{"id":22602,"date":"2022-10-01T00:00:45","date_gmt":"2022-10-01T00:00:45","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=22602"},"modified":"2022-11-01T17:02:48","modified_gmt":"2022-11-01T17:02:48","slug":"credit-past-due-take-charge-1022","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/credit-past-due-take-charge-1022\/","title":{"rendered":"When Clients Fail to Pay"},"content":{"rendered":"

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.<\/p>\n

Even though many hospital reception desks post a sign stating, \u201cAll accounts are due in full at the time of service,\u201d some practices still extend credit to clients. With the availability of third-party veterinary health care financing platforms, most companion animal practices don\u2019t 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.<\/p>\n

If you haven\u2019t reviewed the issue recently, take the time now.<\/p>\n

How Much and How Old?<\/strong><\/h3>\n

First, let\u2019s define accounts receivable, or A\/R. It\u2019s 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\u2019s not typically considered A\/R.<\/p>\n

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\u2019t have. The careful use of credit can benefit more pets and help grow the practice.<\/p>\n

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.<\/p>\n

Reviewing the aging is important. A high amount of \u201ccurrent\u201d accounts receivable is much less worrisome than anything more than 90 days old. The older the account, the less likely a client will pay.<\/p>\n

I recommend sending to a collection agency everyone with whom who\u2019ve had no luck. Occasionally, practices won\u2019t 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.<\/p>\n

Some practices treat certain past-due cases as a community giveback and don\u2019t send the clients to collections. Again, that\u2019s fine because a benefit of being a practice owner is the ability to be charitable. Make sure, however, to track your hospital\u2019s charitable work and understand how it affects your profitability.<\/p>\n

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\u2019t keep looking at them every time you review your receivables. Still, keep a list of them outside of your PIMS.<\/p>\n

Decisions, Decisions<\/strong><\/h3>\n

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?<\/p>\n

Most practices don\u2019t offer credit to new clients or pet owners who\u2019ve had problems paying. Instead, they allow only clients with a good credit history and a good reason for needing credit now. The goal isn\u2019t to move clients away from paying by cash, check or credit card, but to make in-house credit an option when alternatives aren\u2019t possible and when you think the client will pay within a reasonable period.<\/p>\n

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?<\/p>\n

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?<\/p>\n