Why is the veterinarian industry so afraid of accounts receivable (A/R)? Why is your accountant telling you not to carry A/R? One reason is they do not know about all the tools out there to help you have a successful A/R program. Another reason is practices have always tried to manage their receivables in-house when they do not have the experienced staff and the necessary tools or time to properly manage the traditional A/R system. Hence the negative connotation A/R has in the veterinarian industry and especially from the accountants that service this industry.
When is A/R not A/R
Traditional A/R is the mailing of invoices and waiting for the money to be mailed back. An A/R system that is designed around Payment Plan Processing (3P) is a much more efficient and effective system that increases payment compliance, customer loyalty and practice bonding. It requires your client to sign a payment plan agreement that includes all the terms, conditions and penalties and authorizes the automatic withdrawals from their account.
My research discovered veterinary costs have increased by 91% from 2007 to 2013, 40% to 56% of consumers are living paycheck to paycheck and 56% of consumers have credit ratings below the prime rate of 700. New client visits continue to decline. Therefore the veterinarian industry must look at alternatives to increase revenue, instead of raising prices.
Offering your clients an alternative payment method is the easiest most cost effective way to increase your sales with very little to no upfront expense to the practice. Payment plans are even more effective than wellness plans because you do not have to discount your services. As with wellness plans there are no complicated operational procedures to implement and you have full control of the terms, conditions and who receives a payment plan. Plus you do not need to discount your services by 10% to 50% as wellness plan do. Save that 10% to 50% and gain control of your hard earned money.
Every other industry carries accounts receivables
Other industries prosper with the traditional A/R system. The veterinarian industry can prosper even more with a 3P system. Other industry also survive even when they have to write-off a certain percentage of their A/R. The veterinarian industry can also survive with some write-offs.
Most practices are already losing 5% to 15% of their practice fees by using third party financing companies. Or you are losing 10% to 50% by offering wellness plans, maybe less if your clients do not use all the wellness plan services. Why not save that money, gain more control of your business and increase your revenue by giving your clients another payment alternative? A payment plan will help your clients maintain compliance and it will increase your revenue without discounting your services. You need to decide, what is better, discount your services or charge full price but allow for better payment terms?
Over 30 years experience
I have been in the payment processing industry for over 30 years. I have seen how successful a professionally managed A/R system can grow a company. Case in point, one of my clients came to me to help them solve a sales problem they were having. They were trying to sell a service that cost about $16,000 but they were having difficulty selling the service. By helping to implement a professional payment plan system their revenue grew from zero to $430,000 per month in recurring monthly payments in less than two years. This enabled them to offer more services and up sell their clients because the payments made the service affordable.
Let a professional manage your A/R
The 3P system should be handled by a professional. A professionally managed A/R is no different than why you have other business tasks processed by outside companies for example payroll, accounting and legal services. It is more efficient and saves you time and money to let the professionals perform these the tasks; especially when the security of your client’s financial information is a very important consideration.
You went to veterinary school so you could manage the care of your client’s pets. However, you were never taught how to run the business side of your practice; especially how to grow your practice when it becomes more and more difficult for your clients to pay in full for your services.
Listen to an expert
Listen to Marcus Lemonis explain to a business owner why he should relax his payment options to increase sales. The business owner is more interested in hiring more sales people instead of implementing an A/R system that does not require an investment.
Marcus Lemonis from CNBC The Profit