Empowering Women in Chiropractic -Accounts Receivable - In or Out?

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Hey everybody. Thank you so much for joining me here today. I wanna thank ChiroSecure for giving me the opportunity to share some really important information with you. I am Dr. Randi Ross. I am the CEO of Premier Practice Consultants, and today we're gonna chat for a few minutes about your accounts receivable, or more commonly known as your ar as it relates to when you're selling a practice or even when you're buying a practice.

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So a lot of people ask this question quite frequently when we do a valuation of a practice. Does that include my ar when we do valuations, ar are not included in how we determine what the value of your practice is from either a seller or a buyer perspective. I use the little bit of tongue in cheek line.

Eh, it's like a, aftermarket. Add on, like when you buy a car and they add on all these things. When it comes to your ar as far as a seller. Sometimes sellers don't want to include their AR for a myriad of reasons, and everyone has their own position on that. Some people say, I wanna take it with me and get these dribs and drabs of money as they come in over the next, 6, 10, 12, 18, 24 months.

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Some buyers will say. You know what? I really don't want someone else's ar so sometimes it's a conversation that really needs to take place after a deal is. And I can tell you that there are times when we do include the AR in an asking price. That's the exception, not the rule. But there are instances where for whatever reason, how a particular practice is structured, it just makes sense or that's something that a seller really wants.

But that's more the exception than the rule. Now when it comes to a bank, okay. 'cause majority of our acquisitions within chiropractic are gonna be bank funded. Majority of those, almost all of them are gonna be through. The SBA small business administration, and today banks will actually fund usually anywhere from 60 to 90 days of ar.

And you ask why would they do that? They do that because it gives cash flow. Your AR is coming in as a new buyer is there from previous services that were rendered. So they either have to buy a few months worth of ar. Or they need to give more capital to someone buying a loan. But that's another conversation.

But just so you understand, the mindset behind most banks will fund 60 to 90 days of ar. They usually feel after that, that the likelihood of collections goes down and even more so the percentage of what you'll collect once we go far into time. Becomes less and less. They will actually on that 60 to 90 days, they will often give you really close to what your value is.

They can look at an AR report as can most buyers and really determine historically. What do you collect? What percentage is your AR collection? 50%. Is it 85%? You can tell that historically when you look at the data of these AR reports over zero to 30, 30 to 60, 60 to 90, 90 to one 20. And even beyond that, again, you could you see a pattern that most people can recognize.

So what we've seen lately, and the reason why I really wanted to discuss this is that more and more we are seeing deals that it's really important, sometimes necessary or definitely favorable, especially for a buyer to have the AR included. And the reason for that can be a few different reasons, but the one I wanna focus on today.

Is that more and more deals are done under what we call a stock transfer sale. Sometimes, depending upon your corporate structure, it's called a membership transfer. Pretty much means the same thing to you, watching out there today. And what that means is whatever that corporate identity is, the seller.

Meaning the person leaving just slides out and the new owner slides in the structure or the umbrella over which the payments come in pretty much stays unchanged. W that really sets up an environment to have the AR included. Think about it, if you are getting checks to A, B, C, chiropractic, A, B, c, chiropractic, then you have some PI in there from six months ago.

A $5,000 check comes in a B chiropractic. Nobody has to really track it to the extent they would have to track it if you took your AR with you. Because it's now all part of that company, your corporation, or whatever your structure is that, that buyer, that entity, that investor purchased.

Okay? So there's less tracking and for some buyers. Especially more the investor types. They feel that it becomes this logistical bookkeeping nightmare to try and track. Okay we bought this much ar so anything that comes in older, we have to track, we have to get it into our books, we have to get it out of our books.

We have to send you 10 99 at the end of the year. For some people it's not an issue for others, depending upon if they own a lot of practices. It can become a little bit challenging. So we're seeing more and more stock transfer sales as opposed to asset purchase sales. So as a result of that, we are really seeing this ar in a different light than we saw majority of times.

Even just a few years ago. Even just a few years ago, it was seller buyer option. Hey, do you wanna sell your ar? Sure. What percentage of what's out there do you want? Okay, I'll give you that. And with an asset purchase, it's a little bit easier because those those services they were being paid for are coming into the previous owner.

Still can be a little bit logistical. Not as much today 'cause most things are direct deposit. The only time we run into a little bit of a squirrely situation with that is if it's pi and the exiting doctor, the seller treated someone that's now continuing. With the new buyer that can get a little bit, little muddy the waters a little bit sometimes, especially if there needs to be a settlement or something like that.

'cause now two parties are involved. I. But within an asset purchase, it is doable. Typically the attorneys will have to have something structured in there that you have to have access to the files for a certain period of time. In the event this ar you have outstanding asks for certain documentation that obviously you wouldn't any longer have.

Again we're seeing more and more that accounts receivables. It almost makes sense really to have it put into the deal. And make it a little bit cleaner, a little bit smoother, and a little bit more streamlined as the new owner takes over and actually as the seller, I. Who would be our client.

As you leave, you don't have to chase that money. You've gotten probably close to what you would have gotten had you collected and track that money. Most people have to wind up paying someone to track it and so on and so forth. So you know, again, you are done. Get out, be clean. Don't have to chase your ar.

Let it be for someone else. And for those buyers out there, even though it might at times seem like a bit of a headache for you to chase somebody else's ar, you really can't look at it that way because it's cashflow for you. It's attached to your business. So it almost makes more sense. Again, not in every single situation, but as time goes on.

We are seeing it really make more sense in more and more deals, in more and more acquisitions. It just seems like the path of least resistance, the cleaner way to complete the deal and actually makes it easier for all parties. Concerned. Obviously, if you wind up in a situation where you are selling or you are buying, consult your attorney because there might be certain specifics that are pertinent to your state or laws that I might not be familiar with that exist everywhere.

I wanna thank ChiroSecure for having me here today and for letting me spend a few minutes with you. I am Dr. Randi Ross, CEO of Premier Practice Consultants. If you happen to wanna reach out to me for any reason, can find me on the internet, you can find me on every social media platform. Premier Practice Consultants.

Have a fantastic day.

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