Independent Pharmacy Accounting

Optimize Your Pharmacy’s Third-Party Reconciliation

Delays in third-party payments lead to delays in reconciliation and posting of payments to your pharmacy’s chart of accounts. There are several points in the accounting process where third-party payers, bookkeeping and your third-party reconciliation approach can be assessed and optimized for faster posting and much better cash flow.

In this video, Ollin Sykes and Kathy Blanchard walk you through several examples of
payment and posting delays. If left unchecked, they lead pretty quickly to cash flow issues. But also, you could pay extra fees and taxes for money you never received. Learn why your accounting team must work closely with the third-party reconciliation service to handle late payers quickly.

Staying on top of third-party reconciliation can alleviate or end delays past 60 days, help you get to the bottom of late payer issues and avoid lost revenue. Send the message that your pharmacy is on top of receivables.

Our pharmacy advisory services team can help you assess and identify accounting process issues and financial statement inaccuracies to help you receive the money you’re due. To optimize your bottom line and top line opportunities, contact us for an RX Assessment.

If you prefer to read this content, the video transcript is below.

Why is third-party reconciliation critical to pharmacy success?

Ollin: Third-party reconciliation for pharmacies is one of the central most important issues on a balance sheet for accrual basis financial statements for a pharmacy. We see so many pharmacies that do not pay any attention to this at all. They will adjudicate a claim, walk away and just assume whatever they get back is correct. There are numerous third-party systems that are out there, that are good. We are going to just illustrate one today, which happens to be the FDS platform. You can take a look at your systems of choice for probably the buying group or the wholesaler you have, but they essentially all work in a similar fashion. Kathy, if you could bring up what we refer to as a ‘good looking’ third-party report.

Kathy: It is all about developing a really good relationship with your analyst at whatever reconciliation service you are using. What we like to see is 95% of the funds that are owed to you, in the zero to 60 day columns. That way, you are working with your analyst, you are developing that relationship with that analyst at FDS or whatever platform you are using to help you reconcile those claims so that you have nothing due over 90 days. And the reason we like to see that is, we like to see what you are actually going to collect versus recording a number that, it is possible, this information or these receivables you have already been paid for. They just did not get reconciled out of your system. They should have been written off. They should have been adjusted. And you are recording income on your books that you will probably never see.

So it is really important to begin developing that relationship with your analyst, keeping these reports healthy. You as the owner of the business need to be working with the bookkeeper or whoever in the pharmacy that you have put in charge of this process. Number one, making sure they have had the training they need in whatever platform you are using. Number two, looking at this report on a periodic basis. I would suggest at least weekly when you get started with a service. That way, you and your tech or your bookkeeper are developing good habits and making sure that these reports are as accurate as possible. Again, we do not want to book income on your tax return that you are not going to get. That means you are paying tax on money you will never receive.

What does a ‘bad’ receivable look like?

Kathy: When we look at this one over here, and this one specifically had a problem. They were not reconciling claims for this specific insurance provider. They had dropped those claims out of the system.

Ollin: Using these numbers at month end for recording your receivable adjustments, you have got a lot of receivables in that over 60-day column that you have either already received or need to be adjusted off. If you are including those in your receivable adjustments, your financial statements can be materially off. The way that you could take a look at this…Kathy you might want to briefly share that spreadsheet that we track the 835s.

Kathy: This is a listing off of one of the platforms. These are the actual deposits received. Basically what we have got here is the date paid by the insurance company. The date confirmed by the individual in the pharmacy. And then we have the date applied by your analyst at your reconciliation service. Now, this becomes really important. We want to make sure that the date that it is paid to you, it is getting confirmed in a timely fashion. But we also need to make sure that your analyst at your third-party receivable service is applying that payment in a timely way. Because if it is not getting applied timely, you can have a situation like this one. Where the checks were paid timely and you can see here, this was paid on the 29th, it was verified on the 2nd, but for whatever reason, it did not get verified out of the system for six whole days.

This specific payment was related to Caremark and we found several instances of that within this file. We were having problems, but we could not quite get a handle on who was at fault here. Was it the bookkeeper in the store not doing their part timely? Or was it the analyst at the reconciliation service level not posting those payments in the system timely? So this is one of the reports directly out of the system. We just added a column to do the math. How many days had passed between verifying the deposit and the book deposit being applied in the system. And we found several instances where that was a problem for this client. We contacted the third-party reconciliation service on behalf of the client. We told them there was a problem and it was addressed immediately with the analyst and that analyst’s supervisor.

So if you are seeing this in your reconciliation program, number one, bring it to your analyst’s attention. But if you do not feel like you are getting timely response or if you see this occurring time and time again, do not be afraid to reach over that analyst’s head and ask to speak directly to their supervisor. Because this should not be happening.

Ollin: These are all tools we use to assist and help our pharmacies on an accrual basis, having accurate financial statements at month end. So if you would like further information about this, do not hesitate to reach out to us. We would be more than happy to talk specifically about your situation or review what you are currently doing now with your third-party reconciliation system. Do not hesitate to reach out and give us a call.

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