Insurance A/R for a clinic: billed versus collected

When a clinic bills an insurer, the money doesn't show up when the visit does. Extended health plans, WSIB, ICBC and other motor-vehicle claims, Teleplan in BC, TELUS eClaims: each pays on its own schedule, and usually in one lump that covers a dozen patients at once. So the amount you billed this month and the amount you collected this month are almost never the same number. The gap between them is where clinic books quietly drift, and where real money goes missing.

Billed is not collected

Submitting a claim means you've billed. That's a promise to pay, not cash in the account. The insurer might pay it in full in two weeks, pay part of it in six, or deny it outright. If your books only record revenue when cash lands in the bank, three things happen. You can't see what you're owed, so you can't chase it. Your monthly revenue lurches around based on when insurers happen to pay, not on how much work you actually did. And denials slip past you, because nothing in the ledger was ever expecting the money.

Billed and collected are two different measures, and a clinic needs both. Billed is what you earned. Collected is what showed up. The difference is your receivable, and it deserves a real number, not a shrug.

Record the receivable when you earn it

On an accrual basis, you recognize revenue when you deliver the service, not when the insurer pays. When you bill a claim you credit treatment revenue and debit an Insurance or Third-Party A/R account for the same amount. When the remittance arrives, the cash clears the receivable. It doesn't create new revenue, because you already booked that the day the visit happened. When a single insurer deposit lands covering many patients, you split it back across the claims it pays, the same reconciling discipline you use to clear a Jane Payments payout.

This keeps your revenue tied to work done, which is the whole point of an accrual close. Very small clinics sometimes run on a cash basis, where revenue is recorded only when paid. That's simpler, but it hides your A/R entirely. Which basis is right for you depends on your size and your tax situation, so confirm it with your accountant. Most multi-practitioner clinics belong on accrual.

Keep insurer A/R separate from patient A/R

A patient copay and an insurer balance are two different collection problems. The patient portion is small, per-visit, and usually settled at the front desk. The insurer portion is larger, batched, and governed by remittance rules and denial codes. Keep them in separate accounts so each one stays legible. Lump them together and the slow insurer claims hide behind fast patient payments, and you lose the ability to see either clearly. A clean chart of accounts gives insurer A/R its own line.

Run an A/R aging every month

The aging report is the tool that makes receivables manageable. It lists what each insurer owes and how long it's been outstanding: current, 30 days, 60, 90 and beyond. Anything sitting past an insurer's normal turnaround is a flag. It might be a claim that never went through, one that needs resubmission, or a denial nobody caught. Reviewing the aging as part of your month-end close turns A/R from a mystery into a short list of things to fix. Without it, you're guessing at what you're owed.

Denials and short-pays: reconcile to the allowed amount

Insurers rarely pay exactly what you billed. They pay a contracted or allowed amount, they short-pay, or they deny. When a remittance comes in, reconcile it against what you billed, claim by claim. Whatever the insurer agreed to pay clears the receivable. The difference between what you billed and what they allowed usually isn't collectable, so it comes off the books as a write-off.

Where the write-off goes depends on how you've set things up. A short-pay against a contracted rate is really a price adjustment, so it sits cleanest as contra-revenue, a reduction of revenue rather than an expense. A claim you genuinely expected to collect and never will is closer to bad debt. Either way, don't let denials sit silently in A/R inflating what you think you're owed. Clear the uncollectable part, and keep the denials visible so you can resubmit or appeal the ones worth the effort.