In part one of this series, “Your Accountant Does Not Know Everything” I discussed how you can increase sales with a healthy A/R. In part two, “Cash is Not King...” I explained the 5 steps to an effective and efficient A/R system. In part three, “8 Ways to Avoid Discounting“, I reviewed 8 considerations that favor a payment plan system over discounting. In part four, ” Your guide to an Iron Clad Agreement” I explained how your payment plan agreement should be structured.
Here I explain the benefits of having a professionally managed A/R, 3P system. A system I believe every practice will need to survive and grow in the veterinary industry.
1. It adds value to your practice
Now we need to understand what this will mean to your business. When I ask the financial consultants in the industry their perspective on carrying accounts receivable I always get a weird look like I have two heads. Upon further discussion and I add, “what if the A/R was professionally managed and the delinquency was kept to an acceptable level”, they still have reservations. The industry has evolved as such that A/R is viewed as taboo.
Taboo only because the A/R has never been managed by a professional A/R company. A/R has always been the job of the staff. A job that they do not have the skills or the proper tools to properly manage the money owed your practice. You need to come to the year 2016 were tools are available to make A/R a very important part of your practice. Just like thousands of other industries that use A/R very successfully.
We all know that accounts receivable add value to your balance sheet and it helps with long term cash flow. This in turn adds value to your business, value that can be measured. When you prepare to sell your practice, what are you selling? You are selling your client base and the potential future revenue. However, there is no guarantee that your clients will continue to patronize the practice after you sell. So what will give you a higher selling price, a practice with no A/R or a practice with continued income from a professionally managed A/R? We all know the latter.
2. It improves your borrowing position with your bank
Most well run practices have little problems borrowing money from their bank. Banks view the veterinarian industry as a very good risk for loans. However, increasing your client base with a healthy A/R will significantly increase your odds of a more favorable rate and terms.
3. Improves cash flow
By offering payment plans you increase your client base which in turn increases your cash flow. It also develops a recurring monthly revenue stream that you never had before and from clients that you would never have been able to help. So not only did you gain a client and/or capture additional revenue from an existing client, it has helped your practice by seeing a consistent revenue stream every month that could pay for some of those fixed costs, especially during your slower months when cash flow has decreased.
4. Become more efficient.
When you utilize an effective payment plan system to schedule procedures into the future you become more efficient with staffing and space utilization. How much more efficient would your practice be if you schedule prepaid dental procedures on a specific day?
5. The Power of Gratitude
Your gratitude to allow your clients to have this alternative payment method will go a long way to strengthening your relationship with your clients and your standing in the community. The actions you take today to help your clients will repay itself with big dividends in the future and make a lasting impression on your practice.
After you have read this series of articles I hope you have come away with a new sense of appreciation on how the industry is going to have to change to grow in the future and how a professionally managed A/R would greatly benefit your practice and the industry as a whole.