In my previous blog, “Cash is not King…”, I explained what you need to do to make your accounts receivable (A/R) work for you and not against you. Now you need to know how to grow a healthy A/R that will save you the 5% to 15% third party financing companies charge and save the 10% to 50% when you discount your services for those wellness plans. If you are good at what you do why would you discount? Do you think Ben Carson discounted his services? Do you really think taking a percentage off the bill is going to attract new clients? The middle-class is losing economic ground and they own the largest percentage of pets. If your clients do not have the means to pay the entire bill at time of service no discount will matter.
There are many ways to build an efficient healthy recurring revenue stream by implementing systems that make your clients want to use all your services and discounting is not one of them. Think about it, do you not buy more when a store offers you a payment plan? Of course you do. Paying a little per month is easier than paying a lump sum, hence you continue to add to your balance until you reach your comfortable monthly payment. The new tools available to your industry make this all possible. Here are eight considerations you need to know when implementing a professionally managed A/R system, payment plan processing (3P system) instead of discounting.
1. Use credit history inquiries to determine the qualifications of your clients. A professionally managed A/R company will be able to supply you with a tool to inquire into your client’s credit history which in turn will allow you to make an informed decision. This is a very powerful cost effective tool that can be used wisely and securely and allows you to make an informed decision. You are no longer swinging in the dark about whether to extend a payment plan or not. Being educated on your clients financial situation is a powerful tool for your decision process and puts you ahead of your competition.
2. Payment plan vs. third party financing. If your client is approved for third party financing why would you not offer a payment plan instead and save that 5% to 15% the financing companies charge your practice? Why give the third party financing company the clients that have good credit and will pay. These clients are great candidates for a payment plan. Think of it this way, you would have to run more than 5% to 15% delinquency (what the third party financing companies charge your practice) for payment plans not to be a more cost effective payment method. Also, think of any negative exposure your practice may have received from third party financing companies that have not treated your clients properly. Our research has shown there is great disdain in the industry towards third party financing companies on how they work with the practice and handle the practice’s clients . Gain control of your money and your clients. Of course this assumes cash flow at your practice is not a problem. If cash flow is a problem than you will have to continue to use those third party financing companies to get your money upfront and be charged those high fees. Is that cost really worth it?
3. Increase compliance by offering prepaid services. Forward thinking practices will find clever ways to utilized the 3P system. One of those ways is to increase dental compliance for non-emergency services. By offering a three to four month payment plan for the procedure and scheduling the procedure three to four months in the future your dental compliance will increase. The entire bill or a majority of the procedure will be paid prior to the service. If the procedure has a cost overrun than your client will pay the balance or you can choose to set-up another payment plan. If you clearly state your policies there will never be any confusion from your clients. Imagine how having this system in place will greatly make your practice more efficient. By scheduling procedures in the future you are able to better staff for each day and you become more efficient by doing the same procedures grouped together.
4. Compete with those discount spay & neuter services by offering the prepaid option and scheduling the procedure on a future date. Another innovative way you can increase new client visits and retain your existing clients.
5. Advertise you offer payment plans. NO, you will not attract all the deadbeats. If you properly advertise payment plans available, “restrictions apply”, you will attract new clients to your practice and your existing clients will visit more often. Be very clear with your restrictions and qualifications when extending your client a payment plan. It is your time and expense, so do not be afraid to clearly state when and to whom you will offer a payment plan. You will discover by advertising you now offer payment plans you will attract new clients that will pay cash for their normal office visits but they chose your practice over your competition because you offer this alternative payment method when that unexpected large procedure arises. Your client may not have the funds available to pay for the entire procedure today but they can handle a payment plan with a large down payment xx monthly payments.
6. What are the parameters of your payment plans? Are you giving your client a written estimate prior to performing the procedure? How much of a down payment will you require before the procedure begins, 25%, 35%, 50%? What is the maximum length in months you are willing to extend a payment plan? Will these terms change based on the total dollar amount of the procedure? Do you have a policy based on your client’s credit history? Are payment plans only for existing clients? All questions that can easily be answered and make implementing the 3P system very easy for you, your staff and your clients.
7. Train your staff so they are comfortable discussing the payment options you offer and why and when a payment plan is offered. Where will this discussion take place, at the front desk or in an exam room? What are the steps your staff needs to understand from the initial consultation to estimate to how payment will be made? The system can be designed as cookie cutter or very flexible depending on your staff’s ability to properly handle the implementation.
8. Use a professional A/R company. They will be able to help you design and implement a system that will maximize your results, answer all these questions and help you implement a successful A/R, 3P system. Your practice and/or your staff does not have the tools or the time to implement an efficient, effective A/R system. Let the experts handle the billing and collecting of the money while you concentrate on the medical procedures.