offs, by code and by who posted them.
• AR roll-forward tied to the books.

Help with AR and collections

Cisor’s practice management consulting can set up an AR routine, financial policy and adjustment codes, and the Cisor Metrics analysis reviews aging, write-offs and posting patterns to find where money is stuck. You can request a practice analysis or call (703) 345-0606.