Five efficient methods to streamline bill pay in your dental practice.
We have dental practices from 500k in revenue to 5 million in revenue that manually write 2 to 3 checks per year. It keeps the books clean and transparent along with the cash flow consistently accurate. Every practice can benefit from streamlining bills and reducing the old school check writing for many reasons, including the following:
Always have a reliable cash balance
Cleaner records and paper trail for your CPA and IRS
Correct numbers for expense benchmarks
No more outstanding patient refunds
A lot less admin time spent paying bills
A lot fewer mistakes and time spent in bookkeeping
Less risk of embezzlement
We've seen all of the bill paying methods out there that dentists are using and we have our favorites. The easiest and super-efficient ways used by the most successful dental practices are the ones we have explained below.
Online bill payments is the most obvious method but still not used by everyone. If your vendor has online payments available, then pay it online. It's less time than writing a check and mailing it, and it comes out of your account within a day, so you know your cash balance.
Every vendor for your fixed recurring expenses like loans, utilities, rent, and phones, should be paid by automatic payments. Automatic payments can be quickly set up online on the vendor's website.
For cash sensitive dentists:
Cash flow sensitive practices can set up most of the online recurring automatic payments to be paid by a credit card instead of directly out of your bank account to eliminate cash flow worries. I will explain this in more detail later.
Banking Bill Pay
Banking bill pay is a check or electronic payment you authorize the bank to pay on your behalf. Just set up your payees one time and they will always be there ready to pay. Most banks provide banking bill pay for free included with your business checking account. You can pay bills in a lot less time since it eliminates the need to write checks, address the envelopes, and mail.
Banking bill pay is perfect for those pesky vendors like dental laboratories or landlords who prefer checks or don't provide automatic payments. Setup your payees (vendors) in your bill pay center. When it's time to pay, enter an amount, and the bank will pay it with an electronic check. You can even set it up on a schedule or recurring payments. You set the rules on timing and amount, then the bank follows.
Use banking bill pay to issue patient refunds instead of manual checks. It keeps track of the checks that haven't been cashed and you can investigate or void and reissue right from your online bill pay center. My favorite is Bank of America and Wells Fargo because it lets you create "Groups" like folders for your vendors. Create a "Patient Refund" group to filter for easier tracking of all of the patients you sent refunds.
For cash sensitive dentists:
Cash flow sensitive practices can use banking bill pay for an accurate cash balance because most banks will deduct the electronic check from your cash on the day you tell it to send to the vendor. That means it comes out of your account immediately and not when the vendor cashes it. You won't have checks out there in space making you panic because you don't know what's going to be cashed on the same day you need to run payroll.
Paying bills by credit card is probably the most popular method of paying bills for dental practices. Its commonly used to set up online automatic recurring payments with all of your vendors like in the first method we explained.
Open a high limit credit card and set up as many vendors as you can to automatically pay the bills through this credit card each month. You will be able to reduce the amount of bills you pay manually, and they will be paid automatically. The less you need to think of, the better. There are tons of other benefits to paying everything using a credit card, such as the following:
Keeps a more consistent cash balance with no surprises
Protected by fraud and unauthorized transactions
Total transparency with vendor names clearly displayed in card transactions
Cleaner records for Bookkeeper, CPA, and IRS.
Credit card cash back rewards and other excellent vendor discounts! This is a big one for dentists.
Don't carry a credit card balance month-to-month! You will end up paying interest; then it's not worth it. You also want to be careful with how much you're spending since you do not see cash going down. It can create a sense of safety which causes you to not be as cautious in your spending. Watch your credit card balance as the month goes and always plan cash to pay it off in full. Download the bank or credit card company app for easy viewing of transactions and balances as the month goes.
For cash sensitive dentists:
Cash flow will be much more natural to track if you don't have a lot of bill payments coming out of your bank account every day. One payment in full to credit card each month will ease your mind. Then you can plan accordingly.
If you make partner payments each month or take draws/distributions, why not set it up as a cash transfer bank-to-bank instead of writing checks? Then it's instant and no mess. A lot of the larger banks allow for this type of setup. I mainly see practices doing this with PNC Bank, Wells Fargo, Bank of America and SunTrust.
Check to see if your bank allows you to create automatic scheduled cash transfers to reduce even more time and headaches. Then you can set it and forget it.
If you're using one of the popular payroll services like Paychex, ADP or Gusto, then you can pay your 1099-MISC contractors through your payroll service instead of writing a check. Gusto payroll is excellent because you add your contractor to Gusto by entering their email address. It invites the contractor by email to create their direct deposit account with 1099-MISC filing information then electronically files their 1099 free at the end of the year. No more paying contractors by manual checks and scrambling to get their filing info in January.
You shouldn't have temp contractors unless they are a doctor. In a recent audit, the IRS practically told one of our clients that temps don't exist in dental practices whether its two hours or two days. If temps are on your schedule, using your supplies and equipment while also under your supervision, then they are an employee. Big bummer, right? It was for my audited client who had many temps. Check with your CPA before making someone a 1099-MISC contractor.
Write fewer checks and start utilizing technology to the fullest. The practices that are ahead of the rest have gotten out of their box and embraced technology to speed up the bill paying process. It keeps the books clean and transparent along with the cash flow consistently accurate. Every practice can benefit from streamlining bills and reducing the old school check writing.