Home Care U - Expert Session on Home Care Billing, Invoicing, and Managing Accounts Receivable (Dana Charumbira Pt. 1)

Episode Date: July 16, 2024

Establishing the proper payment terms and invoicing frequency impacts all downstream revenue and cashflow. However, many agencies are doing it wrong. Dana Charumbira, Managing Director of The Home Care CPAs, is here to set the record straight and detail out small billing improvements that will help you scale revenue faster.Connect with Dana Charumbira on LinkedIn.Enjoying the show? Send me a text and let me know!Learn more about Careswitch at: careswitch.comConnect with the host on LinkedIn: Miriam Allred This episode was produced by parkerkane.co

All right. Welcome everyone to Home Care U, a podcast by Care Switch. I'm your host, Miriam Allred. I hope you're all enjoying the show. It's great to be back with you today. A couple of housekeeping items here at the start of the hour. I just want to remind all of you listening to this. We record with a live audience every Wednesday at 3 p.m. Eastern. So shout out to everyone that's here live with us today. Then every session is then published as a podcast the following Monday. So some people ask in the live sessions if they're being recorded or vice versa. So every session is recorded and published as a podcast the following Monday. You can find the show by searching Home Care U wherever you get your podcasts. So know that they're on our website, careswitch.com, but you can also find them on Spotify or Apple podcasts or anywhere else that you get your music or your podcasts.

And just another reminder for those of you on live today, feel free to jump into the chat or the Q and a box and ask us questions. We are live and we've got questions and an outline prepared for you today. But if you've got questions that come up as we're going through this today, don't hesitate to reach out. We'd love to hear you out and ask those questions live as well. So don't be shy. Jump into the chat and let us know what questions you've got. So let's go ahead and get started.

Our guest today is Dana Cherumbira. She's the managing director at the Home Care CPAs, formerly known as Franchise Financial. She's located in the greater Chicago area. She may be a new face or voice for some of you today. And she and I recently connected and she knows all things billing, invoicing, finances. And so she felt like the right guest to bring on the show today. So Dana, thank you so much for being here. I'm excited for the session today.

Yeah, thanks Miriam. I've been a Home Care youth fan for a while, so I'm excited to join as a guest. Time to get you in the hot seat. You say that now, but beware. Here we go. So today's session, we're going to talk about all things home care billing, invoicing, and managing accounts receivable. This is a very hot topic for really every size of business. When you think about starting to mid to scaling, to growth, you want to have a really good handle on your finances. So before we jump into, I want to give you a few minutes to introduce yourself to our audience, talk a little bit about yourself personally, professionally, you're getting into home care and where you're at today.

Yeah. Thanks, Miriam. So I'm a CPA. I've been a CPA for just over 15 years. I did sort of have a traditional CPA route out of college. I started working at a CPA firm, did a couple of years there, and then went into the corporate side of things. So I started working within a large global manufacturing company headquartered in Chicago. It was a great team, great group of people. That role brought me to South Africa. So I was in South Africa for a few years, which in hindsight, really, I would say influenced a lot of my, how I see business and how I believe business and community works together

and business and society. A lot of how I view what business does is influenced by that experience abroad. So I was there for, I want to say five or six years. I was doing my MBA part-time at the University of Cape Town. And it was interesting when I joined the program, they talk a lot about values-based education, which sounds kind of like a buzzword, but when you get into it, you really start to interrogate, what is your role in the community and the business world? And when my husband and I were coming back to the United States, I really wanted to find something that I could use my skill set and pair with a purpose and, you know, really have an impact

on an industry that was doing a lot of good. We're looking a lot and, you know, home care came up. And what I love about home care is it touches so many lives. It touches the person that's receiving the care. A lot of the times it helps the family, the caregivers impacted. And so you just see, you know, all these, the positive impact that home care has. And so for me, it was a great, a great space to get started in. I feel like home care, you know, we started really getting close to the industry in 2020, 21. And I think home care is continuing to evolve into, you know, more of an industry that is getting a lot of attention. I

know it's term non-medical, but I do think it has a really important role to play when we're thinking about, you know, aging in place and needing support outside of, you know, the traditional medical system. And so I think it's becoming a more sophisticated industry. And that's where I think being able to contribute, not only, you know, great, we'll keep the accounting billing and payroll, but also like forward thinking, you know, financial planning and analysis and bringing some more like sophisticated concepts to an industry that I think is really deserving of that. So for us, it's been a great fit.

It's been really exciting. We've done a lot of really cool dashboard reporting. We're getting into more real-time dashboard reporting. So it's been a great journey for me. And I just think it's amazing to work with home care owners that are so passionate about their business and just want to do so much good. And that's really rewarding. I love what we're doing and I love the space and home care is just that I think a great fit.

Awesome. And real quick, you have a national footprint. So correct that you're working with home care businesses across the country. Are there any specific regions that you focus on or have found kind of more saturation in or is it really just pretty broad that you're able to help and serve agencies across the country? Yeah, able to help and serve agencies across the country? Yeah, we do help and serve agencies across the country. You know, we do work with a lot of agencies in California. I think there's a large population that also probably speaks to why there's somewhat of a concentration there. But we are national East Coast, West Coast, Midwest.

So we're all over. Awesome. And independents and franchises. Is that correct? Yes. Yes. We work with franchise systems. And independents and franchises. Is that correct? Yes. Yes. We work with franchise systems. We work with independently owned agencies. And yeah, so we had used the name franchise financial because we started working with franchise systems, which is great because there are a lot of software in the home care

space. You know, there's a client management system. There's for us an accounting system, payroll system. So there's a lot going on. So we're able to really, when we work with a franchise system, you sometimes can really focus in on understanding the intricacies of those systems. And then once we did that, we were able to branch out. And so we're all over now.

Awesome. Well, let's get into the topic today. You've got a lot of expertise to share. And we're really just going to dive right in and just kind of start tackling some of these topics. And the one that I want to start with is client deposits. So you think about finding a client, getting them onboarded, getting them to sign that agreement. You know, sometimes that's a really quick process because they're ready to start care, et cetera. So I want to talk about

this concept of client deposits. Why are they essential And how do you set the correct deposit rate if you're going to go this route? Yeah, it's a great place to start. And I think taking a step back and just sort of how I think about, you know, a billing payroll and accounting function, I really think the work that's being done in the business comes through to the financial side. So a lot of what's happening with deposits is actually like, because we're doing client intake. So while it is like a billing and payroll billing function, you know, it's really in thinking about how do we bring, you know, the whole team into making sure that that's a successful onboarding

conversation because it impacts billing and the deposit side of things. So yeah, deposits are important. And it really, I think the conversation around that with whoever is doing the client intake is just around the fact that you want to take as much burden as you can off of the family. So we get a client deposit, you know, it's just to really make sure that we can start care, that the family doesn't have to worry about, you know, when care, at the end of care, if there's any invoice left, you can apply the deposit to that. So it's really having a conversation with the family to make them comfortable that it's really in their best interest to have the deposit on file.

And then we typically recommend if it's, so there's different ways that people like to pay, right? So, and it's also very generational. So with home care, you find a lot of people still want to send in a check. They like to see an invoice and then they want to provide you a check. So we really encourage that everybody try to collect an EFT or ACH credit card authorization, some sort of authority for them to deduct the bank account based on the invoices that were presented. And if they are providing that, then we recommend that they will get one week of deposit for the service that they'll be provided. And that would be based on you. So if they're having

four hours of care a day for a week times whatever the billing rate is, you would just want to collect one week of care and deposit. And then if they do want to go the check route, we really recommend to protect the agency from, you know, any sort of delays in mailing or challenges with cashing the check to collect a one-month deposit in advance. Sometimes it also works as a deterrent for paying by check. So people don't want to, you know, pay the one-month deposit. So then they would elect to do the ACH or the EFT instead. And then the one thing that we find is, you know, someone started care and they would have care for,

you know, two days a week for three hours. And then that care need starts to expand. That's something just to be aware of as that need for care grows, that you want to make sure that the deposit on file still is equivalent to one week of service. That's where sometimes there is,

you know, end of service and there's a balance outstanding and the deposit doesn't cover it. there is end of service and there's a balance outstanding and the deposit doesn't cover it. They're winding something down and there's not enough funds to pay. So it's really keeping up with someone increasing hours, making sure that the deposit on file will cover the current need. And to make sure I understood, say you collect that deposit and then maybe 30 days later, 14 days later, they have their first invoice. Is it standard to deduct that deposit from their first invoice after service or not? We wouldn't recommend it.

So we would recommend that the deposit be applied to if there's a remaining balance, like when the service ends, that you would apply the deposit there. No, it's an upfront payment or a deposit, I should say. And then you continue to process the bank account or require a check whenever you're processing your invoicing. Got it, got it. In today's landscape, it's not uncommon to have a waitlist of clients. You may have someone that wants to start service, but you don't have a caregiver that kind of fits that schedule.

You know, there's a long list of reasons why they may might be put on a wait list because or someone's vetting care and they're not ready to start for maybe 30 or 60 days or someone's getting discharged, etc. What's your take on deposits in those instances when, you know, the start of care may not be that week or even that month, is it still makes sense to take a deposit for someone that could be starting care later on? So you could, I think the important thing is you would want just to have the deposit on hand before care is started. If you do take it, so the risk of taking it a little bit earlier, there are pros and cons as with anything. So it's great because then you have the deposit and you don't have to worry about that when you want to start care right away. If there's, for some reason that care might not start, then you might have to refund the deposit. So as long as there's accurate record keeping around it,

then yeah, I'd say you can collect it as soon as possible. It helps with cashflow, it's beneficial to the agency. You just want to make sure that you would be in a position to refund it if for some reason care would not start okay um you mentioned that that conversation that intake conversation you know making sure that this is a part of that conversation and they're comfortable and they understand kind of the what and why any other insights or tips on that conversation you know home care is a new concept to a lot of people and they may or may not be familiar, which is how things are structured or things like deposits, but any, anything that you've gleaned that works well or doesn't work well, maybe when that conversation is actually taking place.

Yeah. So I think the big thing is when you're doing client intake, there's a lot going on and that person might not be entirely comfortable with the finance side of things because it gets really sticky, right? There can be a lot of interested parties. You have families, you have the person receiving care, there's potentially a lot going on. So really, I think it's just if the person that's having that conversation isn't entirely comfortable having the financial discussion, you could even write a general script or talking points for them so that when they go into that conversation, they feel well prepared. The other thing would be if that person is like, you know, my, I really want to focus on getting care, making sure that the helmet is prepared and that we

have the right caregiver ready to go. You could have someone in the office call and introduce themselves to the family and say, you know, we're starting care. Here's the structure of how we operate. We do, we ask for the one week deposit and then we'll be processing, invoicing and whatever frequency. So they explain the whole process to the family so that they feel, you know, maybe it's not happening at client intake because of whatever reason, but there is that introductory call afterwards that they have awareness.

And sometimes, you know, during client intake, there is so much going on that maybe the family is like, just so focused. Like if I'm going to take care of my mom or daddy, the best fit. And this whole financial conversation is just like, okay, you know, that's where that follow-up call and that follow-up is helpful because questions might've come up or there just might need to be a second conversation, even if it was during client intake. Yeah. Good points. Every, every conversation looks a little bit differently, but I think, like you said, especially just empowering that person

to answer those tough questions if the setting is right. Let's talk about invoicing. So we kind of scratched the surface of that deposit, what that initial step looks like, and then comes down to structuring invoices and invoicing frequency and all the factors that go along with that. So let's talk about establishing proper invoicing frequency. I think this is, you know, may seem like kind of a

generic question or kind of a generic concept, but there's a lot of different invoicing structures in home care, surprisingly. So I want to hear you kind of talk through how to establish the proper invoicing frequency for your agency and what are the factors? Yeah. So from like a purely, you know, working capital and maximizing your cash flow mindset, right? You want to invoice as frequently as possible, which, you know, it's really hard to say, like, we're going to invoice every day. And you can, you know, sometimes if you're billing Medicaid and doing high volumes, you'd

want to be submitting those claims daily because you want those in a system. Private pay. So I'll talk about private pay and maybe taking a step back. One of the biggest things for billing and payroll is to have a really defined process with really tight deadlines. We recommend private pay that you're billing every week. I know some people bill twice a month. If you can bill every week, if you have the resources and the staffing to do that in the office, I really think billing weekly. I know it adds a little bit more time and administrative work, but it really helps on working capital, especially if you're paying weekly, because you want to match your inflow from invoicing to your outflow on payroll. Invoicing weekly, if it's a

different concept, it can feel a little bit overwhelming or like a lot of work to do. And that's where we really focus on what's the process and what's going on behind the scenes so that you're in a position Monday morning, ideally, to run billing from that prior week. And when I say a process in place, so typically there's a lot that happens in the office with the team who's scheduling and staffing, you know, making sure that people that were scheduled on those shifts are actually showing up. Are they saying yes, they worked or they didn't going into the system? We recommend doing that on a daily basis. So that come, you know, that following week, you're not scrambling to know like who worked what day in the prior week.

So by Monday, you're like really in a great position to say, okay, we're ready to invoice, you know, so having the team in place and having them have that structure to be able to run the invoicing weekly, you can basically start processing payments Monday afternoon, you know, if you if you have all your shifts that and you're ready to go. And that way, you know, you have cash in your bank account by Tuesday, Wednesday, if you're running payroll on that Friday, that's that would be like, best practice and how we see it and that's where having you know like those eft forms on file because you're running the payment and whatever payment processing system you're using you're not worrying about checks coming in the mail one of the things too that we really recommend for private pay especially you know having a great

as much as we want to standardize everything i say every client's going to be built the same way. And everyone's going to pay with an EFT for me, no, that's not always the case, right. And so if you have a huge client list, and you're trying to remember, like all these different nuances, like, okay, this person wants to approve it for first, or this needs to go to long term care, for reimbursement, you know, that can feel like a lot. So really just having like robust documentation around, like, here's the client, here's special things that need to happen for them. Because if you're not trying to reinvent the wheel every time you're running invoicing, if you have strong documentation to go back to, you can really get that process done all

Monday morning if everything is in the right, if all the steps are followed and they're followed timely. Yeah. So you referenced private pay. You also kind of mentioned with Medicaid, you could be billing as much as daily. Any thoughts or insights on say long-term care or VA and how those may be different or similar to private pay? Yeah. So long-term care, that one, so there's different ways to go long-term care. So you can have a structure where the client is still paying you directly and then you're providing them with the invoice and whatever documentation is required for them to receive the funds from long-term care.

We typically recommend that structure from a cash flow perspective, giving that client the support they need to be able to recover the funds from their long-term care insurance company. So you don't want to put them on an island and have them just figure it out themselves or really supporting them through that process. And then there would be an assignment of benefits situation where they've signed over a benefit to the agency, and then you're responsible for invoicing the long-term care insurance company. And either they'll send you a check or they'll, you know, provide an ACH and a remit form. In those instances, you know, we would still recommend, you know, the weekly billing frequency.

And then you just want to make sure that as soon as that invoice is ready and those timesheets, if they require, you know, physical timesheets for payment and you have a sign of benefit, that those are ready to be submitted that Monday. Because you typically have potentially, depending on the insurance company, some are paying pretty quickly, but if you're waiting 30, 60 days for a payment, for whatever reason, and then if it's a larger client, or if you have multiple weeks of service that you're waiting on payment for, that can really be a huge cashflow issue for the agency. So yeah, so the recommendation would be to collect payment from the client and then support them into recovering those funds from the long-term care company. And then if it's a time and a benefit, getting everything to the long-term care company as soon as possible. Usually the time

sheet can be the delay there. That's where like, or if there's like an approval required before they'll release the funds, that's where we see sometimes a delay. The VA, you know, we see a lot of great work being done with Paradigm. And so I believe they're submitting on a weekly basis. I think Medicaid is the one we're seeing a lot of, you know, daily submissions. And then VA, we're seeing also a typical like weekly invoicing frequency. Awesome. You've referenced it a couple times. It comes down to like size and bandwidth and like capability of the team. So just, just to kind of hone in there a little bit, you know, for different revenue sizes, you know, maybe startups and then mid and enterprise, I just

want you to kind of articulate what you would recommend for each stage and what you typically see. So when I say startup, you know, maybe that zero to 2 million, mid two to five, you know, larger is, yeah, whatever, whatever, you know, maybe 10 million plus, what would you recommend is reasonable for each of those sizes when it comes to the frequency? Yeah, so we see agencies in all of those sizes billing different frequencies. I think the question is around, you know, who's doing the billing. And when you're kind of in those different phases, right? Because if you're a startup, it might be the owner

and they go in like on Sunday night and they're figuring everything out and they're billing Sunday night or Monday morning. And then what we see as you grow, right, is that you build a team. So when you start to get into that growth phase, I would say like 2 million to like 4 or 5 million when you're growing, especially at a rapid pace,

you really feel that cashflow crunch because you're all, like your revenue is growing, you're seeing great top line, but then you're like, why do I have no cash in the bank? And it's because that cash is going to fund your payroll. If you're not invoicing as often as possible. And that's where it gets a little bit more into like, okay, if we're bringing a new payer source, what does that look like?

And how do we bring them into that process? So I think when you're in the growth phase, you might have somebody dedicated or there's someone in the office that has an administrative role and they're doing your billing and your payroll. And so really for them, it's like, how often and how quickly can we get this inv payroll. And so really for them, it's like, you know, how often and how quickly can we get this invoicing done so that we're getting cash to the bank to support payroll? And then when you're like more mature and you're larger, you might have an entire like billing function. If you're not outsourcing it,

that's where we also feel like some people outsource because it makes sense to not have it in-house. There are different structures with outsourcing, you know, percentage of billing, or you might be just paying someone flat fee to do it. But when you're in that larger, because that becomes like so mission critical, right? It's like, if you miss one or two,

that's, you really feel it. So those larger agencies might have like a full-time billing and payroll director, billing director that's handling it. So I don't think, you know, so frequency, and especially when you're it. So I don't think, you know, so frequency, and especially when you're smaller, depending on your capital sources, you might really need to be invoicing weekly because like, you have this need to, you don't have a huge pile of cash from like, that you can rely on to fund payroll. So I would say frequency, no matter the size,

if you can get it done weekly and then if not, and then really the impact of the size is more, you know, who's doing the billing and then, you know, how are you structuring that team? Awesome. Yeah. Really good points. I'm kind of like leaning in here and it sounds like if I'm understanding, right, like in your professional opinion, if possible, like weekly should be the cadence, but of course there's circumstances where maybe every other week, you know, you probably don't want to be doing monthly, but every other week would be safe. You know, if you're small or you don't have the resources or, you know, you're getting started, but it sounds like weekly, you know, across the board is, is typically like the best cadence to

follow. Is that, is that all fair to say? It's fair. And I do think the one thing I should mention is if you are, so if someone is billing like twice a month or every other week, as long as you're, this is just my opinion on the cash flow side of things. As long as you're paying bi-weekly, then that you probably won't feel it as much. But if you're billing every other week or twice a month and you're paying weekly, you just have to have a strong cash flow projections in place so that you're not, you don't need to see money in the bank. You have to realize that that's going to go to payroll in a week. So a lot of it is matching with your payroll timing. So yes, so weekly is great. But

if you have the capacity only to do it twice a month or every other week, then that is going to match your cash flow out with that. Yeah, yeah. I remember you saying that in a previous conversation that we had, which was at minimum match your payroll cadence, because you know, in and out needs to be aligned to make sure that you can maintain that cash flow. Let's talk about payment terms. So this is another really crucial piece here, which is actually the collection and what the expectations and the terms are for the client. So what do you recommend when it comes to establishing payment terms? So we recommend for private pay, it's due on receipt. So that would be, you know, when the invoice is generated, your process for the payment. If they're sending a check, then usually there's the check mailing time, but you would still

want to build into the contract due on receipt. And then what we find is sometimes agencies are going into contracted work, right? And so they are being told, like, here's a payment term that we are paying on, you know, maybe that's 30 days, maybe it's 60 days. And I would say that I believe all of that is negotiable, whether or not it's something that will be changed, that doesn't always happen. But if you are presented with a contract, that's a 30-day payment term, there's a conversation to be had that says, you know, we typically are billing, you know, twice a month. And so for us to be able to really support and staff this contract in the way

that we want to, we'd really like to amend this to be, you know, a 14-day payment terms or seven-day payment terms. Sometimes that's met with yes, sometimes it's not. But the one thing I would say is like, if you're working in a contract work, you're working with like bigger organizations, a lot of the times they will have some sort of AP group or there's some process that'll say like, okay, what was the date that this was submitted? Like what is the invoice date? And that's what they're going to use to determine when they pay you so that's where it goes back to again like really getting that invoice and in a timely manner so that you're

if it is a 30-day payment term you're really getting that payment in 30 days not in 45 because the invoice sat with you for a couple weeks and they're waiting to pay it for 30 days after receipt over time too so like if you're going to contract work and at first they're like no we only pay every 30 days and you're showing you know you're staffing shifts you're going to contract work and at first they're like, no, we only pay every 30 days. And you're showing, you know, you're staffing shifts, you're building a rapport with them. And you start to have conversations about potentially expanding that relationship. That's another opportunity to say like, hey, we would really love to do that. We just really want to revisit the conversation around payment terms. Can you bring that down to 14 days?

Any opportunity there is to try to negotiate. And what we see sometimes is agencies get in this position where they really want the hours and they really want the work. And so they sign on to these contracts without thinking like, hey, maybe we have a conversation around this. And we have seen at work, we've seen contracts where they said, okay, we're going to pay every 30 days. And then we started submitting invoicing every week and it's getting paid weekly. So there's always the opportunity, even if they say they pay once a month, you can continue to submit weekly. And so it could fail through the AP process. So it's really, you know, a combination of having

negotiation and then still submitting as often as you can to make sure that you're getting paid as quickly as possible. And then the other thing with like contract work is in payment terms, which I know payment terms technically is okay, 15 or 14 days or 30 days. It's also understanding what are they requiring to get paid to release that payment for that invoice? Is it, do they want to see signed timesheets? You know, do they need to have EVV? Is there some other requirement that they, or do they need medical testing done for everybody? So Is there some other requirement that they need medical testing done for everybody? So there's some other requirements that they need to have fulfilled before they'll release that invoice. Because the sooner you know that, and the sooner you're aware of that, then, you know, sometimes

invoices get stuck in pending approval status because of some completely unrelated, like, not an invoicing issue, but there's a supporting document that's missing. So when you're going into those contracts, you really want to have those conversations around like what is needed and you want to have a process in place with your team to make sure that you're collecting anything that they would require or you're educating your caregivers on EVB and the whole electronic side of things, because that can also be a big focus. Yeah. A couple of times just to clarify, you mentioned, there's always room for negotiation, I just want to lean into that a little bit. Are you referencing negotiation with the client in the family? Or are you actually, or are you also referencing negotiating with like a payer source, you know, in their terms and what

you need for your business? That's a good question. Yeah. So I would, when I say negotiation, I'm speaking more for the payer source. Usually there is a back and forth with the family around finding the rate, but I would say that sort of standard is the due on receipt with the family. But yeah, payer source and where they're presenting you a contract and, you know, have standard payment terms in there. So where you're kind of being presented with something that they want you to agree to, that's where I think you can say, hey, we're not really agree. This doesn't work for our business. And it's not because... It's more from a position in their place of, we want to be able to support you and to staff this contract in the best way possible. So for us, from a cashflow

perspective, we really need this within 14 days to be able to do that. So having a conversation in that way that it's positive for days to be able to do that. So having the conversation in that way that it's positive for them to help you get paid faster. Got it. Yeah, I'm glad I'm glad I asked because I, I guess I was thinking, you know, even with those contracts, typically, there are established organizations that are already contracting with other home care businesses, like this isn't the first rodeo. But it is good and interesting to hear you say that like there is wiggle room and negotiation to be had there. They may propose something that's beneficial to them that may or may not be beneficial to you, but it's still worth having that conversation and seeing if you can find common ground with them, even if it may look different for another agency in your market, etc.

Yeah, exactly. And so that's where it's like, they have multiple agencies that they're working with because they want the best service. And so that's one way, if you're getting paid and you're able to pay your caregiver, then support your operation, you're able a lot of people are paying by ACH that do on receipt, like you mentioned, we do see credit card in the mix. We do still see paper checks. We even see, you know, maybe transfer wires, all sorts of different payments. Anything interesting there, like that, that you've seen, I guess, my hope and anticipation is like, we've got to get away from paper checks, but this is also, you know, the demographic that we're working with that are comfortable with that method, but any insight in just like kind of the breakdown of payment methods and what you've seen there or different observations you've seen over the years there?

Yeah, it's a good question. I mean, I would say what's interesting there is how you, so it's interesting because like, this goes into pricing theory too a little bit, but if you're an agency that is really focusing on low cost, right, you might be getting people that are like, hey, we want to pay by a credit card. We really want to get this, you know, set up there. And then that credit card is declined, declined, declined. But then if you start to push into like some of your higher rates, that's where we actually see payments are failing through. There's not a lot of issues.

So we actually see, you know, where you're positioning yourself in the market in terms of rate actually sort of attracts like a different clientele and how they want to pay. So that's where we, you know, there's always sort of this, you know, obviously want to maximize and charge the highest rate, but then there's also players that want to charge a little bit lower rate, but that also then attracts like a certain clientele and how they're paying, which can be detrimental to the business because you're getting the hours, but then the credit card is actually coming through. And that's where again, a deposit is really important because it protects you a little bit. And I would say now too, as care is getting a little bit more expensive, people are, and people are really starting to like think about, you know,

how long will our funds last? There's a lot of scrutiny around it. And we're getting requests for, you know, can we review the invoices before they're actually paid, which is fine, you know, as long as you have an EFT form on file. We would say if someone wants to approve it, you would say if we don't hear back in 48 hours, we're going to assume approved or 24 hours, because you don't want to open the door for them to just never approve it. So you still want to put in a stipulation that says, we're happy to do that. But if we don't hear back by this day, we're going to process the payment and then we can make any corrections, you know, as a credit or a refund. So that's what we're seeing a little bit with with the rise in the cost of care is families are really trying to manage the funds and they want to

have, you know, input into when when things are coming out of the bank accounts. Yeah, both really good points. Anything to be said on like the paper checks or wires or some of the maybe less common payment methods that we see? So we see wires if there's potentially like a POA involved or like a very different structure where they're like going to wire, they might do a prepayment. So we also see prepayments, which are good and bad. So prepayments are helpful because, you know, you get cash in the bank. Sometimes people will pay for a month ahead of time. In that case, you just want to make sure that you really have a system where you're tracking against that prepayment, because I think people are like, oh, I prepaid. And it's like at the end of the month, no, there's still a balance. So you want to make sure that you have records there

and you're able to have a conversation around it. And then, yeah, paper checks. So another way, if someone doesn't want to do a deposit of a month, you could do a prepayment as the way forward. And then each month they have to prepay. And that's also, you can collect the check when you're doing a visit to make sure

that things are going well or there's someone dropping by the house. So you can time that. And that could be a great way to check in with the client as well, you know, collecting a check. So it doesn't, it's always not, it's not always negative. It's just sometimes making sure that, you know, if they want to pay by check, okay, how does that work? Maybe it's a prepayment, maybe it's on a month deposit.

And then we just make sure we're getting it. And we're having, maybe you're sitting down and reviewing the invoice with that client. You just need to make sure that the agency has the bandwidth to support that. Awesome. Awesome. Yeah. Not looking for anything super specific with these questions, just more of like general observations that you've seen with different payment methods over the years. The last thing that I just want to make sure we touch on when it comes to payment terms, this isn't maybe something that I'm super familiar with, but I want to make sure you have a place to talk about it, which is DSO or day sales outstanding. Do you want to just explain that concept and how that's relevant to payment terms here as well? Yeah, it's great. So we monitor DSO for all of our clients. DSO is in sort of like a general working capital structure. Day sales

outstanding tells you how quickly you're getting paid. So you're taking your receivables and your sales for the month and you're understanding, okay, if, if when we look at those two and we divide our receivables by our sales, and then we multiply them by the number of days in the month,

there's a whole formula to it. We typically look at the rolling average of 90 days, just to kind of get a good sense of the last three months how people have been paying. So DSO is a great indicator of how quickly you're being paid and how much cash you need in the bank for various things. So if it's a private pay, like purely private pay agency, we would typically see DSO at zero because you're collecting as soon as you're invoicing. Sometimes we see DSO at like two to three because they are from check payers and we're waiting for something in the mail. And then when you're starting to get into contract work and you have like a mix of payer sources, you know, if you have a payer source that pays you every 60 days and you have some private pay, maybe your date sales outstanding is at 21 days, which is three weeks. And so what

that'll tell somebody or what helps them understand, there's a few things that I think it's a great metric to track. And it really takes off like some of the pressure from like cash flow being somewhat of this like black hole of like, where is the money? And when is it coming? VSO helps you to plan. So if you know that you're getting on average paid every three weeks, you're running payroll every two weeks, then you know, okay, we need a week of float from a capital source somewhere. So do we have savings that we can fund a payroll from? Are we going to have to draw on a line of credit? Just gives you insight into like when on average, are your inflows and outflows going to match? And then the other thing DSO tells you if you track it over time is like how efficient and

effective your collections are. So if you see DSO trending up, then you know you probably need to look at something and understand like what's not getting paid. And you dive into your AR and start to investigate it. You see DSO trending down, it's also good to know, you know, are we getting more efficient here? Did our payer source mix change? And it just helps to really have a pulse on that because it just,

for me anyway, is a great indicator. Like if you're feeling that cashflow pain, is your DSO at 35, then yeah, you're probably really feeling it because you're waiting a month to get paid. It's not meaning everybody's paying you and taking 30 days to pay, but on average, your clients are taking that long to pay. Yeah. So it sounds like, especially if you have a payer mix, multiple payers, DSO is a really good KPI to keep track of holistically across the payer mix and then probably per payer mix as well for all the obvious reasons, like you mentioned. So really good call out there. I think this leads really nicely into this topic of managing accounts receivable. Like you said, it can be a little bit of like a black box of, you know, the money's coming in, where's it going?

Where's it sitting? How's it going out? Like just managing the flow of money. So let's talk a little bit about that. Starting with, this is a tricky question, like who manages accounts receivable? Obviously every business is a little bit different. You talked about people outsourcing or bigger entities may hire, you may hire an internal accounting rep, et cetera. What are your thoughts on just who should manage accounts receivable? And then let's get into best practices. What are some of the most important things to be keeping an eye on?

Yeah. So you really want to have one person that kind of, when I say owns it, meaning they're responsible for understanding what's happening with your AR. So that could be, if you're smaller, probably the owner is closely tied to that because they want to know like who's paying them and who's not. And you're starting to grow probably the person that's doing your billing. I would say even if someone else is managing it, the owner would still want to have like a close eye and maybe you're reporting in a weekly meeting what accounts receivable looks like and tracking the aging of it as well.

But yeah, I think it's either going to be the owner or potentially the person that's doing the billing just to make sure that there's one person that's really focused on what's happening with that. And then seeing how things are aging because they'll move from current all the way to 90 or 120 days plus. You just want to try to catch things before they start moving that way. And it's safe to say, regardless of whether or not the owner is managing this, you know, they need to have a hand in it. I think that's a really important piece to mention here. You know, we think of people that get into home care that, you know,

maybe the business side or the finance side isn't their strength. That's okay. But make sure whether you have a CPA, internal, external, whoever's managing the finances, you ask the questions, get really close with them, gain a better understanding of what, what is happening with your finances and what your accounts receivable looks like. And don't, you know, don't take your hand off the wheel in that essence. Like, make sure you're heavily involved. Yes. Yeah, exactly. And that is the thing.

Like, the owner is not going to most likely going to be sitting there calling people for payment, but they might have like a really close eye on, you know, okay, who hasn't paid us? What are we doing to resolve that? Because that's what you want that person that's really overseeing it to be doing is making sure that there's a plan in place if someone's not paying or the invoice has been submitted or following up on an invoice that's been submitted. And that's where, again, robot documentation, reviewing that AR, having notes around what's

happening, what's going on so that it's being followed up and paid eventually. So you're talking about reporting on accounts receivable, looking at that regularly. What specifically are the metrics or the line items that someone should be paying attention to and essentially reporting on? You would want to look at the balance as a whole. I would say the big thing is you want it to be aging correctly. So that's where payment terms come into play. So you want to make sure that that client is set up correctly in whatever system you're using for

their payment terms whether that's your client management system because those report ar or if you're using an accounting software you want to make sure that their payment terms are set correctly so your ar is aging properly and so you want to make sure that you would like to have everything obviously paid and there's nothing past current. But as things start to move from like current to 30 days past due to 60 days past due, really by that point, you should have already touched base with the client and have an understanding of why it's sitting here. Sometimes it's because they're waiting for funds to be released from a certain source or they are waiting on a documentation if it's like a payer source that requires time sheets and there's something or it's just stuck somewhere. But you want to make sure that when it's aging, you have an idea of why it's sitting there

and then have a plan for who's reaching out and who's following up on it. And that's, again, where deposits really come into play on private pay because if it's the left invoice, you can apply the deposit and that will clear the AR. And then also I think sometimes AR is sort of like a billing issue is how people frame it. You know, oh, that's the billing AR issue, but something becomes an AR issue typically

after like a long series of events have transpired. Like that's where the client intake process is really important. And maybe that follow-up phone call is important because if billing and how invoicing is done is explained well in the beginning, that eliminates a lot of issues as to work through any sort of back and forth or any sort of potential disputes that may come up if they have a clear idea of what's going to happen. And again, that's where that like contract negotiation is really important because you would have a good idea of what's required to be paid. So something doesn't just get like invoice sent to an email

address and you're like hoping a check is going to show up. You know, you have a good idea of what's happening and like what needs to be submitted before you get paid. Sometimes payer sources require things in like a different invoicing format that we need to make sure that we're having submitted or they require a portal that you go into. So it's really that education piece in the beginning, whether it's you educating the client or you being educated on what that payer source needs to try to prevent it to going past that current stage on the AR report. Yeah, this is pretty interesting. You know, is it maybe safe to say that AR is a result of, yeah, like a communication breakdown or documentation breakdown or expectation breakdown, which, you know, is typically maybe outside of

the finance team's control. You know, you think of a much larger organization where multiple departments have a hand in this entire process and you think of, oh, AR, you know, belongs to billing and the finance team. But like you're saying, you know, three steps before that, or back to the start of service, you know, expectations weren't properly set. And now here we are, you know, 30 days without a payment and, you know, expectations were properly set. And now here we are, you know, 30 days without a payment. And, you know, we're back in the debacle. Is that seem like a fair assessment? Like it's actually an issue that starts long before, you know, the invoice is or isn't paid? Yeah, I would say probably like 70 to 80% of AR issues are because of that, like there's a lack

of understanding in the beginning. Sometimes there is like in home care, you know, you're dealing with families, you're dealing with other people that have interest in what's going on with those funds. And there is unfortunately refusal to pay typically at end of service. And that's where the deposit is really helpful. I really think finance is part of,

you know, the strategic group of the company. And that's where it's also up to like AR to educate the staff on like, okay, here's what we need to understand in those conversations. So it's a two-way street. It's everybody working together, but just to position the agency through whomever is having those conversations and the best way to make the client happy and then to also make sure that the agency is protected in receiving the funds. And it's not typically just an invoicing AR person that's responsible for that.

It's the whole team working there. Yeah, absolutely. Let's talk about software for a second. I would say the most common accounting software in the industry is probably QuickBooks. Is that your preferred software? Are there others that you think are worth people's time if they're, say, looking into it or dissatisfied with their software? What's kind of your experience when it comes to managing this? Most likely internally. Obviously, people can hire this out and they're using whatever software is conducive. But if someone's looking to manage this internally, is QuickBooks best, easiest option? Are there other options out there that you would advise? I do. We work pretty much primarily with QuickBooks Online.

We've converted clients from other software to QuickBooks Online. The thing that we really focus on a lot with clients is automation and integration. And we find that a lot of systems are built to integrate with QuickBooks Online. So for us, it is great. You know, the one thing about QuickBooks Online, though, I think they make everybody think they're an accountant. So they are like, oh, it's just that easy to do bookkeeping. And so sometimes it's just like, oh, I have QuickBooks.

I'm set with accounting. And it's definitely not as straightforward as they position it. But it's a great software and it's a great platform because we like to see the client management system is integrated with QuickBooks Online. So you're not having to do manual record keeping around revenue. That's at the end of the month, pretty straightforward with some adjusting journal entries. Payroll typically will integrate with QuickBooks Online. And then they have really great connectivity with like their bank accounts and whatnot. So that's our preferred software. We've built a lot of our systems and structures around it. Not to say that others aren't good.

And I don't, you know, cost-wise, QuickBooks Online, the version we recommend, I think is around $90 a month to start. So yeah, that's the cost we typically see. Yeah. That's funny that you say, you know, people use or sign up with QuickBooks and think like, oh, this is my accountant or, you know, this is, there's kind of that like misunderstanding that it may like kind of run itself or do the work for you, but it's really just a tool. It's just the software. It's what you do with it, how you spend time in it, that you'll start to get, to get the results. I've heard that kind of like misunderstanding. So it's funny that you call that out. As far as taking things on internally versus hiring them out externally, you know, you might be

biased in this sphere, but what are just like some, some general tips in that sense? Like, when do you feel like, is it maybe as you're scaling, you feel like you could use professional, some professional external help that would help you scale? Like what, when's a good time to consider hiring some of this out or bringing in outside help to support maybe your finance team? Yeah, that's a good question. I mean, we, we work with, and it's great that I am probably completely biased to this space because that's a good question. I mean, we work with, and I am probably completely biased in this space because that's what we real help agencies a lot with. But really, you know, we help agencies of all sides. And I think there's benefit from working with a professional, whether that's me or some other, you know, any CPA that will give guidance around it. Nice about starting when you're smaller or just getting started is you can really get the foundation and the structure set up well. So that's where going back to those integrations and automations. If you're able, when you're still, you know, somewhat smaller, you're focusing on growing the business. Maybe you're getting into different payer sources.

You can really make sure that you have your client management system talking to folks online in a way that's going to report a gross margin for you that is helpful. And then you can see income by payer source pretty easily, and then gross margin by payer source pretty easily. So we see when people start working with us, when they're becoming a larger agency and this hasn't been done, there's sort of this undoing and redoing, which isn't the worst thing. It's just, you're not having that information. And then I really believe like timely financial reporting helps guide the business. So, you know, if you're just getting started

and you're like, is my pay rate good? Is my billable rate good? That's where like looking at your gross margin, comparing that to what's happening in your region or nationally can help you understand and make sure that you're like charging fair rates and paying fair rates. Because we sometimes see people, if they want caregivers, they're paying $5 over market rate and then, you know, overtime and they're losing

money and they're like, I feel like they're always feeding the business with capital. So I think there's benefit in different stages. I mean, when you're larger, you're probably evaluating, okay, what does this payer source mean for me? How does that impact my DSO? Or what does that mean for my cash flow? And a big thing with home care is like, the home care agency owners have so much on their plate at all times, like even if they have a team, there's just so much going on. So you just want to be able to focus really on like the core of the business and what's making money and then just have some insight into you know what's going on with the finances rather than diving in and doing

it yourself and there are agency owners that do like they build budgets and they run reports and you know that's part of what they're doing um but we really aim to like take that burden off of the owners and the management so that they just see like a one-page snapshot and they can focus on growing the business and structuring in the way that they want. Yeah. And I think there's, there's always a time and a place to get outside help. Even when you are a larger organization, it's not uncommon to establish bad habits. You know, things have been the way that they've been for a long time and, you know, it's hard to break those habits or it's hard to even identify those habits if they've been around for so long. And so I would also suggest or imply that, you

know, like you said, setting a really strong foundation from the start is crucial. It's also really important to maintain that foundation as you start to scale, like you said, it's easy to compromise, or negotiate or, you know, bring someone on quickly, because, you know, you think it's in the best interest of the business. But then you talk about, you know, 10, 20 plus million dollar organizations. They have a lot of this down pat, but there might still be things that are kind of like slipping through the cracks or again, bad habits that have just accumulated over time. And so to get an outside perspective, you know, kind of from like an audit or an analysis type purpose to come in and look at your finances, you know, really doesn't hurt even at scale,

even when you feel like, you know, we're doing this, we've scaled, we've got a lot of revenue, like we know how to manage our cash flow. There are oftentimes like you've seen just room for improvement. And even the small and simple things that can have a really big impact on revenue. Yeah, exactly. And when you're in an organization, I mean, I was in the corporate world for a while. And it's great because you have your peer group when you're working, but like that outside of the perspective, and especially when it's like industry specific, you know, that's the big thing because home care is so, so unique. And there are so many nuances as much as like, we're like, oh, it's people and you know, there's kind of the structure to it. There are nuances and things that we can do differently. So yeah, there's definitely benefit even if it's just having a conversation. I want to wrap up here, but I want to tease next session. So today we wanted to kind of lay the groundwork for billing, invoicing, managing accounts receivable. One of the things that you've called out several times today is your love and focus on KPIs. Once you have the strong

foundation, then it turns into like ongoing maintenance. What numbers are we looking at? What financials are we tracking? What does that look like on a weekly or monthly or quarterly basis? And so next session, we're going to dive into how to analyze your home care finances, which I think is really your bread and butter. I think, you know, we set this foundation today, but next week is really what you feel probably most passionate about. So I just want to thank you for giving us an hour today of your time. And we'll look forward to continuing the conversation again next week. Thanks, Miriam. Yeah, I'm really excited for next week. Today was great. And I'm excited to dive in

more to the financial analysis piece for sure. Yeah, likewise, this went by really fast. I kept looking at the time like, whoa, we're flying by. We just got everything that we wanted to get through. So this was great. So thanks again for being here. And thanks everyone live for joining us. Join us again, same day, same time next week. And we're going to continue the conversation with Dana. That's a wrap.

This podcast was made by the team at CareSwitch, the first AI-powered management software for home care agencies. If you want to automate away the menial of your day to day with AI so that you and your team can focus on giving great care, check us out at careswitch.com.