Cash Flow Tips Dental Practices

According to one study conducted by U.S. Bank, a massive 82% of all businesses that ended up failing said that cash flow issues were a major contributor to that event. Although there are various reasons companies encounter cash flow problems, one of the biggest is that the business owner ignores their bookkeeping.

Dental practices have their own unique challenges. Therefore, if you really want to take control over the cash flow for your practice, there are a few key things you'll need to follow.

1. Be proactive.

Perhaps the most critical thing to understand about dental practice cash flow is that the dynamic has changed significantly over the last few years.

More and more, insurance companies are shifting costs to consumers — a burden that they may not be ready to handle. According to one recent study, about 10% of families in the United States have a medical bill they can't afford to pay at all. A further 25% currently have some type of outstanding medical bill. It's an unfortunate situation for all involved, but it requires medical practices to be especially proactive about how they're collecting for services rendered.

2. Verify Insurance Status Before Offering Services

A dental provider should always be verifying the insurance status of a patient before offering services of any kind. If an emergency situation were to come up, you definitely have a duty to do whatever is in your power to help someone out. But at the same time, that doesn’t mean that you can’t verify the insurance status for every patient that walks through the door for some type of routine procedure.

Thanks to automation, this process is far easier than it has been in the past. You can have someone provide their insurance information in a matter of moments, allow the computer to verify it against what you already have on file just as quickly, and proceed with the task at hand. That way, you know immediately whether or not you’re going to get paid for what you’re doing – and how much that payment will be.

3. Request Payment at Time of Service

Along the same lines, you’ll also want to train your staff to request payment at the time of service whenever possible. Remember that cash flow issues don’t necessarily come about because patients won’t pay – it’s because they haven’t yet paid and that money is suddenly in flux. Therefore, if people are able to pay their bills on the date of their appointment, they should absolutely be encouraged to do so. Not only that, but you could offer some type of incentive program to help move things along – like some type of savings plan where people will be charged less if they pay up-front and in cash.

4. Offer a Range of Payment Options

In terms of cash flow, a way to mitigate risk involves getting as much money from patients at the time of their visit as you can. To get to this point, you need to offer a wide range of different payment options. People can always pay with cash and checks, but you should also offer the option for credit cards, digital services like PayPal or Venmo and more.

5. Create an Efficient Checkout Process

Making the checkout process as efficient as possible is also a great way to get to this point. Train your employees to take someone's copay when they check-in so that they don't have to wait after their appointment. Make sure that they're informing patients that a statement will be coming with additional charges and outline any that their insurance policy might not cover. The more efficient you can make this process, the more likely it is that you'll be able to collect payment while someone is still in your office. At the very least, it will significantly reduce the amount of time you're waiting on unpaid bills.

6. Bill for Missed Appointments

Depending on the type of practice you're running, you may also consider instituting a policy to bill patients for appointments that they miss. A missed appointment is so much more than just a minor inconvenience for doctors and staff — it's literally taking up time that could have been used to provide care to another patient. Therefore, it may be a good idea to keep a credit card on file and let people know that if they don't cancel an appointment they can't keep ahead of time, they will be charged a flat fee. Usually, it's recommended to tell patients that they need to cancel at least 24 hours in advance.

7. Pay Suppliers on the Due Date

Another step that medical practices can take to improve cash flow involves paying their suppliers on the due date. Sure, we'd all like to be paid ahead of time — but there is a due date on an invoice for a reason. Especially if you're having a hard time managing funds, pay vendors and suppliers on the due date so that you can use that money for more important matters in the meantime.

8. Reduce Inventory

You could also take steps to reduce your supply inventory as much as possible. Especially as your practice continues to age, there will come a time when you know what you need and what you don’t. This will likely coincide with a period where you’re gathering more information about your patients themselves. Therefore, strategically reduce your inventory so that you’re not paying for anything more than you actually need.

9. Set Base and Target Balances

Setting a base balance and a target balance are also important steps to take. A base balance is a pre-determined balance in your practice's operating account that will allow you to see fluctuations relative to that amount. A target balance can be a useful tool for identifying the progress you're making toward certain income-related goals.

10. Use the Right Approach

Cash flow management for dental practices has always been tricky — but it is absolutely possible to be successful with the right approach. By making tips like those outlined above a normal part of your operations, you'll be able to enjoy all the benefits of this process with as few of the potential downsides as possible.

Gulf Coast Accounting & Tax Services can help you manage your cash flow and much more! Contact us when you need assistance.

Blog

10 Cash Flow Tips Dental Practices Need to Follow