Don't get fleeced on veterinary client payments

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Handling cash and electronic payments options can get wild and woolly. This isn't a detailed how-to but a "Have you thought about this lately ... ?" reminder to check your systems. While sometimes it seems like every twenty something is firing off money to each other (and online vendors) on PayPal and Venmo, brick-and-mortar veterinary hospitals still need to offer a far wider array of client payment options (at least until we all get our cybernetic implants with credit-card chip readers in our foreheads). So, let's get back to basics and offer some pros, some cons and some best practices for managing payment-from cash to apps to everything in between.

Consider cold, hard cash

Even as we transition into a cashless society, some clients still prefer the option of good ol'-fashioned currency. It wasn't so long ago that cash was the preferred payment method in a veterinary practice; now, estimates are that it runs just 5 to 7 percent of revenue.

Pros:

• No fees involved.
• No after-the-fact cancellation or transaction disputes.
• Some clients live in a cash-only world, so to refuse cash payment is to refuse their business.

Cons

• Risk of robbery.
• Risk of embezzlement. (Could it happen to you? It happened to this dvm360/VHMA Practice Manager of the Year entrant.) A practice grossing $2 million annually is likely sitting on $10,000 dollars a month in cash flowing through the books. That's a tempting target for a potential embezzler, so strict oversight and strong internal controls are crucial.

Best practices

•  Make cash deposits as frequently as possible.
• Claim all cash payments as revenue, no matter how tempting to do otherwise.
•  Keep your internal controls tight, and ensure division of responsibilities.
• Article highlights

OK, folks, the dvm360 team loves this article, but if it's too long this second, just do these things:

> Click here to read this article and make sure you've set up good internal controls to manage cash, checks, bank deposits and credit card information. This is non-negotiable, unless you want to be the next embezzling statistic.

> Decide what client payment options you accept (cash, check, credit cards, debit cards, third-party payment plans, IOUs) and make sure your policy is written and understood by > If you do IOUs, don't overdo it, please? Your CPA (like, say, author Tom McFerson) will be super-bummed, you'll have trouble keeping the doors open, and you'll have trouble paying folks a living wage.

Check on checks

Once a main source of payment for a veterinary practice, now personal checks are less than 5 percent of revenue in most facilities. Checks are still written by larger clients (nonprofit groups, for instance) when paying for multiple invoices at one time. Checks are a necessary evil-nobody really wants to accept them anymore, but everyone feels they need to.

Pros

•  With check verification services, the chances of a bounced check are now significantly reduced.
•  Older clients often prefer this form of payment.

Cons

• Fees for verification and immediate deposit can be costly. (Here are 10 banking mistakes that can cost you or your veterinary practice big.)
• For checks from businesses, verification is more complicated and often requires a trip to the bank.

Best practices

•  Strong internal controls are a necessity, especially if bank trips are required to deposit the checks.
•  There is an opportunity for fraud (checks copied and forged, account numbers stolen and used, all by a rogue employee).  

Keep an eye on IOUs

Allowing a client to walk out the door with only the promise to pay is a payment method offered by practice owners with a soft spot and frowned upon by financial advisors. 

Pros

• A nice feeling to assist those in financial need. You feel good, the staff feels good, the client absolutely feels good.

Cons

• Many hard-luck cases are hard-luck for a reason, and you're likely not the only bill they owe around town. Once the client leaves the premises, you'll have little leverage for collection.
• Your warm feelings may begin to dissipate as your IOU ages from 30 to 60 to 90 days old.

Best practices

• A client's financial misfortune shouldn't be your problem. Choose wisely whom you extend credit to, realizing that the chance of collection drops by 60 percent once they walk out the door. (If you're going to do this, consider writing up a policy and enforcing it throughout the practice.)

Charge it!

Credit cards and other financing options comprise the lion's share of veterinary practice revenue, often 80 to 85 percent. That usually includes American Express, Discover, Mastercard and Visa.

Pros

• Fees are dropping and remain competitive. Most practices pay fees of less than 2 percent on credit card transactions.
• Funds can hit your account the same day, as opposed to the old days of a three-day wait time.

Cons

• Fees vary depending on which card is used. (American Express is usually the priciest.)
• With multiple clients paying by credit card in a given day, tracking these batched payments into your checking account can be messy and time-consuming.
• Payments can be disputed and/or reversed by the client after the fact.

Best practices

• This method of payment drastically reduces the risk of embezzlement, but a rogue employee can still subject the practice and your clients to credit card fraud with stolen numbers and verification codes. Make sure multiple people check payments like this. (Don't forget to maximize your own credit cards for your personal and business needs.)  

Other ways for clients to pay

PayPal (link to website): A new and growing payment method that lets friends and family members contribute funds towards the payment of a bill. Any fees are typically paid by the client.

GoFundMe (link to website): Usually for owners of animals with expensive medical issues, this allows friends, family or the general public to contribute toward the payment of a bill.

Bartering: This is a step better than an IOU. Trade services for services. For example, a plumber trades you his killer skills for your veterinary services. Properly accounting for this can be tricky, so check with your accountant and get this stuff in writing.

Do the debit

Younger clients prefer debit cards, especially those who abhor credit card debt

Pros

•  A driving force in the emerging cashless society. (Not sold on cashless society? You're not the only one, says this university.)
•  Fees are reasonable, and the payment hits your account quickly.
•  No cash to deal with or deposit.

Cons

• There is still a fee.
• Occasionally, clients without credit may have trouble paying larger invoices when their bank account is low.

Best practices

• While this is an ideal method for smaller client invoices, be sure to weigh the fees per transaction and consider instituting a minimum.

Offer the other financiers

A third party extends credit to the client when there are no other reasonable payment options. In some situations, a client may not have a checking account or a credit card available to make a payment. The third party will offer the client credit based on a quick application process.

Pros

• Allows clients without the immediate funds to pay and care for a sick pet.
• Gives practices a low-risk payment option for potentially high-risk clients.

Cons

• Fees aren't cheap, but on larger invoices, they're usually an amount you're willing to swallow.
• The application process, while quick, is still a process. The approval needs to be handled before the pet is admitted, which can be awkward.

Best practices

• Compare services. (Check out many of the current players here.)
•  Verify costs, approval rates and timeliness before making a decision on which to offer to clients.

Whether you accept all these forms of payment or just a few of them, think through the pros and cons and see if you want to check up on a better deal you could get for your practice from a banking or credit card vendor, or whether it's time to finally let IOUs go. Get out there, do great work, and get paid-and get your team paid!

Tom McFerson, CPA, ABV, is partner at the veterinary accounting firm Gatto McFerson in Santa Monica, Calif.