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Process Improvement Plan - Accounts Receivable

It is the second Monday night in October and it is now 3AM. You cannot sleep.

You are the CFO of Marysville General Hospital, a 300 bed community hospital in the Midwest. Your hospital Board meets at noon on the second Tuesday of each month. You have a truly awful report to give the Board and you are dreading it more than anything else you've done in your 15 year career as a hospital senior manager.

The target for Days in Accounts Receivable (which the Board and CEO set some years ago) is 55 days. When AR Days are at 55, cash flow to the hospital is strong and you can meet all monthly obligations while putting some money away into investments for the hospital's future.

It has been several years now since the hospital has seen its AR at 55 Days. There have been many factors, but AR has been in the 70-80 day range for some time now. Last month it crept up over 90 days. And this month you have the painful task of reporting to the Board and CEO that the hospital is carrying 100 Days in Accounts Receivable.

You must come up with a plan to bring AR Days back in line, and you will not be able to accomplish that alone. It will take cooperation from the Medical Staff, the clinical departments, Health Information Management, Business Office and many others. But it must happen, and it must happen soon, or your community could actually lose its hospital.

Your Role/Assignment

Come up with a plan to bring AR Days back in line. It will take cooperation from the Medical Staff, the clinical departments, Health Information Management, Business Office and many others, so include how you will involve these departments in devising a solution.

As you prepare your Process Improvement Plan:

What further data collection will you conduct before beginning to write your plan?
What will be the elements of your plan?
For each element, who will be the key players and what will be their roles?
What resources outside of senior management will you engage?
How will you present your plan at the Board meeting?
And how will you know that your plan has been effective?

Solution Preview

Please refer to the attached file for the response.


The following data will be needed before formulating the plan:
1. List of credit transactions with the corresponding dates of approval and maturity.
2. Basic personal profile of the debtors as to: occupation, source of income, size of family, place of residence, number of dependents.
3. Mails and other evidences as to when mailed payments from the customers were actually received by the hospital management.
4. Evidences of clearing of payments/transactions that took place between the mailed payments were received and the actual date when the payment is posted in the company's bank account.

The details of the plan for the improvement of the hospital's management of accounts receivable are indicated in the following table:


-To characterize existing accounts receivable and to classify them as to current and outstanding 1. Preparation of Aging of Accounts Receivable Schedule
Finance department Finance department records

Finance department personnel 1st
-To determine the period of time involved between the payments was sent by the debtor/client and the actual posting in ...

Solution Summary

A process improvement plan for accounts receivables are determined.