In clinical practices, getting paid promptly is just as essential as delivering excellent patient care. You treat patients, submit claims, and send statements- but the big question is: how long does it take for that money to reach your bank account? If you manage a clinic in the United States, delayed payments can create serious strain. Payroll becomes stressful, supply orders get postponed, and plans to expand or enhance care are forced to wait. That’s why tracking AR days (Days in accounts receivable) is vital.
AR days measure the average number of days it takes to receive payment after posting a charge. It indicates how efficiently your billing system turns work into cash. A low AR days figure means healthy cash flows; a high one signals collection or process delays.
Process To Calculate AR Days
Step 01: Select your time frame
Begin by selecting a specific time for your calculation. This choice examines the rest of the math. Most practices use one of the following:
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- Monthly (30 days): Great for fast progress checks.
- Quarterly (90 days): Supports identifying seasonal or trend-based transformations.
- Yearly (365 days): useful for high-level review of long-term performance.
Once you select the time frame, stay persistent. AR days used the number of days in your selected window as a part of the formula. If you switch between months and quarters, your outcomes won’t be comparable due to math transformation, even if your AR balance doesn’t.
Step 02: Calculate Your Average AR
Nextly, estimate your average accounts receivable for that period. This tells how much money, on average, was waiting to be collected every day. Gather two numbers from your billing systems:
- Beginning AR balance: The unpaid total on the first day of the period of insurance and patient balances.
- Ending AR balance: The unpaid balances total on the ending day of the period.
Excluding credit balances and unapplied prepayments, the number reflects only the actual receivable.
Step 03: Find Your Net Patient Revenue
Now, calculate the net patient service revenue for the same period. This may represent the exact revenue earned delivering care, not cash received, and must align with your AR balances.
| Includes | Excludes |
| Charges for visits and methods during the selected periods.
Both the insurance and individual portions. Adjustment for contracted fee schedule and discounts. |
Cash payments for older claims.
Non-patients’ income, like as rent or product sales. Credit balances, prepayments, and refunds. |
How to get it:
Start with gross charges, then subtract the contractual adjustments and daily discounts.
Step 04: Calculate AR days
Now plug everything into the formula:
AR days = Average AR / Net Revenue)× Number of days in your time frame.
Rounded, that means your practices generally wait about 24 days to collect after posting a charge. The lower this number, the quicker your revenue turns into cash.
Understanding AR Days Benchmarks
Once you have calculated AR days, it’s essential to analyze and interpret what it means for your practices. Here is a general framework:
- Less than 30 days:
Excellent. Payments are being processed quickly and efficiently.
- 30 to 40 days:
Acceptable but indicates room for enhancement. There might be fewer concerns in individual payment timing or payer processing.
- Over 40 days:
A warning sign. Delayed payments can strain cash circulation. Review your billing process, claim submission speed, and denial management practices.
How AR Days Drive Better Business Decisions?
Knowing AR days is not just about a number – it’s a strategic tool. If AR Days are trending up, your practices might need to strengthen denial management, speed up all the claims follow-up, or enhance the patient billing clarity. If they are dropping, that is a sign that your revenue cycle management is enhancing.
Ministering AR days monthly or quarterly permits you to predict cash flow, which makes better staffing and purchasing decisions, and set naturalistic financial objectives. It also helps to demonstrate operational efficiency to lenders, investors, and partners.
Final thoughts
Calculating AR days gives you a clear, data-driven view of how effectively your practice converts charges into payments. With Docvaz and our Medical Accounts Receivable Service, you can track AR accurately, identify bottlenecks, and strengthen every phase of your revenue cycle.
An AR days figure under 30 is perfect; between 30 to 40 means you must fine-tune your process, and over 40 indicates that it’s time for deep review and understanding. With the right and effective tools and habits, you can shorten AR days, elevate cash flow, and concentrate on what truly matters – providing excellent patient care.
FAQ’s
What is a good benchmark for AR days?
Less than 30 days is excellent, but 30 to 40 days are acceptable as well.
What is the general formula to calculate AR days?
You can calculate AR days through AR days = Average AR / Net Revenue)× Number of days in your time frame.
What is the distinction between gross and net revenue?
Gross revenue is the complete billed, and the net revenue is what you actually expect to collect after adjustments.
How often should AR Days be calculated?
Most practices review them monthly or quarterly to monitor the trends.
What causes high AR days?
Common causes involve slow claim follow-ups, unworked denials, or confusing patient statements.
