Accounts Receivable & Budgeting for Veterinary Offices Video

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  • 0:01 Everyday Budgeting &…
  • 0:36 Accounts Receivable
  • 3:17 Budgeting
  • 4:31 Lesson Summary
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Lesson Transcript
Instructor: Artem Cheprasov
This lesson will outline the basic concept of accounts receivable, outstanding accounts, important check practices, and what a budget is. It will also go over some important rules regarding the acceptance of checks.

Everyday Budgeting & Accounts Receivable

I bet that somewhere down the line you were owed money by someone. Maybe it was lunch money, or maybe it was tens of thousands of dollars.

Businesses are owed money all of the time. Actually, many businesses don't receive money until quite a bit after they sell their product! In veterinary medicine, we try to avoid that.

And I'm also willing to bet that you've had to budget your money at one point in time. Again, perhaps you had to budget your own lunch money for the week or maybe budget your money for everything for an entire year.

So, without further delay, let's go over the basics of budgeting and accounts receivable in veterinary medicine.

Accounts Receivable

Accounts receivable is money owed to a business for a product or service. It's money that wasn't paid at the time of service and is, therefore, a debt owed to the clinic by someone.

Let's say that currently the accounts receivable account in your clinic has a balance of $0. Then a client comes in, has $100 worth of services performed, but can only pay $70 during checkout. Since $30 wasn't paid and is still owed to the clinic, the accounts receivable balance now rises to $30.

Obviously, when a clinic doesn't get the money they are owed, they have to sacrifice somewhere or something else.

To avoid an excess balance in accounts receivable, a practice should strive to receive full payment at the time of service. One of the best ways to minimize the amount in accounts receivable is to provide the client with an estimate so they can quickly see if it is something they will be able to afford.

To further avoid overfilling accounts receivable, do not hold checks for clients. What this means is you shouldn't hold on to a check (as opposed to depositing it at the bank right away) for a client until a future date. There is no guarantee any funds will be in the client's bank account in the future.

Additionally, do not accept postdated checks. A postdated check is a check with a future date written on it. In some states, this is actually illegal, and even if it's not illegal, once again there is no guarantee there will be any funds at the future date.

Furthermore, every client who pays by check should have their driver's license number written down. This helps collection agencies collect the amount that is owed if a check bounces. Bounced checks, or returned checks, are not uncommon in veterinary practice. The problem with returned checks is that they have a pretty significant fee associated with them, something like 20 or 30 bucks. That's a lot of money! Clients should be made aware that if their check bounces, they will be responsible for paying this fee.

Clients who have outstanding balances need to receive monthly statements with the amount they owe and a request for payment. Statements can include a fee for the statement itself, since it takes time and money to generate and send a monthly statement. Statements often include finance charges as well.

If the clinic has made every effort to work with the client in collecting an outstanding balance, which includes making reminder phone calls, sending certified letters, and giving 90 days to pay the balance, and the client still refuses to or cannot pay, then the accounts can be turned over to a collection agency. At this point, or even sooner, the clinic will most often refuse to service the client until their outstanding balance is settled.

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