It was a perfect plan. A dentist in a small California community had planned his fast-growing practice optimally. He found an ideal location, hired two talented technicians and a front office person with 20 years experience, and utilized his local ties to generate traffic from the day he opened.

Within three years, his practice included several hundred patients, owing both to the quality of his work and his family name. But by the end of that third year, he anguished. He stressed. He lost sleep.

He suffered over numbers that told a story of fantastic billables but a loss in actual collected revenues. He experienced the same plunging feeling as 93 percent of America's dentists: he missed income and profitability targets. When he needed more equipment and supplies, he found he didn’t have the cash to pay. He borrowed from his savings and took out a small line of credit to insure he could pay his bills and keep the practice growing.

How could that happen to a thriving business that grew by nearly 100 percent in billables in each of its first three years? How could that happen to a dentist who stretched himself to the bone to maintain strong customer satisfaction?

The answer: poor collection practices. For all the front office person's skills, she was not well trained in the deceptively challenging area of collections. The dentist added to the problem by giving patients the option of paying at time of service or sending them a bill. After all, he was in a small community. He did not want to acquire a reputation as a money-first practitioner in a place where word-of-mouth raced through town. He figured that for decades, doctors have simply sent bills to patients – could times really have changed that much? Changing times or not, the bottom line was that he couldn’t pay his own bills. Something needed to change.

Collections are the financial backbone of any business. Without adequate collections, a practice will suffer from inconsistent cash flow. If bills exceed available cash, then we run into negative cash flow situations that require us to turn to outside sources to keep the doors open, and it’s a slippery slope to closing or selling the practice from there.

We can run two or three appointments an hour for nine hours a day out of all exam rooms. We can generate gross revenues that raise our accountant’s eyebrows with pleasant surprise. However, if we don’t collect on a timely basis from the patients, we suffer. Ultimately, our patients will suffer as well.

If you’re in this position, you are not alone: Statistical data indicate that 60 percent of all payments overdue by 120 days or more will never be collected! This means that if you don’t collect soon, it doesn’t just mean you don’t get the money today, but often it means that you never get the money. Unfortunately, more dentists find themselves in this position than not. Either we haven’t collected from patients at time of service with a smile, or we’ve handled patient billings like most of America’s manufacturers and service organizations – sending invoices with “Net 30-day” payment terms.

People spend money to alleviate pain much more often than they do for other things. This means that if a patient needs a filling, he will gladly pay to have the pain eliminated. But what happens two weeks after the procedure when he gets your bill in the mail? He’s not in pain any longer, he has other expenses. While he knows that he should pay the bill, he sets it aside for “later.” Most of us have a pile of things we’ll do “later.” Is this where your bill – your cash – should reside? Often, if the patient doesn’t need more care or has decided that what he or she received is adequate, we’re forgotten.

Turn It Around: Collect At Time Of Service
If collection is a problem in your practice, here is a highly effective method for drastically improving collections:

1. Take credit cards if you don’t already – if someone doesn’t pay their bills or wants to creatively finance things, it’s not your problem.

2. Collect at the front desk before the patient ever sits in an exam chair. No kidding. This is one of those things that sounds really uncomfortable, but is not nearly as bad as you think. Plus, it’s way more uncomfortable to try to collect from patients who don’t pay their bills. Or consider how comfortable it is to stress over running low on cash at the end of the month. After all, they need to pay anyway, right? Have them do it before you provide treatment. Experience shows that patients are actually more appreciative of service if they have paid in advance. If this is just too big a leap for you, then collect before the patient leaves the office. In either case, give them a 2-3% discount for paying during their visit.

Here’s why this ends up being better not only for you and your practice in the short-term, but in the long run as well:

1. Patients will be more willing to pay than you think. They will also be more likely to come back for follow-up service, because they will not owe anything from past-due bills. Your patients’ teeth will be better maintained and they will be happier with your service.

2. You will give patients no cause or reason to resent you from the string of collection letters and phone calls that you will be forced to give them if they have a long-lasting debt to you. How likely do you think a patient is to come back if they are embarrassed about paying even one bill late? Again, have them pay during their visit and they will not hesitate to come back.

3. Some patients are like credit card consumers. They will justify their bad payment behavior for lingering debts by blaming the provider; in this case, you. A lot of bad word-of-mouth arises from rumors about your practice that are simply untrue — but who among potential future customers knows that?

4. You guarantee regular daily cash flow for the practice, which eases your financial burden as well—taking that stress off your shoulders and enabling you to focus primarily on providing the highest quality of clinical dental services.

How to Collect
Here are a few simple practices for collecting at the time of service and making the experience pleasant for your patients:

1. Hire a great front office person. The front office person is the hub of your practice. She or he sets appointments and contacts patients, distributes helpful literature or products, collects payments, deals with insurance, runs credit cards, manages the practice’s bills and stays on top of overdue payments. The hiring of a good, devoted and detail-oriented front office person is as important to your practice as acquiring an office and being open for business. If you have a staff person who isn’t willing to ask for payment up front, recognize that you are choosing to pay someone to lose money for you. I know how hard this can be to deal with, but honestly, if someone isn’t willing to do what is needed to make your practice successful, it may be time for them to move on.

2. Maintain credit cards “on file” (This can be slightly involved, so I’ll discuss it further in a future article)

3. Create clear payment guidelines, print them out, and give them to first-visit patients. Also post them outside the receptionist’s window, in plain view.

4. If a treatment takes multiple visits, collect 50% at the time of the first visit, and all final fees before completing the treatment. Make this policy clear to your patients in your payment guidelines. Give patients a discount for paying 100% up front.

5. Offer patients the traditional “freebies” of any dental practice — new toothbrushes, dental floss and sampler tubes of toothpaste — as they leave the office. Also give them a handout of tips on caring for their teeth. That way, they feel they have received something from you in addition to the treatment. They are likely to tell at least one friend about the quality of your service, and you’ll acquire a new patient.

What about the dentist I mentioned before? He made the switch to collecting at the time of service one year ago. His fourth-year revenues grew by 25% — a nice, steady number for a small-community practice after three stratospheric years of seizing the local market — but his profitability increased by 70%. And that’s after paying back the bank and his savings.

I encourage you to take a look at your own practice. Are collections what they should be? If not, ask yourself what you will do to change this. Knowledge is great, but action is where results come from. What is your next step?

Author's Bio: 

Al Lipper is a master business coach, university instructor and dental business consultant. He is CEO of Dental Success Consulting.