Question

2. Scenario 2: Manage practice financials and reduce debt You've been working at your clinic for some time and your Practice Manager suggests that you review the finances of the practice and attempt to reduce debt where you can. Answer the following questions, then use your answers to conduct a short (5 minute) role play with your assessor to discuss how you would approach reviewing the finances of the practice and reducing debt.

2.1 You know that one indicator of the financial health of the practice is DRO (Days in Account Receivables Outstanding). What does DRO tell you and what could a high or increasing DRO indicate? (40-60 words) 2.2 Another indicator you can use is Aging Accounts Receivable. What does this indicator mean, and if it is high, how does it affect the debt tolerance of the practice? (30-50 words) 2.3 Your Practice Manager suggests you review your Time of Service collections. What does this refer to, and what should you be aiming for in order to reduce practice debt? (50-80 words) 2.4 After you review the practice's finances, you realise that you need to put in place a debt collection strategy. What would be one example of an ethical debt collection strategy. (30-50 words) 2.5 What would be an example of an unethical debt collection strategy? (20-40 words)

Answer 1

2.1 High days in account receivable means that receivable is collected after some credit period. This denotes an opportunity loss for the practice as on time payment will help in improving working capital.

2.2. Aging accounts receivable means the days past due for the particular invoice. It it is high then it means that debtors are paying after enjoying considerable amount of time.

2.3 This means that time should be reduced for each patient so that in same time more patients can be offered the services. This will help in increasing the revenue for the practice.

2.4. Ethical Debt collection strategy may includes a debt recovery team who can follow up the debtors after the expiry of credit period. Further interest should be charges for debtors who significantly delayed the payment.

2.5 Unethical debt collection strategy may include coercing the debtors to make the payment. This means the recovering the amount in a more unlawful manner forcefully.