Striking the right balance between quality services and claim denials

Aged Receivable Collections

VeeBill's Dynamic credit executives plan and direct the credit, collection, and accounts receivable functions to increase sales and profits. While pursuing these goals, they use their decision-making capabilities to foster growth, optimize cash inflows, and improve the quality of work performed by credit, collections, and aged receivable collections personnel.

Using valid measures of performance is critical in this process. For many years credit and finance professionals, along with academic researchers, have been seeking a means of accurately measuring performance in credit, collections, and aged receivable collections.

Aged Receivable Collections are tallied by invoices and arise as a result of the operating cycle's process of selling inventory or services on terms that allow delivery prior to the collection of cash. Inventory is sold and shipped, an invoice is sent to the customer, and later cash is collected. The existence of receivables indicates that the company, instead of collecting cash, invested cash into receivables which, in effect, are loans to customers.

Trade receivables take the form of invoices rather than promissory notes. Your legal rights and collection methods are different for trade receivables than for a promissory note. When you find days receivable greater than your sales terms, the first step in analyzing your problem is to age your aged receivable collections by multiples of your terms. For example if you give Net 30, this means your invoice is to be paid within 30 days. The logical aging time periods may be 0-30 days, 31-60 days, 61-90 days, over 90 days.

Aging of aged receivable collections identifies your problem customers, and also allows you to manage your credit policies based upon industry standards. If your accounts receivable are abnormally long, you know you must work harder at collecting for items you have already sold. If on the other hand, your accounts receivable are abnormally short, you may be able to increase sales by easing your credit policies.

Read more on Medical Billing Advantage.

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