Veterinary clients can't pay up front?

Veterinary clients can't pay up front?

If you're drowning in outstanding receivables, dive deeper into these alternatives with veterinary clients and avoid account overload in the future.
source-image
Oct 30, 2013

In the October issue of Veterinary Economics we helped Dr. Andrew Jereme—our theoretical practice owner—introduce pet insurance to his clients at Brighton Animal Hospital. Now he’s looking for another payment alternative for clients so they can afford veterinary care.

You see many of his clients don’t usually pay on the same day of their appointments. Instead, the practice sends them a statement at the end of the month. The hospital team started this system years ago when the practice was smaller and they did a lot of ambulatory work. Clients liked it and the team just never got out of the habit.

The problem

Eight years ago, Brighton Animal Hospital had $25,000 to $30,000 in accounts receivable at any given time. Although they had some write-offs here and there, the losses were never a significant problem and carrying the accounts allowed pet owners to provide excellent care they otherwise couldn’t afford.

It's a different world now and at the end of last month, the practice has a whopping $248,665 in outstanding receivables! The 2007 recession hit the community hard and more clients took advantage of this extended payment alternative. Now they’re taking more and more time to pay their bills. To top it off, as the practice has grown, Dr. Jereme doesn’t know all the clients as well as he used to and some pet owners will probably never repay their debts.

The first step he takes is to review the age of the accounts. To some extent it doesn’t matter what the total accounts receivable amount is, what matters is how current the accounts are and whether clients are making payments. However, as the dollar amount of accounts receivable grows, it is inevitable that the amount of old accounts grows too. This information is available in his practice information management system (PIMS) software.

At Brighton Animal Hospital, 27 percent of the accounts receivable amounts are more than 90 days old and another 15 percent are between 60 to 89 days old. The total amount of accounts receivable and the percentage of old accounts have grown steadily over the last two years.

The solution

It’s time for Dr. Jereme to get these accounts under control. Essentially all of the accounts are more than 90 days past due. If he doesn’t think the client will ever pay the invoice, then he should send the account to collections and write it off in the PIMS. Writing off these accounts through the invoicing software gives the practice cleaner reports to work from.

It’s also important to keep a list of the clients sent to collections and flag their accounts in the PIMS so the practice doesn't grant credit to them again. It’s OK for Dr. Jereme to make the occasional exception about sending the more than 90 day accounts to collections if he genuinely thinks they’ll pay or there are other extenuating circumstances, but he needs to careful he doesn’t make exceptions for all of them!

Next, Dr. Jereme must focus on collecting from the remaining clients. Phone calls, though less pleasant to make, are often more effective than letters because they put people on the spot. They may also identify the client’s financial problems as well as hospital practice problems. Phone calls should start early in the process, but don’t just let anyone pick up the phone.

Choosing the right team member is crucial for this task—you need to train this person and make sure he or she is neither too soft in the approach (ineffective!) nor too harsh (may violate client’s legal rights and invite a lawsuit). Dr. Jereme decides to not just focus on contacting the old accounts—he’ll also attempt to collect earlier from the newer accounts so they don’t become more of a problem. He’ll continue to send clients to collections if their efforts aren’t paying off.

And finally, he'll investigate third-party payment alternatives for future credit requests and train the staff effectively on how to talk to clients about this option. This way, his practice will never again be a personal piggy bank for clients in the future.

Hot topics on dvm360

Reality TV and the veterinarian: Discussing mainstream dog training advice with clients

Your clients may be getting behavior advice from cable TV. Get your opinion in the mix.

Vetcetera: The complex topic of canine fear-related aggression

A guided tour of resources for addressing this popular and complicated subject, featuring advice from Dr. John Ciribassi.

Blog: Election results pose obstacles for veterinary prescription law

Flip in U.S. Senate's majority may slow progress of Fairness to Pet Owners Act.

The war between shelters, veterinarians needs to end

Despite practitioners’ legitimate gripes, they’re hurting themselves.

7 steps to a better relationship between veterinarians and rescue groups

A DVM in the city shares his advice to veterinary practices for working with rescues.