I was chatting with a practice manager about how gut-wrenching it felt to keep sending invoices to clients who would just ignore the bills and ultimately not pay. It was particularly demoralizing for this veterinary practice, which offers excellent care and service and goes out of its way to accommodate pet owners.
Even though many hospital reception desks post a sign stating, “All accounts are due in full at the time of service,” some practices still extend credit to clients. With the availability of third-party veterinary health care financing platforms, most companion animal practices don’t have as much in accounts receivable as they used to, but the situation is different at large animal and mixed animal practices. In any case, the amounts owed can add up fast.
If you haven’t reviewed the issue recently, take the time now.
How Much and How Old?
First, let’s define accounts receivable, or A/R. It’s what clients owe you for previously provided products or services. Many practices manage A/R themselves, meaning they send statements and collect the payments, but others use a vendor. Regardless of who follows up, the hospital bears the risk of not being paid if the client defaults. Also, know that if you offer a third-party veterinary credit option and are guaranteed payment by the company, it’s not typically considered A/R.
I tell practices that prevention is always more effective and desirable than treatment. By that, I mean the best way to collect A/R accounts is to implement a well-thought-out system that includes policies on who can owe you for services and when. Deadbeat clients are a cost of doing business, but if you handle the situation correctly, allowing some clients to delay paying for services can bring in revenue and profits you otherwise wouldn’t have. The careful use of credit can benefit more pets and help grow the practice.
Now, look at your aging accounts receivable list. The report usually comes from your practice information management system and shows each person who owes you money, how much and since when. The aging breaks down the amounts owed into current (less than 30 days), 31 to 60 days, 61 to 90 days and over 90 days.
Reviewing the aging is important. A high amount of “current” accounts receivable is much less worrisome than anything more than 90 days old. The older the account, the less likely a client will pay.
I recommend sending to a collection agency everyone with whom who’ve had no luck. Occasionally, practices won’t send a client to collections because they might not have done well with a patient and are nervous about the ramifications. Such a decision is reasonable, but try to limit such A/R cases and learn from your mistakes.
Some practices treat certain past-due cases as a community giveback and don’t send the clients to collections. Again, that’s fine because a benefit of being a practice owner is the ability to be charitable. Make sure, however, to track your hospital’s charitable work and understand how it affects your profitability.
Meanwhile, keep working with the clients you think will pay, even though collecting from them might be slow. In your PIMS, write off the clients going to collections so that you don’t keep looking at them every time you review your receivables. Still, keep a list of them outside of your PIMS.
Decisions, Decisions
Next, review your A/R policies and system. Identify and plug the holes. For example, to whom do you grant credit? If you carry a lot of in-house A/R, consider moving some of it to an outside health care financing company. Use in-house financing only in limited cases. Define those cases. Do they involve emergency cases only, accounts over a specific dollar amount or long-term clients with a history of receiving credit?
Most practices don’t offer credit to new clients or pet owners who’ve had problems paying. Instead, they allow only clients with a good credit history and a good reason for needing credit now. The goal isn’t to move clients away from paying by cash, check or credit card, but to make in-house credit an option when alternatives aren’t possible and when you think the client will pay within a reasonable period.
Review the types of clients receiving credit and those not paying. What do they have in common? What do you need to do to close the loophole?
For example, one practice I know automatically billed euthanasia services instead of collecting for them at the time of service. The clinic owner thought that asking clients to return to the reception area and pay was emotionally challenging for them. Unfortunately, more than a few pet owners never paid. What could you do instead in these cases?
- Call the client in advance and collect payment.
- Collect payment at the clinic before the euthanasia.
- Collect payment in the exam room.
- Offer to bill long-term clients when the risk of non-payment seems low.
Details Matter
Something as simple as updating client contact information before they receive credit can save a lot of headaches. It’s easy today for a practice to know a client’s working cell phone number but have outdated information for everything else. Getting people to pay when you can’t find them is hard.
Therefore, ask all clients to whom you are granting credit to fill out a form listing residential contact information, such as an address, home phone, cell phone and email address, and their work information, like employer, office phone number and second email address. Don’t just gather the information blindly. You should verify it.
In addition, talk about your expectations. Don’t just say, “We’ll send you a statement at the end of the month.” Instead, cover verbally and in writing:
- Any required deposit.
- The expected cost of the services.
- When the money is due. If you permit installments, be clear about the due dates and how much.
- Any interest charges or fees.
- When you’ll take collection or legal action due to unpaid bills.
- Whether you’ll provide future services if a balance is outstanding.
Make the Call
If you aren’t getting paid, follow up now. Phone calls, though less pleasant to make, can’t be ignored as easily as letters. The team member making the call needs training. Also, the person must be willing to handle the task, be a good communicator, and be neither too soft (ineffective) nor too harsh (violating a client’s legal rights and inviting a lawsuit).
Make sure you understand your state laws on giving credit for services. For example, your practice might need to register with the state, and any
credit-related documents, such as a credit policy, application and promissory note, might require specific language. In addition, interest and service fees must meet state requirements.
Granting credit to pet owners can be a hassle but at the same time benefit the practice if done well. Remember that it is a client privilege, not a right. Stop offering the service if the time spent on credit tasks isn’t worth the payoff.
HOW TO VERIFY CLIENT CONTACT INFORMATION
- Review and make copies of at least two forms of client identification.
- Call the client’s home phone number and make sure it is in service.
- Verify the client’s employer (including self-employment) online and call the work phone number.
- Text the client’s cellphone and ask for a response.
- Consider running a credit report if the bill is significant.