Since independence, India has achieved the remarkable progress in the political, social, and economic fields of different section. After the liberalization, this progress has been given further fillip and has been recognized by the advance countries. In the area of medical sciences too, commendable progress has been made during this period. Unfortunately, however, hospital administration has lagged far behind. Even the most sophisticated and so called the modern hospital in India continue to be governed by the stereotype system of the hospital administration for example appointing the senior- most doctor as medical Superintendent. This person is entrusted with responsibility of the entire hospital administration, irrespective of whether or not he undergone any formal (or even informal) training in hospital administration.
1.1Meaning and Definition
When goods and services are sold under a contract permitting the customer to pay for them at a future date, the amount due from the customer is recorded as accounts receivables so; receivables are assets accounts demonstrating amounts owed to the firm as a result of the credit sale of goods and services in the ordinary course of business. The value of these claims is carried on to the assets side of the balance sheet under titles such as accounts receivable, trade receivables or customer receivables. "Accounts receivables are amounts allocated to the business enterprise, usually by its customers. Sometimes it is broken down into trade accounts receivables; the former refers to amounts allocated by customers, and the latter refers to amounts allocated by employees and others".
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Accounts receivable management in the hospital practice represent the amount due form customers (book debts) or debtors as a result of selling goods or services on credit. "The term debtors is defined as 'debt' owned to the firm by customers arising from sale of goods or services in the ordinary course of business." There has three characteristics of receivables those are, the element of risk, economic value and futurity. These three factors have explained the basis and the need for efficient management of receivables in the hospital practice. The risk element should be carefully analyzed. The services provided on the basis of cash have riskless but not on credit sales, as the same has yet to be received.
Today in the modern world when health financing is touching new heights with the increasing penetration of health insurance in the market, there has been a new problem for the operating hospitals. As the hospitals are nominated to be on the panel of TPAs, insurance companies and other corporate companies proving health facilities to their employees, these companies demand huge discounts and a suitable payback time for the bills incurred. This time period for the clearance of the pending bills can range from 15 days -90 days or as per the contract. Due to this period a large amount of income of the hospital remains locked in the debt while the cost incurred to provide the service has to be paid. This increasing debt in the form of Accounts receivable can create an extra burden over the hospital resources. Due to absence of a specific account receivable manager there are delays both on the part of the hospital as well as the third party involved in clearing the accounts. This research has been formulated to study this aspect of management and thus devise methods for effective management of Account receivable.
Hospital has provided the services to the patient for treatments of condition utilization highly specialized equipment and personnel. It has critical for the hospital to maintain the efficient cash flow in account section by obtaining timely compensation for the resource.
It can be contended that revenue generation is the most precarious function of a hospital organisation. Managing of the account receivables asset is a challenging task. The vast majority of hospitals expect that over 99.9% of all billings will be collected but it is impossible up to certain limit. Gathering ninety five percent of revenue is not good enough. Hospital will tolerate bad debt expense of several a percent of revenue, but not much more. But in that condition other department will supposed to work together and promptly.
It is generally anticipated that a high percentage of invoices will be funded on time and over 90% within 30 days of the due date. Management expects that the asset will be able to support sales and that all customers will be served promptly, courteously, and professionally. Management of the receivables asset is a complex task. It addresses the consequences of practices and processes usually outside the span of control of the responsible manager. Excellence in receivables management is a combination of art as well as science; it involves business process, technology tools, staff skills, motivation, company culture, changing behavior of customers and coworkers, the right organization structure and metrics, incentives, and flexibility to deal with changing external influences.
Always on Time
Marked to Standard
The receivables asset is sometimes called the garbage can of the hospital. This is because the receivables asset reflects the quality of the entire revenue cycle operation. If an error is made in taking an order, fulfilling it, invoicing it, applying the customer payment, or if the customer is dissatisfied with the product or service, quality of the receivables asset is an excellent barometer of customer service. It is feedback the customer willingly and quickly gives. It is tempting to call it a free quality control measurement system, except it is not free. The firm does not have to pay customers for the feedback, but it does incur costs in remediating the problems. The general flow of data pertaining to patient account receivables is shown in the figure below
TYPE OF JOURNALS
EXAMPLE OF POSTING MEDIA
Charge to the patient
Patient advance payment
1.2 Patient account receivables ledger
The simplest method for handling the account receivables is to require all patients to pay their bill upon discharge form the hospital, which eliminate the need to maintain the account receivables record on discharge patients. Only inpatient currently admitted have an account in hospital office, where hospital charges are entered and the final bill prepared for payment. Any balance e of the patient bill reaming unpaid after the discharge is then debited to free care inpatient.
Another method is to maintain the separate ledger account for each patient admitted to the hospital. Either a ledger card or envelope can be maintained, in which are posted or collected all the charges to the patient account for the hospital services. Because of the numerous account involved, patient account reciviable are place in a subsidiary ledger. When this procedure is follow it is necessary to establish a control account in general ledger. Details of the posting to the subsidiary ledger are then posted in summary to the general ledger control account for the various journals. At the end of each month the sum of the balance on each of the patient account card should be verified with the balance in the general ledger control account.
Several types of account receivables ledger forms may be used. Some few examples are
Table 1 patient account receivable ledger (vertical type)
1.3Charges for Hospital Services
The routine services charges generally include room, routine, drug and supply nursing etc. these charges usually originated in the business office and may be posted daily, weekly, or upon discharge. Daily or weekly posting means quicker preparation of the bill upon discharge, and spread out the work load for the billing clerk. It also enables the business office to present weekly bills so that patient and their relative can arrange for prompt payment. This is especially important for surgical case or long stay patient where payment of the hospital, bill because of its size, might be impossible if presented upon discharge.
Special department which may be send their own charge slip to the business office for posting to patient account are the operating and delivery room, anesthesia, pharmacy, laboratory, blood transfusion, X- rays dental etc. such charge slip should be collected if the individual envelopes or folders and arrange by patient name in the business office. They can then be posted to each patient account and the final bill easily prepared. Such charge slips system which avoids error and omissions. Every effort should be made to established procedure designed for the purpose of preventing such error or oversights in reporting charge and eliminating late charges caused by failure to send the charge notice promptly to the business office.
1.4 Provision for Uncollectable Account
Some account receivable will be uncollectable after patient leave the hospital, for variety of reasons. Some provision for uncollectable account, based on the past experience, should be made by the hospital authorities. It may be percentage of net patient income or arbitrary amount
1.5 Drivers of Improved Receivables Management
Table 2. Drivers of account receivable
In most hospital the sales strategy of services and/or the front-end operations (i.e., order processing and fulfillment, etc.) are outside the direct management control of the individual person responsible for receivables management results. In such cases, the account manager is measured on the results of a process that he or she does not fully control. In response to this, rational of the hospital will place the entire revenue cycle (order to cash cycle) under the control of a single executive, as a "process owner." This arrangement has many advantages, the primary one being the identical of authority with responsibility. Even then the executive does not have total control over all the determinants of the account receivables, specifically the sales strategy and the "need to make the numbers" at the end of a month or quarter.
1.6 Revenue cycle
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Revenue cycle is the hot topic of the current healthcare finances, especially in the hospitals. The main concept of the revenue cycle is not he the new but it is gaining increase emphasis as it become harder and harder to maintain the profit in current healthcare environment. The revenue cycle is define as the set of recurring business activities and related information processing associated with the billing and collecting for the goods and services provided to customer.
For the analysis of the individual business the revenue cycle activities typically are broken down into three parts. A) Those that occur before the services is provided B) those that are simultaneous with the services, and C) those that occur afterward.
2.0 LITERATURE REVIEW
This chapter carries out a review of the literature on the relationship between management of accounts receivables and its role in business. It covers receivables, justification for investment in receivables, receivables management policy, profitability, the relationship between receivables management and profit levels and the conclusion.
2.2 Accounts receivables
According BPP Publishers (Business professional practical), Financial management (2009), accounts receivables represent the firm's claim on the assets of customers. Receivables constitute a substantial proportion of the current assets of several organizations, thus represent investment.
Kakuru (2000) defines receivables as book debts which the firm is expected to collect in the near future and those receivables is money owed to the business for a short period of time.
Eskew (1989) noted that receivables are investments and should neither be too many nor too few but rather the test should be whether the level of return the firm is able to earn from receivables equals or exceeds the potential gain from other commitments.
Dickerson (1995), also commented that if it is possible to sell on credit, then selling on credit becomes more profitable, for it leads to increased sales as well as profits. And helps to maintain and retain customers. Thus companies should sell on credit than on cash.
However, firm's potential to earn a favorable return on investment in receivables is dependent on the volume of credit sales, collection period and credit policy applied.
Schoen M, and Najera M studied the how to achieving the revenue integrity in hospital and health system. The Bellevue Hospital, Ohio, USA sought to improve its performance in three areas-days in accounts receivable (A/R), denials, and charge capture-to enhance revenue integrity. Results included the following: A 30 % reduction in days in account receivable. A nearly 200 percent increase in bad debt collections. There were more than $1.6 million reductions in denials write-offs. An improvement in net revenue generation was more than $1 million. There were no studies found to create the new operating process for account receivables management in the hospitals. (Schoen M, and Najera M ,The Bellevue Hospital, Ohio, USA. )
Francis JM. Studied the reduction in account receivable begins before patient admission. In this study, a 362-bed teaching hospital reduced its accounts receivable from 80 to 59 days. The keys to success were management commitment, clear communication of goals and objectives among hospital departments, attention to the patient's account prior to admission, and emphasis on education for employees who deal with the public. These studies mostly focus on the internal administration of the account receivable management. Conclusion of this study were explaining that, the days reduction was depends on the inter personnel communications of department and proper supervision.
Reiss JB, Di Cioccio SJ were studies how to finance Medicare receivable legally in healthcare market. Although factoring transactions involving Medicare receivables are prohibited by Medicare regulations, a healthcare organization can allow a lender to finance its Medicare receivables and still retain "ownership" of accounts until they are paid. An organization can convert Medicare receivables into cash if: A lender finances between 65 percent and 80 percent of certain "eligible" accounts receivable and takes a security interest in all (or some) of the organization's receivables; Payments on eligible accounts are sent to a designated lockbox account; An amount equal to the amount deposited in the lockbox account is regularly swept into another account (the collateral account); and Legal agreements are drawn up among the healthcare organization, the lender, and any other depository involved. An organization pursuing this financing method should understand the risks involved and prepare legal documents to offset these problems.
Pellar JR, MacFarlane WA were studied role of account manager in the hospital, this studies was explaining how the role of manger which is useful for generating the revenue. In this case hospitals begin to see their accounts receivable as a sleeping giant, the role of patient accounts managers may increase in importance. A 1991 survey of patient accounts managers reveals a 25 percent average salary increase over the 1988 figure. The duties of patient accounts managers have remained much the similar, with increased emphasis on the basics receivables management, billing, and collection.
2.3 Justification for investment in account receivables
Trade credit is important to a firm because it helps to protect its sales of good and services from being eroded by its competitors and also attract potential customers to buy hospital services at favorable terms. In most economies, including Uganda, trade credit is significant source of working capital (Pandey, 1996).
Kakuru (2000), noted that different business firms depending on their size, the nature of the business dealt in and type of industry give various justifications for investment in receivables;
Firm use trade credit as marketing tool. When a firm has just launched its products, credit can be used to expand sales. In declining market, it can be used to maintain the market share. Credit is also extended so as to build long term relationships with the customer or as a reward for their loyalty i.e. building customer good will.
Depending on the status of the buyer, credit is granted. Because of bulk purchases and higher bargaining power, large scale buyers demand easy credit terms. Some companies may not grant credit to small scale retailers since it becomes hard to collect receivable from them. By extending large amounts of credit to big firms, the company extending credit will be at an advantage as it will collect the money in lump sums.
Trade credit enhances a company's bargaining power. If a company's bargaining power is low, it will grant more credit so as to build and enhance its bargaining power unlike a company with a high bargaining power.
Granting credit to customers may be a practice with in a given industry. Thus new entrants in the industry are left with no option but find it inevitable to offer credit. This is done so as to win customers from competitors and later on maintain them using the same incentive. Therefore, if any firm is to survive in any competitive industry, granting credit becomes inevitable.
2.4 Account Receivables Management Policy
To ensure optimal investment in receivables, a firm requires an appropriate credit policy. Kakuru (2000) define credit policy as a set of policy actions designed to minimize costs associated with credit while maximizing benefits from it. It is aimed at having optimal investment in receivables. Optimal investment is that level of investment where there is a trade off between the costs and the benefits associated with a particular investment. A firm's credit policy should maximize the firm's value. The firm's value is maximized
When incremental rate of return is equal to incremental costs of funds used to finance the investment (ACCA Financial management, paper F9, 2009).
2.5 Credit Policy
This refers to guidelines that are followed in managing credit in a business. Credit policy includes credit standards, credit terms and collection procedures. Credit sales of good and services are a function of total sales; total sales depend on such factors as the economic conditions e.t.c credit sales are also influenced by the nature of the business and industrial norms. All these factors are to a very large extent uncontrolled by a financial manager. The only way credit sales can be controlled is by making alterations in the firm's credit policy. A firm therefore requires credit policy in its operations since a proportionately large amount of sales are made on credit and credit policy variables are the ones in the control of the manger (Kakuru, 2001).
Credit policy is designed to minimize costs associated with credit while maximizing the benefits from it. Credit policy is either lenient or stringent.
With regards to the literature used in this research, it has been observed that there is wide data about the variables under study and that it is not easy to establish a perfect system of account receivables management. This is because of market business surrounding and the interpersonal conflict between the healthcare and corporate company. So need to achieve the good quality of account receivables management in the healthcare system.
3.0 STUDY DESIGN
3.1 Need of study
The account receivable management plays a crucial role providing efficient healthcare management. In the last few decade the organisation are moving from vertically to managed the horizontally. That means the organisation more focus on the process orientation compare to function orientation. Just-in- time, total quality management, business process reengineering is the best example of the horizontal management improvement creativities. Those creativities are designed to improve an organisation work process and different activities to efficiently and effectively meet or exceed changing customer requirement.
Management information system to track and delivered information about the horizontal aspect of business has lagged significantly behind the need of its manager.
Account receivable are money own by customer (individual or corporate , organisation) to another entity in exchange of health service that have been delivered or used but not yet paid for receivable usually come in the form of operating the time of credit and are usually due within relatively short time period ranging from a few days to annual year . Account receivable is becoming the inevitable in modern days. This arise due to various emerging reason such strong and growing health insurance ,market, corporate companies and even out of pocket payment.(patient are not able pay immediately and seeking time for payment. As the hospitals are nominated to be on the panel of TPAs, insurance companies and other corporate companies proving health facilities to their employees, these companies demand huge discounts and a suitable payback time for the bills incurred. This time period for the clearance of the pending bills can range from 15 days -90 days or as per the contract. Due to this period a large amount of income of the hospital remains locked in the debt while the cost incurred to provide the service has to be paid. This increasing debt in the form of Accounts receivable can create an extra burden over the hospital resources. Due to absence of a specific account receivable manager there are delays both on the part of the hospital as well as the third party involved in clearing the accounts. This research has been formulated to study this aspect of management and thus devise methods for effective management of account receivable.
The basic need of account receivable management is to make best use of the value of the firm by achieving a tradeoff between the liquidity (risk and profitability). The purpose of account receivables management is not to maximize sales of goods and services, nor to minimize the risk of bad debt. If the objective were to maximize sales, then the firm would sell on credit to all. On the dissimilar, if reduction in bad debt risk were the aim, then the firm would not sell on credit to anyone. In fact, the firm should manage, its credit in such a method that sales are stretched to an extent to which risk remains within an acceptable limit. Thus to achieve the maximizing the value of the firm should manage its trade credit.
The efficient and effective credit management is help to expand sales of good and services and can demonstrate to be an effective tool of marketing. It helps to retain old customers and attract new customers. Well managed credit means profitable credit accounts. The objectives of receivable management in every hospital is to promote sales of good and service and profits until that point is reached wherever the return on investment is further funding of receivables is less than the cost of funds raised up to finance that supplementary credit.
Granting of credit and its management involve costs. To maximize the value of the firm, these costs must be controlled. These thus include the credit administration expanses, losses and opportunity costs of the funds tied up in receivable. The aim of account receivables management has be to control and regulate these costs, not to exclude them altogether. The cost can be reduced to zero, if no credit is granted.
"The purpose of any commercial creativity is the making of profit, credit in itself is exploited to increase sale of good and services, but sales good and services must return a profit." The primary objective of management or receivables should not be restricted to expansion of sales of good and services but should involve expansion of overall returns on investment. So, receivables management should not be confined to mere collection or receivables within the shortest possible period but is required to focus due attention to the benefit-cost trade-off relating to numerous receivables management.
In order to add profitability, accuracy and effectiveness to receivables management, inventiveness must make it a point to follow certain well-established and duly predictable principles of credit management." The first of these principles relate to the allocation of authority affecting to credit and collections of some specific management. The second principle situates stress on the selection of proper credit terms. The third principles emphasize a concluded credit exploration before a decision on granting a credit is taken. And the last principle touches upon the formation of sound collection policies and procedures.
3.2 Scope of the study
i. Subject scope. The study focused on the current trend, polices, practice and understanding concept of account receivable in hospital.
ii. Geographical scope. The research was carried out different place and different hospital in India. (Delhi, Nagpur, Amravati, Yavatmal)
iii. Time scope. The study is the essential part of academic curriculum for the period from 2011 to 2013
To explore the hospital policies with regard account receivables management.
To explore the current trend, practice and effect of hospital with regard to management of account receivable
To understand the effect of account receivable working capital management hospital.
To explore prevailing situation which pressure to go for higher ratio of account in Hospital
This section explains the methods that were used to conduct the research in the collection of data and a plan of how the study was conducted. It presents research sampling design, study population, sample size, source of data, data collection methods and techniques and limitations of the study.
3.4.2 Study Population
The study population was made up of the management, staff and the account section employee of the hospital. The data was be collected from eight different hospitals in different city (Nagpur, Delhi, Amravati, and Yavatmal).
3.4.3 Sample Size and Sample Procedure
The researcher purposively selected 2-3 management staff from the each hospital. For the research purposive sampling was used to select the 18 employees.
3.4.4 Sources of Data
The primary data collected from the CEO by interviewing them of the hospital. The staffs interviewed were hospital administration manager (general manager). Account head and receivable managers of the hospitals also contributed those proper data collection. The details of questions are enclosed in annex.
Secondary data source
The secondary source of data such as account receivable ledger, charge slip, patient fee journals, patient concession journal, combine patient billing system, OPD and IPD billing system. Account receivables management involves how smoothly working the billing process.
3.4.5 Data Collection Methods and Techniques
Questionnaires. Open ended questions were designed and distributed to all respondents for answering. For collecting the data used the following step.
STEP 1:- In the first step, before the actual data collection, I done pilot study in Tata memorial hospital and H.N. hospital Mumbai. It includes the questioners. After the data collection little suggestion was given by the people. Then I finalized the questioners.
STEP 2:- To explore the account department function, system and procedure and the knowledge performance evolution of account department of the Hospital.
STEP 3:- To know the different transection of the account department and follow up duration of the account receivables management. Find the proper process of the account receivables management technique and person responsible for the account receivables.
STEP 4:- To draw the conclusion for managing the account receivable and designing the proper technique for avoid the bad debt and improve the operational efficiency.
3.4.6 Limitations of the Study
Withholding information. Some of the respondents were not willing to disclose the Information; some were not in the moods of discussions.
3.5.7 Significance of the study
The study findings will enable the hospital management in which to identify the weakness in the hospital account receivable management policy. If the hospital management accepts this report, it will provide a good guide for the improvements in the hospital account receivables management.
The study will provide literature review to the subsequent researchers or scholars who had conduct research in the concept of the account receivables management study.
The study will improve the knowledge on reporting aspects, data collection and analysis.
The study will enable to qualify for the award of Master of Hospital Administration.
4.0 Analysis Discussion of Findings
On obtaining the data from both primary and secondary sources, the findings were coded, edited, inform of tables which discussions and findings were based.
The hospital account department is play the most important role in the managing the account receivable. This particular study was done in the account department of the hospital which is mostly focus on the financial operation methods. This study was done 8 different hospitals of India.
4.2 Characteristics of respondents
The respondents were selected with the basis of knowledge of account receivables and responsible person of the hospital (CEO) and account head. This topic has become the prominent issue in the recent past for every hospital. The most of the hospital doesn't maintain appropriate account receivables management strategies. The main purpose of conducting the analysis is to gather the fair idea about the account receivables management and avoid the bad debt.
Table 3 explanation of account receivables (CEO, account manager, head of account department)
Meaning of the account receivables management
The service which provide through insurance and wait
The amount which we are recover on time
Services on the basis of credit and wait for the money
The amount received from the party after the discount and gain the particular bills
Not clearly know the concept.
Services on the basis of credit
Services provide to the company tie-up
Services provide on the basis of credit and received the amount.
This is the explanation given by the hospital head. After the coding of the questioner, some finding seen that, the meaning of the account receivables management has known by 70% of the employee in which is working in account sector. And the rest of samples employee of hospital have some confusion. They feel the term TPA and account receivables are same. So that most of CEO of the hospital try to focus the current issue of the hospital. On other hand the data collected from the supplementary employee of the hospital face the similar difficulty. Few of them have the similar confusion of the account receivable management.
Table 4 Transection
Transection lead account receivable
Corporate, public sector undertaking
National electronic fund transfer. Corporate account
Varies account like corporate TPA, government transection.
Corporate patient, insurance,
Public sector undertaking and TPA, corporate.
It also seen that the inappropriate transection entry was happening in few hospital. It could be true that early year the hospital had no receivables management policy. Some hospital doing the entry under the corporate patient account, TPA account and public service account because few hospital working through the older operation procedure so that difficult to managed. And that organisation not willing to adapted the new operation method. (Computer HIMS) Cash discounts induce customers to pay early their credit obligations so as to pay a lesser amount of the credit. In spite of the positive trend of the hospital in which containing almost 25 percent of receivables still were more than 90 days old. In addition, about 5 percent of patient bill were never paid at all with about 3 percent being charged off as bad debt losses and 2 percent going to the charity care of the hospital.
The reduction in bad debts can also be attributed to the receivables management policy in the hospital. . Every year that goes, the hospital gain experience and revises the management of its accounts receivables, improves collection methods, and introduces new ways to improving credit recovery. It could be true that in the early years, the many hospital had no a receivables management policy that could guarantee effective recovery of receivables leading to a reduction in bad debts like in the later years. The optimal receivables management policy ensures that credit is extended for lesser periods such that money that would be used for expansion and investment in productive activities is not tied up in credit.
The hospital provides the services to their employee, stakeholder, government panel, public sector undertaking, corporate sector company and the TPA. Those all service provided to the patient on the basis of credit. The 90% hospital population was strongly agreed that the account receivables support the current business environment. Along with the above statement, average number of hospital was agree for the 30-45% revenue generation was done by account receivables management. After the analysis of the account receivables, the TPA section has generated the more revenue for the hospital. In that condition the risk of return may be high corporate or private company while in hospital staff, government panels, PSU and stakeholder may the low risk of return. All those above activity of the hospital was managed by the one person so that many time hospitals spend the more time in documentation result delay in the cash inflow. So need to focus on the current issue of the account receivable management.
Table 5 collection schedule
1 month. 1 and half month. 2 month
1 month, 2 month and 2 and half month
Regular follow up through executive
Fax and phone call
2 month fax and phone call
No need to take follow up
1st three month
Phone call, fax and later by executive.
This study sought to establish the role of account receivables in the healthcare industry in which is flexible in nature. It both may be increase the profit and reduced the bad debt of hospital. The most of respondent believe that to focus on time taken for documentation and regular follow-up should be necessary for avoiding the dad debt. Interpersonal relationship of the department of the hospital plays the important role in the management. Most of processes of hospitals delay due to the interdepartmental conflict. For the management of account receivables need the special employee who maintain the data as well as take the regular follow up. The hospital used the account software which helps to take the regular hospitals data management.
Most of the hospital would not to share the information regarding the credit balance. Some hospital used the average day collection technique which is used to control the receivable in particular time period. Average Collection Period is also called Day Sales Outstanding (DSOI) at a given time 't' it may define as the ratio of receivable outstanding at that time to average daily sales of good and services figure. Few hospital store the data in excel and follow up the track of bills.
Average collection period = Average receivable at time "t"
Average day sale of good and services
The 70% of the hospital employee are agree that time period set to collection the dues depends upon the credit behavior of the client and the relation of the company.
The above graph show that the 80% of hospital was maintain the annual financial record of the account receivables management while remaining 20% was not maintain the any separate account for the receivables management so that the concept of the account receivables management was not familiar to those 20% of the population. The 80% of the hospital was follow the regular reminder and collection schedule which help to reduce the bad debt of the hospital. For the reminder and collection many hospitals follow the phone call, fax and visits to the company. It must be necessary because provided the information on how long it takes hospital collect receivables. Because of large number of payer, and the complexities involved in billing and follow up action, which lead to high error rate, hospital clearly have a great deal of difficulty of collecting bills in timely manner. The proper schedule of the collection of the money show that account receivables section, credit department, cashier and collection department promote good internal control. Many hospitals in India want to become the paper free organisation so that HIMS is the major concern for the account receivables management which is help to controlling account as well as ledger.
5.0 SUMMARY OF FINDINGS
5.1 Accounts Receivables Management
It was established that the term account receivable management has not familiar with the many hospital India. Most of the respondents strongly agreed or agreed to the same. This is true as it is in conformity with the previous studies carried out on the same topic. So those for the proper management need the strong policy and best operation procedure.
It was further established that between 2005 and 2011, the hospital profitability was improving. The indicators of improvement in profitability were expansion of operations renovations of the existing facilities. Improvement in profitability was to some extent attributed to the use of receivables management policy so to innovate the good management policy and which ensures optimal investment in accounts receivables and thus minimizing bad debt losses.
In the management of receivables, credit worthiness of customers should be assessed. The costs and risks of maintaining any credit customer should be matched with the returns from such a customer.
Account receivable clerk.
There should be adequate work force in the credit control department so as to make fast the process of credit collections. The all the profile of the person should be clear. The Accounts Receivable Clerk has to be answerable for providing financial, administrative and accounting services in order to ensure functioning, efficient and exact financial and administrative operations. The Accounts Receivable Clerk must be observing with established policies and procedures of the account receivables up to the end result.
The role and responsibility of the account receivables management clerk
Perform the day to day activity of the cash inflow of financial transactions to ensure that incoming finances are maintained in an effective, up to date and accurate manner.( following are the main activity)
Ready for to receive and verify invoices and requisitions for goods and services
Verify that transactions comply with financial policies as well as procedures
Prepare, verify, and process invoices and coding payment documents
Prepare batches of invoices for data entry
Enter the data of invoices for payment
Regular process backup reports after data entry
Manage the weekly cheque run follow up
Maintain the record all cheques
Prepare vendor cheques for mailing
Do the list of all vendor cheques in the log book
Prepare manual cheques as and when need to required
Maintain listing of accounts receivable and payable
Maintain the general ledger
Maintain updated vendor files and file numbers
Print and distribute monthly financial reports of accounts receivables.
To follow the regular payroll functions.
Create and preserve confidential casual employee files
Process TD1 forms
To calculate salaries and benefits
Regular verify pay amounts.
Regular verify coding and obtain signatures
Batch pay sheets for data entry
Data enter payroll information
Log in and distribute pay cheques
Prepare and remit source deductions and payroll tax
Administrative support should be provided, in order to ensure effective, smooth and efficient office operations
Maintain inventory files
Monitor and order office supplies
Prepare purchase orders
Prepare travel and accommodation warrants and travel advances for staff
Review and verify travel claims
Maintain a filing system for all financial documents
Ensure the confidentiality and security of all financial and employee files
To provide good receptionist services
Greet and assist visitors
Direct calls and respond to inquiries
Collect money and provide receipts
Finally to perform all other related duties this may be required.
Follow the check list.
Checkpoints: Accounts Receivable
What policies have been developed to deal with decisions on credit, referrals of patient accounts to collection agencies, and bad debts?
Are they reasonable and are they followed?
Who is authorized to approve these types of decisions?
Are personnel responsible for approving credit denied access to cash?
What policies and procedures exist for unapplied payments?
Does the organisation of the accounts receivable section, credit department, cashier and collection department promote good internal control?
Are employees of these sections restricted from working in the other areas even during lunch breaks and absences?
How records are safeguard from unauthorized access?
What provisions are there for sharing or lending records?
What type of controlling account or ledger is used for accounts receivable?
Are the accounts receivable reconciled on a regular basis?
Do the types, size, and aging of accounts receivable and bad debt write off resemble national averages?
How are cash receipts posted to individual accounts and are they reconciled to total receipts?
In what form are patient accounts maintained?
What detail is available on charges and payments?
How often and in what manner are charges posted?
What internal controls exist that ensure all charges are posted and posted correctly?
Are there many late charges?
Is a total bill available to the patient at departure?
How is credit balances controlled?
What are the policies and procedures for refunding credit balances to the patient?
Who authorizes the refunds?
Are there enough credit balances to affect reporting of accounts receivable materially? If so, credit balances should be placed in a separate account.
What reports are prepared routinely and what is their distribution?
Are all exceptions reported?
Are accounts receivable aging schedules prepared that cover aging by date of discharge, by date of last payment, and by area of payment responsibility starting with the discharge date?
What reports are prepared on unapplied payments?
Is confirmation of accounts receivable performed? This may be a standard step of the certified public accounting firm's annual audit. This process will help determine whether patient's payments have been applied properly to their accounts.
5.4 New process flow chart of account receivables management.
Account receivables management is an effective accounting method that healthcare manager can use for to generate the more revenue for the hospital. From the finding it can be concluded that if hospital uses a stringent receivables management policy or operation which is help to generate the more revenue for the hospital and avoid the bad debt. That mean the way receivables are managed profoundly affects profitability. It will be particularly useful when an organisation wishes to bring the change in the management accounting system. The efficient and effective account receivable management does help to expand sales of goods and services and can prove to be an effective tool of marketing. It helps to maintain old customers and win new customers.
That why more emphasizes that receivables constitute a significant portion of the firm's current assets and thus should be managed properly. Thus it becomes necessary to concentrate the company balance where investment in receivables is at optimum. The need to achieve optimal investment in receivables calls for a firm to institute a credit policy.
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I approve the delegation of responsibilities outline herein within the context of the attached organizational structure.
TATA INSTITUTE OF SOCIAL SCIENCES
DEONAR, MUMBAI 400 088
Introduction: I am Mr. Avinash Bhagade, student of Tata Institute of Social Sciences and currently doing Master of Hospital Administration (MHA). As a part of program requirement I have to do a project. I have selected a topic on account receivables management. This topic has become prominent issue in the recent past for every hospital. There has been no or less number of studies being carried out hence I have chosen this topic for my project work. The basic purpose of the study is to understand the importance of accounts receivable management, and how hospitals are focusing their strategies towards maintaining appropriate accounts receivable management. I need your kind cooperation in terms of answering to my questions. It is purely voluntary, in case you choose to with draw or not answering any question or part of the question or all the questions can be possible at any point in time. However I hope you shall help me by answering the questions to complete my academic requirement successfully. Please feel free to ask any question at this point in time. Thank you for showing interest to answer my questions.
NAME OF THE ORGANASATION:
According to you what is the meaning of accounts receivable?
What kind of transactions shall lead to accounts receivable?
What type of account receivable likely to arise in the organisation?
(For example patients would not able to pay at that moment, MOU with organisation, TPA and Insurance patients etc)
Do you think accounts receivable can be avoided in the current business environment?
Yes B) No
If Yes how?
If no what reasons?
What kind of percentage of customers likely to come under accounts receivable management on day to basis?
Is it possible to achieve accounts receivables do not exist at end of every month? (with in 30 days)
Yes B) No
If yes what kind of approach should be?
If no; what are the reasons behind?
Does organization have set credit limit for consumers?
Yes b) No
If yes, who will decide the credit limit?
Does the organization is maintain annual financial statement of receivables?
Yes b) No
If yes, what are standard for that?
Does hospital follow the reminder and collection schedule?
Yes b) No
Procedure days after original due date
Call/visit consumer â€¦â€¦â€¦â€¦.
Are there written policies and internal operating procedures that have been approved by the hospital management committee?
If yes who will follow the procedure?
If no, what is the reason behind them?
Does the organization of account receivables section, credit department, cashier and collection department promote good internal control?
Yes b) No
If no what is the major problem between them?
What policies have been developed to deal with decision on credit, referrals' of patient account to collection agencies and dad debts?
How you find the receivables are collected in time?
What kind of time period set to collect the dues?
Do you think there is need for dedicated person to do this job?
What would be the best strategies to ensure the dues are collected within a month?
When the person authorized to approve disbursements signs the checks or vouchers, is supporting documentation available for review?
What type of controlling account or ledger is used for accounts receivable?
Are credit balances controlled?
Yes B) No
If yes, how balance controlled?
If no, what is the reason behind this?
What organizational relationshi