In today’s digitally driven economy, clients and veterinary hospitals prefer the convenience of credit cards, debit cards and virtual payments such as Apple Pay and Google Pay over cash and checks. Veterinary practices that accept card payments at the time of service eliminate or greatly reduce their accounts receivables and the time and expense that go into managing collections.
While popular, credit cards come with inherent hassles. The most obvious for businesses are merchant fees, which banks charge for processing payments. Depending on a client’s particular credit card, the fees sometimes can exceed 5% of the total invoice. Cards offering the most user perks tend to have the highest processing fees.
Merchant processing fees typically cost veterinary hospitals from 1.9% to 3% of the invoice. If your merchant fees are higher or have risen over the past few years, it’s time to check with other processors. Expect to provide two months of statements to get an accurate comparison.
Even if your fees remained steady, getting a competitive quote never hurts.
Those Pesky Chargebacks
A common frustration for businesses is credit card chargebacks. They occur when a client dissatisfied with a product, service or medical outcome bypasses you and contacts the card issuer to request a refund. Chargebacks also occur after clerical errors, such as accidentally charging twice for a purchase. Fraudulent card use creates another chargeback opportunity, especially when a client isn’t bonded to the veterinary practice.
While you can’t eliminate chargebacks, you can minimize their frequency by doing the following:
- Communicate well and repeatedly with clients. Remind them of your appointment cancellation policy and which products can be returned. This advice can prevent misunderstandings.
- Make sure your hospital’s trade name appears correctly on credit card statements. For example, a processor might know your business as DVM Enterprises, but if your signage reads “Countryside Animal Hospital,” clients might dispute an unrecognizable charge.
- Be accessible. Respond promptly and cordially to all client questions and complaints before the pet owner is annoyed enough to contact the credit card company. For example, a client who doesn’t understand how to administer a medication could turn the problem into a chargeback request if you don’t address the issue quickly.
- Review invoices to ensure purchased items have clear descriptions. Avoid using the default descriptions within your practice management information system. Use words a fifth-grader would understand, and shun acronyms unless they are widely known outside the veterinary profession. For example, OHE makes perfect sense to you, but a client might translate it as a surcharge for the use of overhead equipment.
Some credit card processors have responded to complaints about merchant fees by promoting their elimination. How? By passing the costs onto your clients. Over the past four years, I’ve seen an uptick in processors suggesting that option. They point out the money a practice would save by having clients pay the fees, which can total $100,000 a year or more at larger veterinary hospitals.
Should you do that? It depends. Consumers are accustomed to businesses absorbing credit card fees and traditionally don’t see them on invoices. They might readily agree to cover the processing charge for Girl Scout cookies but are less likely to welcome an add-on fee on a veterinary bill.
Pet owners have care options, so rather than assessing a credit card surcharge, I recommend increasing your fees slightly to cover the cost of doing business.
Paying With Cash
Given the wide use of credit cards, why do some veterinary practices encourage clients to pay by cash or personal check? They do it to avoid merchant processing fees. (A less honest reason is to reduce tax liability by not claiming cash payments.)
Cash and checks were the standard payment methods 50 years ago, but before you suggest the option to clients, look at the cash in your wallet. Do you know where your checkbook is? Do you even have one? Requesting payment by cash or check can be impractical at best, and it creates potential risks and more work for your team.
Cash transactions are harder to track than credit card payments, so a dishonest employee can more easily pilfer money.
Accepting cash and checks requires additional reconciliation and regular trips to the bank for deposits. Counting, sorting and depositing cash can be time-consuming, especially for small businesses with limited resources. It also increases the risk of human error, leading to inaccuracies in financial reporting.
Relying heavily on cash transactions poses security risks. The chances of a burglary or robbery increase if your practice is known to have or suspected of having large sums on hand.
Accepting Checks
The biggest challenge with checks is when they’re written on a closed account or returned by a bank due to insufficient funds in the account. Returned checks cost a practice the original payment and any bank fee. At this point, you need to contact the client and request full payment of the original balance and the fee. (Don’t accept a replacement check.)
Passing the bank fee onto the customer makes the practice whole, but what about your team’s time? I remember when chasing down payments for bounced checks sometimes took days or months.
You can mitigate the risks of accepting personal checks by verifying the payer’s identity and using check-verification services.
In the end, credit cards offer efficiency, security and traceability. If you implement a surcharge to recover all or a portion of the processing fees, educate your staff, including the doctors, about how to explain the charge to clients. The last thing you need is for your employees to struggle to respond to payment questions.
DIGITAL WALLETS
Accepting payment through Apple Pay and Google Pay requires a card reader enabled for near-field communication (NFC) and a PIMS system that supports it. For most businesses, the cost of accepting digital wallet payments is the same as with other credit card transactions.