6 Solutions for Seamless Contract Management & Improved Accounts Payable
May 3, 2022
In dentistry, we are often focused on the means that keep money coming into our practice — for example, growing new patient numbers, partnering with insurance providers, and introducing cosmetic services. However, reevaluating how your money is paid out can be a huge game changer in balancing your profit and loss.
For this article, we spoke with Jeffrey Brush, our Vice President of Finance and Accounting. He has spent the last 15 years mastering the art of contract negotiation and streamlining the A/R and A/P processes for our 35 dental practice partners.. As we share his insight, consider how any small business owner can use these solutions to improve their systems and save money long term.
Solution #1: Organize Your Accounts
Most vendors typically fall into one of two categories – business essentials or nonessential services. Business essentials include basic utilities like water and electricity, internet, your PMS subscription, and all services that are necessary for running a modern dental practice.
We have found it’s in the nonessential services where most dentists overlook certain costs and contract terms. Luxury expenses like internet television, guest wi-fi, and coffee delivery services are not crucial to business, and can easily incur unwanted fees if you aren’t paying attention.
Please note—we are not recommending you cancel nonessential services that prove beneficial to patient care. Instead, create a system to monitor and audit each account to ensure the value is worth the cost.
The goal in organizing your accounts is to create a structured system that can be referenced at a glance during a monthly audit. We recommend creating an Excel spreadsheet that includes:
- Your vendor name
- Billing due date and cost
- Payment method
- Contract terms
- Login information for any online billing
Our team has designed a template spreadsheet for private practice owners. Use this as a guide to organize your vendors and accounts.
Once you can see these details in a list, it becomes easier to streamline the payment process by updating the credit card card on file or aligning payment dates to on-or-around the same time of the month. These small changes make it easier to monitor annual subscriptions and auto withdrawals so they don’t sneak up on you.
Solution #2: Audit Your Accounts Regularly
For some trusted vendors, a “regular” audit could mean two or four times per year, while newer vendors could stand to be reviewed every month. These intervals ensure the payments accurately match the terms agreed to in your contract. In addition, regularly auditing accounts gives you an opportunity to assess whether your practice is still fully satisfied with and utilizing the service to the level you first intended.
With any small business, billing errors are bound to happen. Auditing should include a cross-check of your organized accounts spreadsheet compared to your bank statement. During your audit, be aware of errors such as:
- Missed charges
- Duplicate charges
- Unrecognized charges
If you find a discrepancy, contact your provider right away for a correction or clarification. Noticing a missed charge early can save you from exorbitant late fees later. Additionally, being proactive in resolving missed payments is a show of good faith to your vendor.
Mistakes by your vendors should result in an apology and appropriate remedy. Repeated mistakes or unprofessional responses to mistakes are warning signs of a potentially poor future relationship. While loyalty to your vendor partners can benefit you in the long run, don’t be afraid to look elsewhere for a vendor you can trust if you see significant red flags.
Solution #3: Think Twice before Enrolling in Autopay
Autopay and annual enrollment options offer great convenience and ease to the customer, but failing to monitor their activity can be dangerous. Consider a service like Costco or Amazon whose once-a-year fees seem minimal for all the volume savings and perks a member receives. Of course, these big-box businesses want you to become a frequent shopper, but even if you forget your membership and only shop once a quarter, they benefit from lower marketing costs and minimal processing fees.
By design, vendors who offer autopay want you to enjoy the ease of not going online or calling in to make a payment. In turn, auto-payments ensure the vendor receives consistent, on time payments and can easily implement subtle price increases. We recommend a 6-month trial of traditional payments. During this time, you can determine if you trust the vendor and confirm that you actually use their services enough to justify the benefit to your practice.
Solution #4: Switch-up Your Payment Method
Paying every invoice with a credit card is quick and offers flexibility over your practice’s cash flow. However, be sure to pay attention to the cost of convenience. Many credit cards offer cash rebates or rewards points when your card is used, but they might end up costing your practice more money than you realize.
For example, if your credit card company issues you a 1% rebate at the end of each month but the service fee for using the credit card with a specific vendor is 3%, you’re actually paying more for convenience. For some, the 2% difference may be worth the cost compared to printing and mailing a check.
Many vendors will have a preferred payment method, especially small or local businesses. It’s important to clarify each vendor’s preferred payment method , and negotiate some convenience savings if you can pay regularly with a check that will subject them to less fees. Consider speaking with your more trusted vendors about setting up a direct ACH withdrawal, and if they would offer a discount for doing so. ACH withdrawals function the same as a direct bank transfer and incur zero fees for either party.
Solution #5: Pay Attention to Small Fees
Whether it’s tickets to the latest concert, a new outfit, or lunch from your favorite bistro on a busy day at the office, we have all treated ourselves to an online order. But when you get to the checkout screen, you may find the total cost of your order has increased by 15% or more due to hidden service, administrative, or delivery charges. Don’t let your practice fall into the trap of luxury and convenience.
Here are some tips to minimize fees:
- Appoint a team member to monitor your stock of dental and office supplies so you can avoid rush delivery costs
- Pay attention to the payment terms listed on your invoice to ensure your vendors are never paid late
- When vetting a new vendor, avoid those who require an up-front fee or hefty termination fee – that’s a big red flag!
Solution #6: Maintain Control
When partnering with dental practices, we’ve found many of our doctors outsourced or delegated away their accounts payable responsibilities. Turning over financial duties to others can be dangerous, as no one has more at stake in the business than you. Even an endless stream of new patients can’t make up for a poorly managed A/P system— it will only leave you overworked.
Instead of outsourcing accounts payable responsibilities, share the load of vetting new vendors and auditing accounts with your team leaders. Remember that ultimately, who your practice works with and knowing the value vs. cost of each vendor is the responsibility of the practice owners. Any recurring charge, essential or nonessential, should be paid by an account in your name, not that of your office manager.
Multiple accounts can quickly lead to multiple charges for the same service, a mistake that can go unnoticed for months or even years. Consult with your practice leaders before agreeing to magazine subscriptions or mail offers, just as you would when a prospective vendor calls or walks in your door. Assess them thoroughly and remember the final decision is yours to make.
At Apex, we partner with vendors who match our goal of improving patient care. Our accounts payable team works hard to keep the vendors who have earned your trust, while also using our own resources to keep costs low. Visit us online to learn more about the benefits of partnering non-clinical support with Apex Dental Partners.