When Customer Leaves Without a Payment
The best practice in controlling accounts receivable is not to have them, but we both know that that is rarely possible. Managing accounts receivable starts with front staff. Some clinics, especially urgent care and emergency hospitals require a minimum deposit at the check-in, ask “how are you going to pay today”, and require customers to sign the estimates, etc.
Why is managing to limit accounts receivable so important? Statistics show that once the customer leaves without paying after services have been rendered that there is only a fifty percent chance you will get paid. And, after ninety days, the possibility of collecting is tiny. As veterinary consultants, we recommend adding a letter or email campaign (preferably both) to the task of a lead CSR or office manager, depending on the size of the practice. They should send an invoice right away if the customer leaves without payment. Accounts receivables should be reviewed on a monthly basis at a minimum. We are fans of promoting a regular and consistent letter campaign. First, a ‘thank you letter’ is sent if payment was made in a previous month and there is still an outstanding balance. If there was a payment made before, but they stopped making regular payments, a ‘no payment’ letter is sent. This letter will contain the information about the last time payment was made. If there was never a payment made a ‘no payment’ letter is sent, but the language about the last payment is removed. A ‘final notice’ is sent if a ‘no payment’ letter was sent in the prior month and there was no activity on the account. Here is the flow in practice:
Mr. Johnson left paying $100 on his $1,000 bill on March 25th. His invoice was sent the very next day, on March 26th. (you can have this process as part of the opening steps for the receptionist – check if any new A/R occurred the previous day). Monthly statements are sent on the 7th of every month. On April 7th, the client will receive a ‘thank you’ letter because he did make a payment. If the customer doesn’t make another payment on May 7th, the client will receive a ‘no payment’ letter. If there is a partial payment, he will receive a ‘thank you’ letter again. If there is no payment, on June 7th, he gets a final notice. On July 7th, he is sent to collections, and the account is written off. If the collection agency is successful, they will pay you a fraction of the outstanding balance.
We always advise that you check with the collection agency or lawyer when it comes to late fees and interest, as well as understanding your rights as they pertain to collections. Managing accounts receivable is a lot of work. But you might be able to utilize your software, to create templates where all the information will be prefilled, charges added automatically. Automating the process helps reduce the workload. This means that all that the CSR would do is to review, print letters on monthly basis, and send them off by email, snail mail, or both.
The industry standard says that a healthy clinic’s total accounts receivable should be at most 1.5% of your monthly revenue. Once you reach 3%, it is alarming, and all hands-on deck approach should be implemented where all staff members come to brainstorm on what is wrong and how the internal process can be improved.
If you utilize payments via email and text through gravity payments or PayJunction, that might be one of the things to implement to streamline the process.
Action plan: As veterinary consultants, we suggest finding a collection agency first to learn what is allowed and what is not in your state. Then, implement and modify letters as needed, find out how much you can automate with the software you have, and then find a team member who can implement it. Implementing and consistently following a collection campaign, will help control the amount of your accounts receivable you carry, help reduce stress, and reduce amounts uncollectable.