Managing Accounts Receivable

[Guest Small Texas TPA]

We are a new TPA with growing business but our account receivable is almost one-fourth of our revenue which seems relatively large. Does any TPA out there have any suggestions on how we can collect better? We are thinking of having each administrator follow up on receivables of his/her assigned plans. Any inputs (pros and cons) from practioners about this idea?

[Bill Berke]

Yes that seems high to me also, but over how long a period? I would call to collect and, perhaps, at the same time maybe find out about a problem. We do not sell any products, nor are we hooked up with any product people, our sole source of income is our fees. As a result, our clients know that we are their objective advisor. We also do not bill until we finish the work - the admin bill goes with finished admin if we are delivering in person or the bill is mailed two days after we mail the admin package. We have been in business 20 years and we have never had a rec'ble problem (except for the rare deadbeat/bankruptcy) We charge on a fixed fee basis and we go over the fees with the client up front. We tell our clients that we are "high average" and we will lose if they are fee shopping.

[Guest Small Texas TPA]

Bill, thanks for the reply. We billed quarterly based on prior year-end count and send a fifth bill for any adjustments at end of each year when we do compliance work. Our procedure now is that fax a pass due invoice every 30 days. Most clients with overdue fees pay when they receive first pass due notice. There are a dozen or so who do not pay until 3rd or 4th notice. Does any of you put a hold on plans that have delinquent bills? What kind of response do you get from these clients?

[Bill Berke]

Because we bill only once per client, after the annual admin is done, we don't have the problem of managing so many outstanding invoices - you bill four times (in quantity) what we bill. There is the slight risk that we'll get stuck for one whole year's fees, but I felt the hassle of monthly or quarterly billing was not worth the effort. Thus, because this style has worked for us, I believe it to be the best method. And, I said, we don't have a collection problem. In fact 80% of our clients pay within 30 days and a large number pay within a week. But, with our system, we don't do the next year's work until we get paid for the prior year and then, if we had to chase, the client goes on o year's fee advance billing. Right now (today) we have only three clients on advanced billing.

[Guest PAUL DUGAN]

Our operation and experince is very similar to Bills. We charge in advance to any client that nis more than 90 days past due in the past year, we let them know in advance and it is included in our printed fee schedule. I don't think we have ever had over 10% recievables over 60 days.