A stressed-out client rushes in at the close of business with his daughter’s beloved horse in a bout of colic, crying daughter in tow. A few hours of fluids, hand-walking and observation later, everyone settles down, packs up and heads home—long after support staff have gone. In this and many other cases, collecting payment from clients at the time of service is not feasible.
It’s important to have a plan in place to keep your accounts current and your clients out of debt to the clinic, both for your bottom line and with your clients’ best interest in mind. From having a clear payment policy that’s communicated in writing to executing prompt and friendly-but-professional follow-up, debt collection is an art that your clinic must master.
Wilson Taliaferro, owner of Kalmia Consulting, a licensed collection agency in Monkton, Maryland that works with veterinarians, suggests developing a new-client contract for every client to sign. “This can be a simple one- or two-page document and includes things like name, address, phone number, how and when finance charges are assessed, how to dispute a bill or file a complaint,” he says. Many places include keeping credit-card information on file to charge off any balances after they reach 30 days old. “A 30-day window gives [the client] a chance to review the bill and have any questions answered before the charges are put on their card. Not only is this something that can help resolve payment issues, but it can screen out potential clients that had no intention of paying for your services.”
Just as you are asked to update your contact and billing information every time you visit your doctor’s office, ask your clients to update their files when they visit yours.
“It’s always better to try diplomacy before war. If you look at your collections efforts as an extension of your customer service and try to find ways to help people solve their problems, you’ll have more success. People don’t pay their bills for many reasons; financial hardship, lack of perceived value and lack of perceived consequences are the top three,” points out Taliaferro, who presented a session about debt collection at the American Association of Equine Practitioners Practice Management Seminar in 2012.
Collecting payment from clients in the latter two cases requires diligence and consistent communication, and it is largely a game of psychology. “People get so much junk mail. Think about what you’d open first: a postal-metered, white, business-sized envelope or a greeting-card envelope with a handwritten address and a goofy commemorative stamp? If your letters trying to resolve a past-due account aren’t even opened, then they do no good,” explains Taliaferro.
Personal touches and those that create intrigue will get your correspondence opened first. Taliaferro points to colored envelopes, different-shaped envelopes and hand-addressed envelopes. Paperclips, though, are the real winner: “If they can feel something in the envelope but can’t see it, it creates a sense of intrigue. If a letter about a past-due account has a paperclip on it, it also implies that there were other documents attached when it was in your office. This helps raise the question, ‘What were these other documents, and if I don’t have them, who does?’ ”
Wanting to know what else is in their client file and who else—conjuring images of a collection agency—has their hands on these documents can be motivation enough for a client to send payment. Hand-addressed envelopes and handwritten letters give the impression that someone is personally handling an account because it is overdue. Believing that an actual person—rather than just a software program—is paying attention to their activities is also a motivating factor for a client to send a payment.
“If you have a lot of nonpayment because of a lack of perceived value, maybe it’s not only the clients’ fault,” says Taliaferro. Tactics for boosting perceived value is a subject for another article altogether, but one easy way for you to do so is another psychological tool: the design of your invoice.
Taliaferro points out in his “Accounts Receivable: If you act like a bank, use their tools” AAEP PMS proceedings: “If the first thing a client sees when opening an invoice is a dollar amount, the invoice emphasizes how much the services cost, not what was actually done. ... If line-item charges display medical notes about that charge, invoices will not just be a bill but a reminder of the attention to detail and the quality of service provided.”
For late-paying clients in the financial hardship category, professional-looking correspondence is especially important, as they need to be reminded that, while you care about their horses, you run a business and need to be compensated, too. If you wish to offer discounts to clients in certain circumstances, develop a policy for them ahead of time and stick to the policy.
Good Cop-Bad Cop
Continue to send letters and invoices at the 30-, 45-, 60-, 75- and 90-day past-due points. After 90 days of attempting collection, your chances of collecting payment are slim. It’s time to call in the bad cop.
“A practice should never take an unfriendly approach. If you can’t be civil in discussing past-due accounts, hire someone who can,” Taliaferro says.
You want your clinic to be associated with a collection agency that has a good reputation. Taliaferro suggests you ask for references from other small-scale service business managers, such as veterinarians, accountants and lawyers. He also points to ACA International, the Association of Credit and Collection Professionals (www.acainternational.org), as a resource for finding a collection agency.
Don’t hesitate to submit these past-due accounts to collection on the continued hope of getting paid by the client. Yes, the collection agency is going to take a large chunk of the payment they manage to get from your client—as much as half—but receiving some of what’s owed to you is better than receiving nothing at all of what’s owed to you.
If you were to appoint a staff member to handle past-due accounts, be sure he brushes up on the federal Fair Debt Collection Practices Act. This law dictates what can and cannot be said and done during the collections process. (See “Fair is Fair,” right.)
Offering a payment plan option to clients is another way to go. (Taliaferro is not in favor of this practice as a rule, preferring instead to encourage credit-card use for clients who aren’t able to pay the full amount upfront.) Still, there are those clients who don’t use credit cards, and either third-party financing, such as CareCredit, or primary-payment-plan account-management services, such as PaymentBanc, are options.
“There is only one other business I know of where someone is willing to work with large animals at all hours of the night with no upfront written documentation and expects everyone to be happy afterward. That’s Santa. If you find yourself in a Santa-like situation frequently and can’t take payment at the time of service, look into a third-party payment company, such as CareCredit. It costs more than using credit cards but costs less than collection agencies or lawyers,” Taliaferro says. Many of these companies ensure you are paid upfront and take the risk themselves in collecting payment.
Third-party and account-management plans are convenient for you because they assess the client’s financial risk before extending the payment option, handle correspondence with late-paying and nonpaying clients, and require little extra staff time to manage. They’re convenient for your clients because they can make monthly payments, check their accounts online and accept treatment options you suggest without having an existing line of credit.
Major differences between third-party financing companies and account-management services are that third-party financiers pay you upfront and absorb the risk of nonpayment in their own company. Also, their credit checks are reflected on your clients’ credit statements—whereas account-management services forward payment to your bank account as they receive it, so your clinic absorbs the risk, and because the credit inquiry is processed as a healthcare inquiry, their credit checks do not appear on your clients’ credit statements.
Working with either type of company requires trust in that company’s collection policies. Your clients will view them as an extension of your clinic, so learn about the company’s customer-service and payment-collection tactics before signing on. Also inquire about account-management services’ track records, especially because your clinic is absorbing the financing risk.
Stay on top of your accounts-receivable game, and with a good strategy, you can help your clients’ payments stay current. When some become delinquent, as some inevitably will, use all of the tools available to you to bring them back to good standing.
Fair is Fair
The full text of the Fair Debt Collection Practices Act is on the Federal Trade Commission website, www.ftc.gov/os/statutes/fdcpa/fdcpact.shtm. Some of the guidelines set forth are common sense (e.g., you can’t curse at your client or threaten him with violence or other criminal actions). Other guidelines are worth pointing out:
* You may not call before 8 a.m. or after 9 p.m. in the client’s time zone.
* If your client has an attorney representing him in regard to the debt, you can only communicate with the attorney, unless the attorney isn’t responding to you.
* You can’t communicate with others about your client’s debt—only the client, his spouse, his attorney, a consumer-reporting agency, your attorney or a collection agency.
* You may not communicate with your client about his debt via postcard.
* In all communication, you must disclose that you are calling from XYZ Veterinary Service.
* You may not collect interest or fees not disclosed in an agreement with your client or not permitted by law.
* You may not deposit or threaten to deposit a postdated check before the date on the check.
Credit Card Fancy
Few businesses don’t accept credit cards, but that doesn’t make the expense of credit card processing any less. Over the past few years, mobile credit-card processing systems have come onto the scene, making accepting credit cards—even on the spot while you are on a farm call—more convenient and affordable. Square, PhoneSwipe and GoPayment are a few providers that small-scale businesses are talking about.
The mobile processing systems are easy to use: You set up a free account online with a provider; the provider sends a free device to plug into your smart phone or tablet computer; you download a free app onto your phone or computer; you swipe cards or enter the credit-card information manually; and your income is deposited into your bank account. Service charges occur on a per-transaction basis, and there’s no contract length.