When a practice is being purchased, what happens to the accounts receivables?
Typically, the seller retains the receivables. Who will collect them? What will happen is that the staff of the practice will continue to collect them, just as they did when the seller was the owner of the practice. The collection process has a few steps… the collection of the payments as they come into the office and the billing of patients or insurance companies for any outstanding balances. These steps can be time-consuming and typically continue for several months after the transition.
Since the billing is now being done by staff employed by the new owner, the seller will pay a small fee for the administrative costs to collect the payments. What I have typically seen is a small percent (%) being charged to the former owner for those costs – usually 5-7% of the collected fees.
The length of time that this occurs is 6-9 months post-settlement.
The other option is for the buyer to purchase the receivables. This is a negotiated process between the seller and buyer. The amount paid for the receivables depends upon the aging the of receivables, i.e. 90-95% for current balances, 80-85% for 31-60 days, etc.
Whichever option is chosen, this is resolved prior to settlement.
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