PCC AR Aging: Best Practices and Tips

This document provides practical guidance for effectively using and interpreting PCC AR Aging reports. These best practices can help ensure accurate reporting and support effective accounts receivable management.

Running Effective AR Aging Reports

Choosing the Right Reference Date

The reference date is crucial for accurate aging reports:

• Month-End Reporting: Use the last day of the month for consistent monthly comparisons
• Current Status: Use today's date to see the current aging status
• Historical Analysis: Use past dates to see how aging looked at specific points in time

Tip: For month-end financial reporting, run the aging report using the last day of the month, even if you're running the report a few days into the new month.

Selecting the Appropriate Aging Method

PCC offers two aging methods:

1. Effective Date Aging (Service Date):

   • Best for: Understanding how old the services are
   • Use when: Analyzing service delivery patterns or payer performance
   • Example use case: Identifying payers who are slow to pay for specific types of services

2. Transaction Date Aging (Posting Date):

   • Best for: Understanding your AR from a bookkeeping perspective
   • Use when: Analyzing data entry patterns or billing efficiency
   • Example use case: Identifying delays between service delivery and billing

Best Practice: Run both reports monthly and compare them to identify potential billing delays or data entry issues.

Filtering for Meaningful Results

Effective filtering can provide more targeted insights:

• By Payer: Focus on specific insurance companies or payment sources
• By Payer Type: Group similar payers (Medicare, Medicaid, Private)
• By Resident Status: Separate current residents from discharged residents
• By Facility: For multi-facility organizations, analyze each facility separately

Tip: Create a regular schedule of filtered reports. For example:

• Weekly: High-priority payers with known payment issues
• Monthly: All payers, separated by type
• Quarterly: Detailed analysis including discharged residents

Interpreting AR Aging Results

Key Metrics to Monitor

1. Total Outstanding AR: The sum of all aging buckets
2. Aging Percentage Distribution: What percentage of AR falls into each aging bucket
3. Days in AR: Average age of outstanding receivables
4. Trend Analysis: How these metrics change over time

Example Calculation:

Days in AR = (Current × 15 + 30 Days × 45 + 60 Days × 75 + 90 Days × 105 + 120+ Days × 150) ÷ Total AR

Red Flags in AR Aging Reports

Watch for these warning signs:

1. Growing Older Buckets: Increasing amounts in 90+ day buckets
2. Specific Payer Patterns: Certain payers consistently appearing in older buckets
3. Specific Resident Patterns: Same residents appearing month after month
4. Sudden Changes: Dramatic shifts in aging patterns from one month to the next

Action Item: Create thresholds for each of these red flags and develop standard responses when they occur.

Reconciling with Other Financial Reports

Common Reconciliation Challenges

AR Aging reports should align with other financial reports, but discrepancies can occur:

1. Timing Differences: Reports run at different times may show different results
2. Methodology Differences: Different reports may use different aging methods
3. Filtering Variations: Some reports may include or exclude certain transaction types
4. Cut-off Issues: Month-end processes may affect when transactions are recorded

Reconciliation Best Practices

1. Consistent Timing: Run all related reports at the same time
2. Documentation: Note the parameters used for each report
3. Standardized Process: Develop a consistent month-end closing process
4. Cross-Verification: Regularly compare AR Aging totals with general ledger AR balances

Tip: Create a monthly reconciliation worksheet that compares key totals across different reports.

Using AR Aging for Collections

Prioritizing Collection Efforts

AR Aging reports can help prioritize collection activities:

1. Age-Based Prioritization: Focus on older accounts first (90+ days)
2. Amount-Based Prioritization: Focus on larger dollar amounts
3. Payer-Based Prioritization: Focus on payers with known payment issues
4. Combined Approach: Create a scoring system that considers all factors

Example Scoring System:

Priority Score = (Age Factor × 0.5) + (Amount Factor × 0.3) + (Payer Factor × 0.2)

Where:
- Age Factor: 1 for Current, 2 for 30 days, 3 for 60 days, 4 for 90 days, 5 for 120+ days
- Amount Factor: 1 for <$500, 2 for $500-$1000, 3 for $1000-$5000, 4 for $5000-$10000, 5 for >$10000
- Payer Factor: 1-5 based on historical payment performance

Collection Workflow Integration

Integrate AR Aging reports into your collection workflow:

1. Regular Report Schedule: Run aging reports on a consistent schedule
2. Assignment System: Assign specific aging buckets or payers to collection staff
3. Progress Tracking: Compare reports over time to measure collection effectiveness
4. Documentation: Record collection efforts and outcomes for each account

Best Practice: Create a collection calendar that aligns with your AR Aging report schedule.

Technical Tips for Advanced Users

Custom Queries

For advanced analysis, consider custom queries against the PCC database:

-- Example: Find all transactions over 90 days old for a specific payer
EXEC dbo.sproc_ar_aging 
    @fac_ids = '1,2,3', 
    @reference_date = '20230501';

Data Export and Analysis

Export data for deeper analysis:

1. Excel Analysis: Use Excel's PivotTables to analyze exported data
2. Trend Analysis: Create charts showing aging trends over time
3. Payer Performance: Compare payment patterns across different payers

Tip: Create a standard Excel template with pre-built formulas and charts for monthly analysis.

Conclusion

Effective use of PCC AR Aging reports requires understanding both the technical aspects of how the reports work and the business context in which they're used. By following these best practices, you can maximize the value of these reports for financial management and collections.