Due diligence plans can be very complex, so it’s helpful to have a roadmap for developing a robust plan if you intend to acquire a medical or dental billing company or if you’re preparing for a sale. The process of developing a plan can be started by evaluating three areas of your business: Challenges and threats; client relations; and accounts receivable aging.

Tip 1: Identify the challenges your business faces currently.

What are “hot button” issues in your business?

Have these been recent concerns or longer-term challenges?

Are these problems universal to the entire industry, or are they specific to your business? 

Tip 2: Define how client relations is managed by your company.

Who is responsible for maintaining the relationships with clients? Do employees handle client relations on a day-to-day basis, or is the owner of the business the main point of contact?

What is the age of the client base? If the principal provider for a given client is nearing retirement, is there a succession plan in place?

If no succession plan has been established, what impact will the departure of the principal have? What can be done proactively to minimize any challenges?

Tip 3: Understand your aging accounts receivable (A/R) report.

Are days in A/R increasing? Is this a recent trend or has it been an ongoing concern?

Can the reason for the increase in aging be identified? Is it due to one client or several clients, or an internal accounting process?

Do you have “problem” clients who are historically late to pay? What impact might those payment delays have on cash flow?

By assessing each of these areas, you will gain a better understanding about the health and stability of your business, and you will be better equipped to ask or anticipate questions in a prospective acquisition situation.