When buying or selling a dental practice, there are many details to finalize. One of the trickier items is how to handle the amounts still owed by patients for work already completed by the Seller.
These balances, known as Accounts Receivable (A/R), are not included in the appraised value of the dental practice but can represent a significant amount at closing. Since these balances relate to services performed by the Seller, the question becomes: who collects them, and how?
Option 1: A/R Sold to the Buyer
The cleanest solution is often for the Seller to sell the A/R to the Buyer at closing. Because not all accounts will be collected—especially those 60–90+ days old—the total A/R balance is usually discounted to reflect expected collections.
An experienced broker can help determine a fair value using proven formulas. For the Buyer, this option provides immediate cash flow from patients’ payments, while the Seller receives taxable income as though they had collected the accounts directly.
Option 2: A/R Billed & Collected by the Buyer
If the Buyer doesn’t purchase the A/R outright, another common approach is for the Buyer to handle billing and collections for a set period (typically 3–6 months). Payments collected are then remitted to the Seller, minus a small fee for administrative costs.
This method requires extra bookkeeping but helps maintain goodwill between both parties while strengthening the new doctor-patient relationship.
Option 3: A/R Billed & Collected by the Seller
A less common—and more complicated—approach is for the Seller to continue billing and collecting the A/R. While it may seem straightforward, payments often arrive at the practice after the transition, requiring coordination with the Buyer’s staff. This can create confusion and is generally best avoided.
Key Takeaway
Most A/R is collected within the first 3–4 months after closing. If not purchased outright, having the Buyer handle collection is usually the most efficient and patient-friendly solution.
Thinking about buying or selling a dental practice in the St. Louis region?
We can guide you through A/R, valuations, and every other step of the transition process. Contact us today for a free consultation.
– Bill Otten & Kim Rey
