Five ways to improve cash flow so your veterinary practice stays out of the red.
Cash flow management is vital to small business success. And just like ignoring your household earnings, poor cash flow in your veterinary practice can mean living from deposit-to-deposit and always trying to catch-up to meet expenses.
Slow and non-paying patients are often a big reason why. There are many things you can do to help keep cash flowing in a veterinary practice. Here are five of them:
Analyze your cash flow statement. Vets often prefer to delegate cash management activities to others so they can focus on patient care. But it’s still important they know where they stand financially at all times. Having enough cash on hand to pay the bills requires estimating income and expenses over a period of time and planning how to deal with any expected shortfall. You’ll be more likely to pre-empt problems if you can accurately predict cash flow for the following three months.
Define payment and credit policies. It can be easy to forget that credit is a courtesy and not a requirement of doing business. It’s important to establish clear payment and credit policies and communicate them upfront to patients. You must also enforce these policies consistently, reminding patients sooner rather than later if a bill is past due. If patients see that you are lax in your collection efforts, some will stretch your patience – and your cash flow – as long as you allow it. Clearly communicating your expectations can help avoid difficult collection situations.
Use technology to your advantage. At many veterinary practices, money is coming in, just not fast enough. In some cases, the practice itself is partly to blame. You can help speed the collection process by automating your invoicing and payments. This can eliminate lag time and increase your security.
When was the last time you had a merchant services check-up? Advances in the payment processing industry have made speeding up cash flow easier with next day funding. Most clients prefer to pay with plastic, so make sure they have the ability to make payments on your website as soon as they receive a bill. A perk to this mode of payment is the accompanying reporting tools offered for your convenience, which makes balancing and reconciling your receivables easier. Subtle changes in how you process plastics can save you money and help control the fees you are being charged.
Enhance your payment process. You can improve your cash flow even more by revamping your payment process so you request payment authorization for the amount the customer will be responsible for right at the point-of-care. An updated payment process may enable your practice to eliminate backend billing, as well as the confusion it can create among patients who aren’t sure if or when to pay a bill. This not only has the potential to improve collection rates, it can also reduce an office’s administrative workload. Extending credit to your customers is a strategic decision to increase billings while recognizing that some patients do not have the capacity to fully pay at the time of their treatment. However, not all patients should be extended credit if you expect your default percentage to be high. Developing and adhering to a financing policy allows for longer term repayment will help make your treatments affordable and build goodwill with your clients. Risk parameters should be built around the stability and creditworthiness of the client. One way to gauge the risk of a patient is pull credit reports on a client with long term repayment needs. A credit grading system (such as ZACC: getzacc.com) is a tool that can help with patient financing.
Keep your banker up to date. Your bank can help you more quickly if you’ve kept them apprised of your financial situations and challenges. For example, a line of credit can help even out cash flow when your practice experiences peaks and valleys in payment. In some cases, you might be better served to restructure an existing loan or consolidate debts to reduce current payments. The best time to talk to your banker, of course, is before cash flow begins to slow. The more your banker knows you, the better able he or she will be able to recommend solutions that keep your practice running strong.