This is the way we segregate and talk about delinquencies in business and that’s fine. The issue I have with orthodontists talking 30, 60, 90 day delinquency is that it seems our mindset and actions have molded to fit this age old way of doing things. What I mean is that we tend to believe that the times we should take action are the same as the accounting principles represented by 30, 60 and 90 day reports. In reality, we should be much more proactive, engaged and assertive when it comes to dealing with delinquent accounts. We should have a real world, pragmatic understanding of what it means when a customer is 1 day late, one week late, one month late, two months late… and know what to do to increase the chances that we can help the customer continue with the treatment they desire.
In today’s world it is no longer the responsibility of the consumer to remember to pay us – it is necessary for us as small business owners to make sure that our clients pay us. Rail against this all you like and pine for the good ole days of self-reliance and personal responsibility if you must, as long as you eventually realize the truth of this statement. You can be right or you can get paid but it’s difficult to do both at the same time. To that end, the overriding, foregone conclusion that colors this entire article is that everyone in your practice is on autodraft. This is the foundation upon which you can grow and it’s very difficult if not impossible to do so without autodraft as a baseline. When you set someone up on autodraft, it is preferable to draft their checking account for lots of reasons but the main one being that the threat of an NSF from the bank makes it more likely you’ll get paid. Of course many people (like me) prefer to use a credit card and get points so we accept this readily. For those customers who don’t have a checking account or credit card we recommend prepaid cards as this works well. Whenever possible you want to get multiple forms of payment. And that is almost always possible. All this notwithstanding let’s not forget that the goal is to get braces on today so don’t let any of this interfere with that.
A couple things to think about when it comes to credit cards and transaction fees. Some orthodontic practice management software allow you to draft directly through them (we use Orthotrac – it does this well) and, most importantly, have the results posted to the patients chart automatically (this saves time and money). You want to shoot for a credit card fee of less than 2 percent and a transaction fee of less than a dime per transaction. There are reasons for doing better or worse but make sure they are good reasons. Another thing to remember is that your best rate for credit cards is based on you using the magnetic stripe readers – if you key the credit cards in that costs you, at minimum, an extra one percent in transaction fees. The readers are generally free so there is no reason to key in the numbers unless you just like giving up thousands of dollars a year.
Now let’s think about things from a customer’s point of view. When we do we will realize that our household has a relatively fixed budget and more than one bill coming in each month. If there is a month where the budget is short, who gets paid? The answer is simple – the squeaky wheel gets the grease (and those who have autodraft on my checking account instead of my credit card). For this reason it is vital to be on top of you delinquencies and call these patients the day they are late. Most will pay you or make a plan to pay you as long as they are not too far behind. Most people want to pay you and want to continue with treatment so make sure you treat everyone like most people instead of treating anyone who gets behind like a good-for-nothing-dead-beat. Make sure your staff understands this clearly. Staying on top of things will greatly increase your collection ratio and, again, this will insure that over 95% of your patients pay you.
For the remaining 5% it is vital to decide if you want to be right or you want to get paid. Do you want to prove to people they are wrong and you are right and they should pay no matter what or cut their children off or do you want to figure out how to work it out with the 4% who are literally struggling while basically acknowledging the 1% of bad guys are pulling it over on you? Or would you rather insure that the 1%ers don’t get away with anything even though you know this will cost you tens to hundreds of thousands of dollars in the long run? Most orthodontic offices are so bound and determined to make sure the handful of bad people can’t pull the wool over their eyes that they run off hundreds of patients who would pay them as collateral damage. Don’t be that office. Don’t let your Office Manager be that OM. Don’t let your staff be that staff. If you decide you’d rather help the 99 percent and make money then there are some easy ways to accomplish this and bring people back from the edge in terms of making their payments. The first and most important is to insure you have open lines of communication with your patients. Be sure that you communicate openly on the front end that if anything happens –anything at all – you are there for them and want to help. You don’t have to be as overt as we were in our Welcome to Smiley Face piece but it doesn’t hurt. If you can get people to tell you what is going on and keep bringing their kids to the office then you can help them but you have to create an environment where people are comfortable doing so. If a family falls one month behind that’s bad but not insurmountable. We can make an agreement that they will pay a little extra for the next 3-4 months to catch up if that works for them. It usually does and they are grateful. Make sure you document what you agree to and follow up though! If a family falls 2 or more months behind then it is almost impossible for them to catch up. One way to help if it is the right time of year is to make a promise to catch up when their tax refund comes in. In this case we pretend they are current, the patient makes payments as normal and when tax time arrives they pay the months in arrears. One other way to help those who are more than two months behind catch up is to do a one time extension/rollover of the contract. Meaning that we take the months they are behind and add them to the end of the contract, thus making them current on their payments. Again customers really appreciate this, it shows we care (because we do) and it allows all of us to get what we want.
Now, seeing that you are orthodontists I’m sure the outliers are running through your mind and you want to talk about “this one time at band camp…” so let’s talk about that. Outliers are outliers. We don’t make policy for outliers, we deal with them as and when and if they arise. Here are a few outliers I’ve encountered and how I resolved them just for examples. I’m not saying I’m right or that I always do things this way these are just examples:
- Dad comes in and tells me he has lost his job so I need to take the braces off of his child. I respond, “Thanks so much for letting me know what is going on. That can’t have been easy for you and I’m sorry to hear it. How about I just finish treatment on your child, we suspend the account and you pay me when you get work and can?”. This has happened to me more than once and I look at it as 1) a great marketing opportunity, 2) proof that people feel comfortable telling me what is going on in their lives 3) a very easy chance to do the right thing with zero downside for me. How else would you look at this??
- Child or guardian or aunt or someone similar lets me know that the child’s parent has died from any number of causes. I respond to the adult, “I don’t know what to say. Just know that we will take care of the child’s orthodontic treatment and you will not see another bill. It’s not much but we want to do whatever we can to help. Please let us know how we can accommodate the child now or in the future”. This happens a fair amount – the longer you practice and the more volume you see the more it happens. To me there is only one thing to do but handle this outlier (and all outliers) as you see fit in the moment.
Outliers aside, the point of this article is to help you better understand the other end of your accounts receivable report and how best to serve your clients to help them get what they want so that you can get what you want. It’s simple but not easy. You must internalize the fact that whether or not someone pays you is not personal or anything against you. 99 percent of people want to pay you and it’s not a personal attack when they can’t or don’t. Let go of all those old stories you hang onto about the one time someone “screwed you” and your practice. Focus on helping the good people instead of trying to punish those you see as bad. You’ll make more money, feel better, sleep better and have more success I promise. Also remember that the child you are treating has zero control over the finances in the house where they live! The major part of the work I’m talking about is creating a mindset and office culture that allows for meaningful interaction among you, your team and patients/parents. Once you have that established you’re golden. Having spent several of my years in practice not doing a good job of this I can tell you it is not only expensive but painful.