5.3 Financial Management and Practice Operations
Key Takeaways
- Accounts receivable (A/R) represents money owed to the practice by patients and insurance companies; aging reports track outstanding balances by 30/60/90/120+ days
- The day sheet (daily journal) records all transactions — charges, payments, and adjustments — for each day in the practice
- Patient collections should follow a consistent process: statement at time of service, follow-up statements at 30-day intervals, collection letter, and referral to collection agency as last resort
- Petty cash is used for small office purchases and must be tracked with receipts; a reconciliation is performed when the fund is replenished
- Banking procedures include preparing daily deposits, reconciling bank statements, and maintaining accurate financial records
- Medical assistants must understand fee schedules, superbills/encounter forms, and charge capture to ensure accurate billing
Last updated: March 2026
Financial Management and Practice Operations
Medical assistants often handle financial transactions and contribute to the business operations of the practice. Understanding basic financial management concepts supports accurate billing and healthy practice revenue.
Revenue Cycle Overview
The revenue cycle encompasses all activities from patient scheduling through final payment:
| Phase | Activities |
|---|---|
| Pre-visit | Scheduling, insurance verification, pre-authorization |
| Point of service | Registration, copay collection, charge capture |
| Post-visit | Coding, claim submission, payment posting |
| Follow-up | Denial management, appeals, patient billing, collections |
Key Financial Terms
| Term | Definition |
|---|---|
| Accounts receivable (A/R) | Money owed to the practice by patients and insurance companies |
| Accounts payable (A/P) | Money the practice owes to vendors and suppliers |
| Day sheet (daily journal) | Record of all daily transactions: charges, payments, adjustments |
| Superbill/encounter form | Pre-printed form with common diagnosis and procedure codes checked by the provider |
| Fee schedule | List of charges for each service the practice provides |
| Charge capture | Recording all services rendered for billing |
| Posting | Recording payments and adjustments to patient accounts |
| Write-off/adjustment | Amount removed from the patient's balance (contractual adjustment, bad debt) |
| Aging report | Categorizes outstanding A/R by age: current, 30, 60, 90, 120+ days |
Accounts Receivable Management
A/R Aging Report Categories:
| Age | Status | Action |
|---|---|---|
| Current (0-30 days) | Normal | No action needed |
| 31-60 days | Follow-up needed | Send second statement; verify insurance claim status |
| 61-90 days | Escalated follow-up | Phone call to patient/insurance; review for errors |
| 91-120 days | Serious delinquency | Collection letter; final notice |
| 120+ days | Potential bad debt | Consider writing off or referring to collection agency |
Patient Payment Collection
Collection Best Practices:
- Collect copays and deductibles at the time of service (before the patient is seen)
- Provide clear financial policies during registration
- Offer payment plans for large balances
- Send statements within 30 days of service
- Follow up with phone calls for past-due accounts
- Use collection letters with escalating urgency before referring to a collection agency
- Document all collection efforts in the patient's account
Collection Letter Sequence:
- First notice (30 days): Friendly reminder with account summary
- Second notice (60 days): Firm request for payment; offer payment plan
- Third notice (90 days): Final notice; state that the account will be sent to collections
- Collection agency referral (120+ days): Last resort; practice typically writes off the account
Banking Procedures
| Task | Description |
|---|---|
| Daily deposit | Prepare and deposit all payments received each day |
| Bank reconciliation | Compare bank statement to practice records monthly |
| Petty cash | Small cash fund for minor purchases; replenish when low |
| Endorsing checks | "For deposit only" stamp on the back of all checks received |
Test Your Knowledge
An accounts receivable aging report showing a large number of accounts in the "90-120 days" category indicates:
A
B
C
D
Test Your Knowledge
When is the BEST time to collect a patient's copay?
A
B
C
D
Test Your Knowledge
The document that records all daily charges, payments, and adjustments in a medical practice is called the:
A
B
C
D