Cash Flow is King: The Importance of Timely Collections

Graphic of man with bags of money walking a tightrope between columns made of gold coins to illustrate the importance of cash flow and timely collections

My grandfather, Paw-Paw, started his business when he was literally a teenager. Our family would best be described as serial entrepreneurs, and one thing I remember was that my grandfather had a sign that hung in his office when my mother was still a child that said, “Cash Flow is King.”  There is something impactful about learning this at a young age and passing it along over multiple generations.  You simply can not spend money you don’t have. So whether your budget is $1 or $10,000,000, you need at least as much coming in as going out.  Even if you have a line of credit or a very generous lender, it’s best practice to stay on top of your accounts receivable.

While money should not be the sole reason for serving the senior care industry, it is, as you likely know, incredibly important.  After all, if you don’t make enough profit to stay in business, the clients, caregivers and office staff will all suffer.  Therefore,one of your highest priorities is to monitor and verify that money is flowing into your bank account on a regular basis. It’s not only important for paying bills, it’s critical for making payroll.

This can sometimes lead to some difficult conversations with your clients, their families or other responsible parties, but it still has to be done. I do not know a single person who enjoys collections, so it’s best to be ahead of the game and collect as soon as possible before it becomes a problem.

Bill Timely: One of the most important things to do to prevent problems with Accounts Receivable is to ensure that you follow a regular billing cycle for your clients and their parent payers. You want your clients to get consistent bills, so that they can pay you on a consistent basis. Also, always remember that some parent payers, such as insurance companies and the VA, have a time limit on reimbursements, and if you don’t submit timely invoices, you may not be able to collect.

Your agency likely has clients with multiple payer types, and clients who pay for services using a combination of funding sources. Let’s discuss a few of these and some tips for maximizing cash flow with each one: 

Private Pay: The first of these are Private Pay clients, who pay for their own care out of their own finances. Keep in mind that for clients who pay by check, you’ll have to factor in the time it takes for the invoice to arrive in their mailbox, and then for them to write a check and mail it back over to your office. If you are accepting payments by credit card, there is often a large fee for credit card transactions.  Check to see if you can avoid these fees by using ACH which is typically a fraction of the cost of credit card fees.  Also consider a surcharge to cover the cost of the credit card fees if the client chooses to pay via credit card.

Long Term Care: For your clients with Long Term Care insurance policies, there are two basic options for paying for your services. Either way, it is critical to follow the rules of the LTC policy.  These rules typically specify the number and type of ADLs that must be completed in order to be eligible for the reimbursement.  Also specified on the policy will be the number of hours or dollars that are eligible for reimbursement within a specified period of time and for the life of the policy.

  • The first is called an Assignment of Benefits, and means that the client signs the paperwork allowing you to bill their Long Term Care insurance company directly and reimburse your agency directly for the care delivered to the client. This is often the best option but usually does mean that you will not be able to collect for 30-90 days.  
  • The second option with Long Term Care insurance is for you to bill the client for services. The client is responsible for submitting all invoices and care logs to the insurance company. The client first pays your agency, and is later reimbursed by their Long Term Care insurance provider. 
  • The third option with LTC is to bill the client directly, but offer to submit all the paperwork to the insurance company on their behalf.  This can be a very valuable service that may be eligible for reimbursement from the LTC agency.  This allows the client to get the services, pay for the services, but not be responsible for submitting the paperwork which can be overwhelming to seniors.

Other Third Party Payers

There are many other third party payers, most of which pay very similarly to LTC insurance.  Respite programs and grants typically offer a fixed amount of money for care under certain conditions.  Payers such as the VA usually offer a certain number of hours that can be reimbursed.  Be sure you stay on top of these payers, as you may be asked to “prove” you submitted the claim later and/or submit multiple times for the same claim to get paid. 

How to set up Authorizations for Third Party Payers

Within Wellsky(r) Personal Care, formerly known as ClearCare, most of these payment options can be managed using Authorizations.  For clients whose payers (whether Long Term Care, Medicaid, VA or other community/government programs) only authorize a certain amount of hours per day, week, or month, you must make sure that your schedulers follow those guidelines. Any hours not covered by the Authorization are at risk of going unpaid and unrecoverable by your agency, especially if the client does not have the means to afford to pay for care privately.

A note about EVV Requirements

If you are working with a payer source that requires Electronic Visit Verification (EVV), make sure your software supports this in the state where you provide service.  EVV is basically a term for verifying that you serviced the client on the day and time for which you are submitting an invoice for services.  This means you have an electronic method of confirming that the caregiver was at the home of the client at the time specified and completing the tasks that you have invoiced. Failure to follow these guidelines can jeopardize your ability to participate in or collect from payers which require EVV.

Monitoring and Reporting on Accounts Receivable and Collections

There are many, many reports on accounts receivables, aging and authorization status available to you in WellSky(r) Personal Care platform and probably in any other software platform you are using.  Make it a regular event to review these reports to make sure your Accounts Receivable is not getting behind.  Any uncollected funds more than 90 days old can be very difficult to collect. The sooner you collect the easier it is and the more likely you are King or Queen of Cash Flow.

If your agency would like a second set of eyes on how to improve your Collections process, then please reach out to us for a Free Consultation. you can reach us on our website www.seniorcareba.com or call us at 678-340-3649. We look forward to working with you.

*Disclaimer: Senior Care Business Advisors is not affiliated in any way with WellSky® Personal Care, formerly known as ClearCare Online. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official use or best practice recommendations of WellSky® or any other organization.

Author: Tyler West

Tyler West is a founding partner of Senior Care Business Advisors with over 10 years of experience in personal care, home care, health care and technology. He is also a former Director of Operations for a Home Care Agency and worked in technology with ClearCare and other organizations. Additionally, he is a published author. Connect with him through Senior Care Business Advisors website, www.SeniorCareBA.com, twitter.com/@seniorcareba or LinkedIn https://www.linkedin.com/company/senior-care-business-advisors-llc. You can also reach him via email at twest@seniorcareba.com.

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