Top 6 Practices to Optimize Your Accounts Receivable Management in 2025

Did you know that 84% of organizations report financial losses owing to outdated accounts receivable (AR) processes? AR is the money owed by your clients to your business. In medical billing, accounts receivable management involves monitoring and collecting payments owed to healthcare providers for rendered services. An ineffective AR process can lead to disrupted cash flow, increased days sales outstanding (DSO), customer frustration, higher operational costs, and damaged brand reputation.  

Accounts receivable management is important to reduce bad debt, improve cash flow, increase patient satisfaction, boost operational efficiency, and maintain compliance. However, this part of medical billing can be complex due to high denial rates, multiple payers (including patients, government programs, and private insurers) with different procedures, policies and timelines, high volumes of claims, regulatory changes, billing and coding errors, and limited staff resources.  

But luckily these challenges can be addressed by implementing effective strategies to streamline your accounts receivable management. That being said, here are the 6 leading practices to optimize your AR management in 2025. 

 

1. Create Clear Collection and Credit Policies

Establishing consistent and well-defined policies helps in better management of collections and setting transparent expectations for customers. Here are the features of a distinct credit and collections policy: 

• Communication protocols: Standardize when and how customers are contacted regarding overdue accounts.  

• Credit risk assessment: Outline the process to ascertain whether a customer is eligible for credit.  

• Credit holds: Elucidate when overdue accounts must be kept on hold. 

• Escalation of collections: State when outstanding accounts are escalated to patient collections.  

• Late fees and early payment incentives: Specify potential discounts for early payments and charges for late payments. 

• Payment methods and charges: State accepted payment options and any associated processing fees. 

Having these guidelines in place helps prevent disagreements and ensures consistency. 

 

2. Facilitate Self-Service and Improve Customer Communication

Clear communication reduces chances of dispute and solidifies customer relationships. A well-organized accounts receivable process must: 

• Offer self-service portals to customers so that they can access account history, payment options, and invoices. 

• Send reminders proactively to customers to keep them updated about payment deadlines. 

• Facilitate secure messaging to clarify dues and resolve conflicts. 

When customers can easily access their accounts, there are greater chances for them to pay on time and fix any problems without further back-and-forth.  

 

3. Customize Collections and Credit Per Customer Risk 

Different customers have varying risk levels. It is a good idea to assign risk profiles to customers to personalize collection strategies: 

• Low-risk customers: On-time, consistent payers need less frequent AR follow-ups. 

• High-risk customers: Flexible payment plans and more frequent reminders may be required. 

Categorizing customers on the basis of payment behavior enables more effective collections and increases the chances of timely payments.  

 

4. Use the Correct KPIs 

Keep track of the following accounts receivable performance metrics to ensure that your AR processes are operating properly: 

• Days Sales Outstanding (DSO): It is the main metric you must aim to reduce by streamlining your processes. DSO is the average duration required for payment collections. Try to keep your DSO less than 30 days.  

• Average Days Delinquent (ADD): It is the average number of days for which payments are overdue. This figure must also be as low as possible. In case it increases, check your processes to ensure smooth billing and if there are sufficient AR staff to handle collections. 

• AR Turnover Ratio: It shows how fast you are turning accounts to cash, i.e., collecting revenue from customers. This ratio reveals your cash flow. Try to keep it low. A low turnover ratio means having many open accounts with uncollected revenue. This must encourage you to reassess your collections and billing procedures.  

• Revised invoices: There must be minimal need to revise customer invoices. If you observe a rise in the number of revised invoices during a certain period or over time, assess your billing policies and check whether you need extra staff to prevent mistakes that could delay payments and to maintain efficiency. 

• Collection Effectiveness Index (CEI): This is the percentage of accounts on which you collect revenue or you turn over. CEI should be as close to 100 as possible, signifying that you are collecting payment from all your clients. 

 

5. Review AR Aging Reports Regularly 

You can improve AR follow-ups in medical billing and detect overdue accounts by monitoring your accounts receivable aging reports regularly. By examining these reports every week or month, you can identify late payments fast and take steps proactively to address them. This method helps avoid delays in payment and maintain consistent cash flow.  

Here are the main benefits of monitoring aging AR reports periodically:  

• Improved Cash Flow Management: Businesses can ensure a steady inflow of cash and upgrade collection efforts by spotting overdue invoices.  

• Risk Mitigation: Regular reviews can help estimate risks of bad debt, allowing businesses to take proactive measures to minimize potential losses.  

• Improved Credit Management: Understanding customer payment behaviors allows businesses to refine their credit policies and make informed decisions about extending credit. 

• Better Financial Health: Periodic monitoring of AR aging reports lowers the risk of cash flow problems and enhances overall financial health by maintaining liquidity.  

• Strategic Planning: The aging AR reports offer important insights for strategic planning of businesses to allow them to tailor their operations according to customer reliability and payment trends.  

 

6. Outsource AR Management 

Offshoring your AR functions to a trusted medical billing company can significantly improve efficiency. As such, you can avail yourself of expert services related to invoicing, reporting and collections. AR experts can ensure efficiency and compliance in the process, handle regular tasks, and accounts receivable follow-ups on overdue accounts. 

Here are the advantages of outsourcing medical accounts receivable management: 

• Cost Savings: This can lower the need for in-house staff and related costs such as training, benefits, and salaries.  

• Higher efficiency: Medical billing providers often use advanced systems and technology to optimize the collection and billing process and enable more efficient and quicker operations.  

• Enhanced cash flow: Creating timely invoices and following up punctually on unpaid bills can help maintain a steady cash flow and boost overall financial stability.  

• Access to expertise: Outsourcing allows businesses to work with expert professionals who are highly experienced in AR management. This can improve the efficiency of the process. 

• Focus on core activities: Healthcare providers can focus more on core activities and patient care and free up internal resources by outsourcing AR management to a medical billing company.  

• Flexibility and scalability: Offshoring allows healthcare providers to scale up or down their AR operations depending on demand, thereby gaining more flexibility.  

• Improved customer service: Professional AR management companies can offer better customer service by effectively handling disputes and inquiries. This helps increase customer satisfaction.  

 

Adopt the above strategies to refine your AR management in 2025 and increase the rate of claim approvals. For that, it is a good idea to outsource accounts receivable services to a trusted medical billing company like RCM Workshop which has a dedicated team of expert AR professionals to handle billing for various practices. 85% of healthcare organizations identify the urgent need to upgrade payment experiences. A great way to make that happen is by optimizing accounts receivable. Take this step today and boost your revenue cycle!