Collect Now, Not Later
One of the biggest challenges facing today’s dentist is collecting money for services rendered. This process should be simple. The dentist performs dental treatment for a fair and reasonable fee, and the patient pays. Just like at the grocery store, right? Wrong!
Unfortunately, in too many instances, the patient is dismissed without ever paying for their dental treatment. Instead, dental claims are filed with insurance companies (93 percent of dentist are “in-network” in some form of dental plan), and monthly statements are mailed to the patient at an average cost to the business of $5–$7 (labor, statement and personnel cost) per statement, per month. The results? The dentist and business have to wait on their money, ultimately resulting in diminished cash flow, “outstanding” receivables and poor accounts-receivable ratios. During the interim, employees, vendors, landlords and other debt service is paid out of the owner’s pocket. In other words, the owner has to bankroll the business and provide the funds while waiting on their money. This is no way to do business. In fact, the “we will bill you” mentality is a recipe for disaster. The goal should be to collect all funds due at the time of sale or in advance of services rendered.
A consolidation of multiple surveys, conducted by Aldridge & Associates, LLC of dental offices across the United States revealed the most common reasons that patients fail to pay after they have received dental treatment. The results are as follows:
- The front desk personnel doesn’t ask for payment, or they are timid and uncomfortable asking for money (especially in amounts greater than $200).
- The front desk employee has no standard script or system in place to collect payment.
- The employee pre-judges a patient’s ability to pay.
- There is a lack of training and role-playing to create value in dental service.
- There are poor handoffs from dental auxiliaries or dentist to the front desk. (The patient should be informed of the services completed while creating value before escorting the patient to the front desk.)
- There is a lack of rapport and relationship between the patient and dental team. (If the patient values their relationship with the dental employees, they will pay.)
- There is a lack of a clearly written financial policy (with all payment options presented in advance of treatment) that is read and signed by the patient.
With exceptional personnel and superb training, every dental office should be collecting at least 98 percent of adjusted production (after insurance adjustments, not write-offs — there is a difference). If not, the business needs to identify the cause and take action to correct the deficiency. In fact, with excellent systems, collections can be as high as 105 percent.
How? Pre-payment and third-party financing. What a wonderful way to operate a business! Chasing money is a losing proposition especially when you have no collateral (you can’t take the denture, implant or crown back from the patient) and sending patients to collection will never build a business. I suspect some readers will take exception noting that their patient base can’t afford to pay at the time of service or in advance. If this is the case, it might be better to discover this hardship before you decide to treat the patient. Remember, you are running a business, and every business has a right to make a profit. That is, unless it is a nonprofit business. The choice is yours.
Isn’t it time to get your money off of the books and into the bank? Maintaining an accounts-receivable ratio of less than 1:1 (total accounts receivables are less than one-month average production) and outstanding receivables less than 30–60 days are critical for the financial health of your business. I don’t know any employee or vendor who doesn’t expect to get paid when due, and neither should you.