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Debt & Credit Control in Veterinary Practice
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Debt & Credit Control in Veterinary Practice



Power-point presentation of Debt & Credit Control in small animal veterinary practice (UK)

Power-point presentation of Debt & Credit Control in small animal veterinary practice (UK)



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Debt & Credit Control in Veterinary Practice Debt & Credit Control in Veterinary Practice Presentation Transcript

  • Debt & Credit Control inSA PracticeAlan Robinson B.V.Sc. MRCVS DMS
  • PROFIT£££MARKETINGPHCClientsSALESClinicalIncomeVisibilityDiffer’tion&BrandingAttraction&ConversionRetention Pricing InvoicingMOPS& FOPSDRUGSResidualIncomeStockControlPricingDebt &CreditControlFinancialMonitoring
  • 3 Ways To ImproveFinancial Efficiency.1. Measure and Control Costs –quarterly management accounts2. Stock Control – Reduce costs,increase efficiency, reduce wastage3. Manage Debt – Credit Policy, T&C,Collection process.
  • Overview of Topics• Cost of debt• How to develop a Credit policy• Terms of trade (the contract)• How to develop a Debt policy• Methods of debt collection– What makes debtors pay?• Court action – is it worth it?• RCVS guidelines
  • • All businesses carry some bad debt• Insured – OK?• Non-Insured - NOT OK!• Debt costs money (lots)– Money owed cannot be used– Overdrafts cost money– Administration costs (people, letters, phonecalls, court action)– £1,000 bad debt at 10% profit needs additionalsales of £10,000 to break even.• Getting clients to pay sooner can increase cashflow by thousands of pounds per annumReduce Debt to zero
  • Debt ControlOutstanding debt needsto be reduced.At 5% profitA £500 unpaid bill equals£10,000 of non-profit workFixedCostsWagesPROFIT
  • Veterinary PracticesOur findings.Having worked with many veterinary practices we haveanalysed the results.
  • No or Wrong contact information suppliedClaim they have never dealt with the vetsClaim they were unaware that they owed any moneyClaim that it was an ex partners or friends petNo reason – Just extremely evasiveTreatment disputeBilling disputeThought the invoice had been paidClaim no copy invoice was receivedNo Money (Job loss / benefits)Actively seeking debt advice (CAB/CCCS etc) / InsolventPet diedInsurance disputeDefaulted on a payment planThought a payment plan was already in placePartner / Debtor in hospitalReasons for non payment of Vet bill’s
  • Debtor DaysCurrent outstanding Debt X 365Yearly Turnovere.g. Turnover = £500,000Debtors = £50,00050,000 x 365Debtor Days = 500,000= 36.5 (£10,000 = +7.3 days)
  • Debt Costs• Average number of days to convertinvoices to cash is 60• Reduce this to 40 days• Sales turnover £1 million• Bank interest 5%• Save £2,740 in interest p.a.• Gain £54,800 in increased cash flow– (20 days at average daily sales of £2,740)
  • Debt ControlOutstanding debt needsto be reduced.At 5% profitA £500 unpaid bill equals£10,000 of non-profit workFixedCostsWagesPROFIT
  • Credit Control &Debt Management1. Client Registration (no credit)2. Credit control policy (approved by all members of practice staff)– Develop a practice policy– Include an `application form`1. Terms & conditions for clients (the credit contract)– Clients must agree (& sign up)1. Debt management policy– When to chase debts– Who chases them?– How to chase debts – by what method?– For how long? What next?
  • Step 1. Client Registration• Establish the correct identity of the client &patients• Get ‘Proof of Identity’ (Drivers Licence, Utility Bill)• Confirm the terms of business• Default option is “NO Credit – Cash at time”• Provide quality client service information• Formalise process to get ‘PsychologicalContract’
  • Step 2. Credit Management• Establish the correct identity of theclient (Proof of Identity)• Define the client’s credit worthiness• Confirm the terms of business• Provide quality client service• Resolve queries swiftly• Ensure prompt account collection• Provide for effective `final collection`• Minimise the risk of bad debt
  • Who are YOUtrading with?• Use a CREDIT APPLICATION FORM• Application to have a credit agreement withyour practice– Establishes client identity (legal status)– Assesses their ability to pay (risk management)– Supplies information you might need to recovera debt through the court system– Allows you to alter trading terms for a particularclient if necessary– Data protection must be complied with– Does NOT Confirm the opening of an account
  • Terms the Credit Contract• Must be in clear English (not legal jargon)• Must be legal• Must be signed up to by the client prior totreating an animal. (If possible)• Are not legal if they only appear on theback of an invoice• Make it clear from the outset how you wishto conduct business with a client
  • Terms of Credit Agreement• Exactly who the contract is with, fullname, address, contact numbers etc• Payment terms• A right to interest on late payments• A right to charge debt collection costs• A timeframe for complaints• Policy for dispute resolution• The `proper` law of the contract
  • • Stop debt happening!• Begin as you mean to go on• Make sure all staff adhere to the policy• Resolve disputes quickly• Move as quickly as you can to collect payment• Run statements, letters regularly – EVERY WEEK• Telephone and communicateStep 3 Debt Control
  • • Do not offer unsecured credit• Cash only!• Use Insurance – FSA registration• Use Direct Debit facilities• Use Interest free loans for Good Clients(PHC)• Have a robust Client Registration system• Have a good Debt Collection systemWorking with the Credit Policy
  • Stop Debt HappeningOutstanding debt needs to be reduced.– Stop clients leaving without paying – receptioniststoo busy with other jobs, particularly dispensing..– Vets need to recommend that clients pay at thetime. – preferably to produce an invoice atreception– Outstanding Invoicing needs to be more efficient –Need a summary of Insured debt vs uninsured debt– Terms and Conditions for Insurance claims to begiven out at time of treatment– Payment terms signs to be put into reception– Terms and conditions to be included in Client Pack
  • Consultation ProtocolALL CONSULTATIONS (Visits and at Practice)• ALL clients to be given top copy of Invoice / Receipt• Client and patient details• Visit and consultation details• Drug details• Dispensing information (drugs to pick up/ to follow)• Insurance details• Payment details - Paid or Not - Paid Cash, Cheque, Creditcard• Next visit• Signed by client if visit or not paying
  • NOT INSUREDInvoicing• Invoiced by Vet (consult) Nurse (hospital) or Office staff(visit)• Invoices sent every day• Phone call first• Unpaid after 7 days – First Debt letter + Statement• Unpaid after another 7 days (14 days) – Second DebtLetter + Account Fee + Statement• Unpaid after another 7 days (21 Days) – Third DebtLetter – Court proceedings to be instigated if not paid• Unpaid after another 7 days (28 days) – Debt collector orcourt
  • INSURED CLIENTS• Need to know at time of consultation –which company – Direct claim or not• Phone Insurance to confirm policy details• Invoiced and EXCESS collected withClaim form signed if direct claim• Invoice and claim monthly• Refuse to direct claim for somecompanies with bad history…
  • Bad Debt ProtocolsOutstanding Debt > 60 daysPhone call Pay in 7 days2nd Phone call Pay in 7 days or further actionCourt Letter Invoices Terms Statement Court ApplicationCourt Action (>£100) or Debt collector (<£100)Start with Largest Amounts first then most outstanding
  • The Telephone Call• Quality collection involves people – they should`speak for the company`• Take command & control the call• Have a record card ready to fill in (or use acomputer)• Be clear of the facts• Get through to the client• Introduce yourself (practice name first)• Explain the reason for the call
  • The Telephone Call• Listen to the client’s reply without interrupting• Go through all the invoices one by one• Ask for payment• Control the conversation by asking questions• In negotiations always lead with what you require,not `when can you pay`, or `what can you affordthis week`• Obtain promises for exact values and exact dates• Write it down & let them know you are recordingwhat has been agreed
  • Recognising a PaymentOpportunity• A `window` will open when a fresh approach byanother staff member can help• Plan the approach, make them an offer they can’trefuse!• Open with a `frank and honest` appraisal of client• “If you tell me why you can’t pay, I’ll try to find asolution”• Can but won’t pay? Let them understand theconsequences– Only emergency cover for the next month– Letter asking them to find another vet– Solicitors, small claims court etc.
  • Record ALL activity on client records
  • Final Letter Before Action• Details & amount of debt outstanding• Details of previous letters & telephone calls• Where and by what date the debt must bepaid• Your intention to start proceedingsimmediately if debt is not paid• Your intention to claim reimbursement of courtfees and contractual interest• Who to contact if there are any queries
  • Court Action• Small claims track (<£5000)• Fast track (£5000 - £15000)• Costs between £27 - £230 to start proceedings• Trial <£1000 nil cost, >£1000 costs £80• Enforcing judgements,– <£125 cost £25– >£125 cost £45• Attachment of earnings £50• Charging orders £50• Order to obtain information £40
  • Enforcement Options• Refer back to the application form – know yourclient!• Warrant (bailiff or sheriff)• Oral examination• Attachment of earnings• Third party orders (usually via bank a/c)• Charging order (debt secured on an asset)• Remember, if they have no money/ownnothing, you can’t make them pay!
  • RCVS Guidelines• “There may be reason to doubt whether aclient is able or prepared to pay. It is notimproper to enquire into a client’s creditworthiness in order to protect a veterinarian’sbusiness interests. But poor credit worthinessdoes not negate any ethical responsibility toprovide essential first aid for the relief of painand suffering”
  • RCVS Guidelines“It follows, therefore, that it is entirely proper fora veterinarian to provide only first aid treatmentfor the relief of suffering unless the manner inwhich fees are to be paid has beenestablished… this may well involve aninsistence on prepayment in part or in full, proofof insurance cover, referral at the firstopportunity to a charity which treats animals…,or as a last resort euthanasia.”
  • Giving Notice to a Client“When a veterinarian wishes to give notice toa client….., It should normally be done inwriting with as much notice as possible andby recorded delivery. The letter shouldsuggest registering with another colleagueand at a time when animals belonging tothe client are not under treatment. A copyof the letter should be kept”
  • Summary• Develop a credit strategy for your practice• Reduce `bad` debt & encourage `good` debt• Plan for, & manage, debt better• Appreciate, support & educate staff• Educate clients• Stick to your debt policy• Write off bad debt quickly & then forget it!• Accept & prepare for debt as an inevitable partof practice life
  • Any QuestionsPlease?And thanks to