Accounts Receivable in a Dental Practice Sale

Define accounts receivable in a dental practice sale

Accounts receivable, often called AR, are amounts recorded as due for prior services. A practice sale must address whether the buyer acquires those claims, the seller keeps them, or the parties agree to another defined treatment. The article's worksheets are for that decision. They are not a valuation of any real ledger.

Owning a balance and collecting it are separate roles. A buyer might collect seller-owned balances under an agreed process without owning them. A seller might also retain responsibility for collection. Neither arrangement should be inferred from who controls the office software after closing.

EisnerAmper's receivables article recommends addressing AR during negotiation and examining the aging report. Its older sample discounts and fee suggestions are not adopted here as current market norms. The actual terms and evidence determine the decision. (Source: EisnerAmper: Negotiating accounts receivable when buying a dental practice; checked September 5, 2026.)

Do not choose based on a claim that one method is always standard. Compare the actual cash benefit, administrative cost, patient impact and collection uncertainty. Put the proposed treatment into the deal discussion before the final closing statement is prepared.

Freeze a closing list that can be reproduced

Set an agreed cutoff date and time. Save the account-level export and the report settings used to create it. Keep a readable copy as well as the data file. Record the system, report name, clinic scope, date basis and treatment of credits, insurance estimates and payment plans.

An export made later may no longer match the closing snapshot. Backdated entries, delayed posting and corrected charges can change the display. Preserve the original, then show authorized changes in a separate reconciliation. Do not overwrite the only record of the amount both parties approved.

Open Dental's aging-report documentation shows how filters and settings affect the report. It also distinguishes positive aged debt from negative balances and estimated insurance amounts. Those details support a general review question; another software product may calculate them differently. (Source: Open Dental: Aging of A/R report; checked September 5, 2026.)

Request enough detail to resolve differences without circulating patient information widely. Use controlled access and only the information required for the review. De-identified teaching worksheets are useful for planning, but real account reconciliation requires an approved privacy and access process.

Reconcile the ledger before negotiating its price

Start with recorded positive balances. Identify posted amounts that need correction, settled items still shown as open and balances excluded by the proposed deal. Keep a reason, evidence and approval for every adjustment. A round reduction with no account list is difficult to defend later.

The following invented example starts with $120,000 of positive balances. Both parties accept the listed corrections for this exercise. No discount or collection probability is assumed.

Suppose $20,000 of that remaining balance is disputed. It is a subset of the $100,000, not another amount to add. Keep it visible as unresolved until the parties decide its treatment. Deducting the disputed portion and later deducting the same accounts as exclusions would count the reduction twice.

In this example, a separate report also shows $8,000 of patient credits. These are not included in the positive-balance bridge. They need their own review of who owes refunds or future services and how that obligation is treated. Simply netting them into an advertised AR balance can hide a liability the parties have not addressed.

The remaining $100,000 is not a statement of fair value or promised cash. It is the agreed starting population for the next decision. A buyer still needs to assess ownership, collection evidence, disputes, costs and timing.

Read aging without assuming collection probability

An aging table sorts amounts by a date convention. It does not by itself tell the buyer which party owes the money, whether the bill is correct or how much will be recovered. Open Dental's default aging uses charge dates; payment-allocation preferences can also affect the buckets. Check the actual configuration. (Source: Open Dental: Aging; checked September 5, 2026.)

A newer account may have a billing error. An older account may have a documented payment plan or a pending appeal. Review the reason behind the age instead of applying an unsupported percentage to every balance in a bucket. Ask for subsequent receipts on a defined past group to test what actually happened.

Use consistent populations for that test. Comparing today's collections with yesterday's entire receivables balance can mix new services into the numerator. Keep the original account group fixed and track only its later activity. Explain any accounts added, removed or split during the review.

Separate the insurer's estimated share from an established obligation. An estimate is not proof that a payer will pay, or that the patient must pay the full difference. Examine contracts, explanation-of-benefits information, prior adjustments and disputes through the appropriate authorized review.

Write collection terms that staff can carry out

The purchase documents should turn the chosen arrangement into an operating process. Identify who can send statements, answer questions, accept payments, approve discounts, issue refunds and authorize writeoffs. State where money goes and what supporting records accompany each remittance.

Rivkin Radler's purchase-agreement discussion identifies included and excluded receivables and collection provisions as terms to address. Use it as a question framework, not a legal conclusion about a particular state or agreement. (Source: Rivkin Radler: Structuring a dental practice transaction and purchase agreement; checked September 5, 2026.)

Avoid vague terms such as reasonable collection efforts without discussing what staff must actually do. The parties can then ask counsel to reflect the intended process in appropriate language. The clinical team should not have to interpret an ambiguous purchase agreement while a patient waits at the desk.

Keep seller collections separate from new treatment

A patient can owe for services on both sides of closing. A payment received afterward does not automatically belong to the buyer. The allocation should follow the agreed method and applicable obligations, with enough detail to trace the amount to the correct account and service period.

Create a dedicated report or other controlled method for the seller-owned group. If the software cannot preserve that distinction reliably, resolve the limitation before relying on it. A manual workaround needs an owner, clear instructions and reconciliation to the original list.

Do not use seller-owned collections as buyer operating cash. The buyer's cash forecast should show remittance obligations and the actual compensation earned for collection work. The working-capital guide explains why a bank deposit and money available to spend are different measures.

Also distinguish who receives a check from who has the legal right to deposit it. Payer arrangements, bank accounts and entity names may matter. Obtain the correct instructions through the parties' advisers and service providers; changing the name on an internal report does not establish that authority.

Reconcile cash collected and debt still outstanding

The next invented example follows a seller-retained group starting at $100,000. No new charges enter that group. The $1,000 reversal below is a returned prior payment that reopens the same debt. It is not a refund of a patient credit. The $6,000 writeoff is approved under the assumed collection arrangement.

The debt fell by $20,000, but net collected cash is only $14,000. The difference is the writeoff. A report that calls the full debt reduction collections would overstate cash recovery.

Now assume an invented fixed service fee of $650 for this reporting period. It is an example input, not a recommended or standard fee. The fee affects what is paid to the seller; it does not reduce what patients owe again.

Together, the statements explain the $80,000 still open and the $13,350 remitted. Compare both with the bank and supporting account detail. Do not add new-treatment collections to this group's recovery rate, or count the service fee as another patient-debt writeoff.

Resolve exceptions without sending conflicting bills

Keep an exception list for unidentified deposits, mixed payments, returned checks, disputed balances and payer recoupments. Assign each item to a person who can resolve it. Record the decision and the affected period so both parties use the same corrected statement.

If a patient receives a bill from both the former and new owner, staff need a clear route to investigate it. Pause unsupported duplicate demands while the account is reviewed under the approved process. Do not ask the patient to reconstruct a transaction allocation that the parties should have documented.

The ADA sale checklist identifies receivable collection terms and continued-care provisions as issues for contract review. That is a reminder to coordinate the financial handoff with patient care rather than treating the ledger as an isolated spreadsheet. (Source: ADA: What to do when selling a practice; checked September 5, 2026.)

Unfinished treatment and patient credits deserve separate attention. A prior payment may relate to care yet to be delivered. An amount labeled credit in the system may need investigation rather than an automatic refund or transfer. Use the records and custody guide for the separate access and continuity questions.

Plan the end of the collection arrangement

Define what happens when the agreed collection period ends. There may still be appeals, uncashed checks, unresolved disputes and payments arriving at the former address. Decide how these will be routed and documented after routine reporting stops.

Prepare a final account list with status, remaining amount, last action and next owner. Reconcile it to the opening group and every approved change. Obtain the agreed acknowledgment without describing unresolved accounts as closed merely because the service period ended.

Control access after the handoff. Keeping indefinite software access because a receivable might be paid later is not a substitute for a defined records and privacy arrangement. Establish an approved method for later inquiries and necessary supporting information.

Preserve the records needed to explain the reconciliation. The retention and access rules depend on the records, parties and applicable requirements. This guide does not set a universal retention period or authorize disclosure of patient data.

Common mistakes when negotiating receivables

Treating face value as guaranteed cash skips the key diligence. So does adopting an old discount schedule without testing the accounts. A useful negotiation explains the evidence and uncertainty behind the proposed treatment rather than relying on a percentage labeled standard.

Another mistake is leaving collection details until after closing. Staff may then receive conflicting directions about statements, refunds or deposits. Agree on a workable process while the parties can still resolve terms together.

Avoid hiding patient credits in net AR, combining new charges with the closing group, or subtracting the same dispute twice. Keep cash receipts, returned payments, writeoffs and service fees in separate rows. These distinctions make later differences much easier to locate.

Finally, do not confuse a financial agreement with patient-data permission. The parties need both an enforceable arrangement and an appropriate access process. A complete spreadsheet cannot supply either on its own.

Summary: close with an account list and an operating plan

The useful deliverable is a matched set: the agreement, frozen ledger, adjustment schedule, collection instructions and reconciliation format. Together they explain who owns each balance, who can act and how money will move.

Bring unresolved accounts and proposed collection terms to the buyer, seller, accountant and transaction attorney before closing. Connect those decisions to the purchase-structure review and the buyer's cash forecast. The goal is a clear handoff that staff can carry out and patients can understand.