Supply chain disruptions caused by the pandemic underscored just how critical vendor relationships are to the health of dental practices. In fact, in MineralTree’s recent State of Healthcare AP Report, 75% of finance teams in healthcare-related businesses said that the importance of their vendor relationships has grown, outpacing other industries by more than five percentage points.1 Dental practices and DSOs focus a lot on what patients need, as they should. But to serve those patients, they need to keep their inbound supply chains flowing.
They know that if the supplies and products they need to treat patients are in short supply, it’s a huge risk for all involved. And that is especially so in the dental industry where in many cases viable sourcing options are limited to a small number of vendors. That means dental practices and DSOs need to solidify those relationships by leaning into what their vendors need from them.
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When asked to identify vendor priorities, speed of payment (85%) is the number one response among health care-related finance teams followed by accurate payments (53%). This aligns with the top responses among vendors, who confirm their desire for faster (84%) and more accurate (67%) payments. Yet, many dental practice and DSO finance teams still find themselves burdened by manual invoice processing and payment methods, making it difficult to meet their vendors’ wishes.
So, what can dental practices and DSOs do? Based on insights from the State of Healthcare AP survey, here are five ways dental practice and DSO finance teams can address their vendors’ needs while improving their own operations at the same time.
Get in the vendor mindset
Consider the payment relationship from the vendors’ point of view. They depend on steady cash inflow to purchase materials and fund operations. MineralTree research found that invoice processing challenges and delays due to supply chain disruption are 10 percentage points higher for health care-related teams (53%) than other industries (43%). This interrupts the flow of supplies needed by dental practices to provide safe, quality, uninterrupted care to their patients.
According to the research, 43% of accounts payable (AP) teams spend 6 hours or more a month responding to vendors’ payment-related inquiries, and 17% of them spend 11 or more hours. This is not only a problem for AP teams, but for vendors as well, who don’t want to spend their time following up on outstanding invoice payments.
Embrace AP automation to assist lean finance teams
Finance teams can save a tremendous amount of time and cost by digitizing the labor-intensive tasks of invoice processing, which includes entering, coding and matching invoice data; routing invoices for approval; and managing workflow. Similarly, on the payment side, automation drastically speeds up payment timelines, particularly compared to the process of preparing checks, getting signatures, and stuffing, sealing and mailing them—as well as the time it takes for the post office to deliver the payments.
Most dental practices and DSOs have automated at least some of their AP processes (61%). Yet only 18% are fully automated. Over 85% of these teams report gaining efficiencies through automation.
More than 65% using automation are able to process more invoices and payments using the same-sized team, and an additional 21% have reallocated freed-up staff time to other projects.
Find out how vendors want to be paid
While prompt payment leads vendors’ wish lists, it’s also important to identify how they want to get paid. A majority want to receive more e-payments, such as ACH and virtual cards. Vendors realize the benefits that e-payments provide, which, in addition to more timely payments and better cash flow, include AR processing efficiency, cost savings, and increased security and fraud protection.
Dental practices and DSOs also gain big advantages from e-payments, including time and cost savings, alleviating pressure on shorthanded staff, and, like vendors, increased security, and fraud protection.
Enable visibility and analytics to unlock better cash flow management
Automation gives finance teams visibility to the details and status of each and every invoice and payment. Coupled with analytics, this helps finance teams closely analyze their payment mix, identify early payment discounts, and measure KPIs. It also enables them to strategically prioritize payments to specific vendors and manage cash flow. This ensures they always have adequate funds to pay for critical supplies.
Use payment services to save time and increase vendor satisfaction
Managing the high volume of payment-related vendor inquiries is another key area where automation can help. Eleven percent of the health-care finance teams in our survey spend over 20 hours per month just responding to vendor inquiries, which is higher than other verticals (7%). At the same time, only 56% of vendors are happy with the response time on their inquiries, leaving a lot of room for improvement.
Self-service portals may seem like the obvious way to alleviate these problems, but only 3% of vendors prefer to research answers to their questions via portals. Instead, nearly 89% prefer to send an email, and the rest to call. As such, dental practices and DSOs are increasingly relying on managed services from their AP automation vendor to handle incoming payment inquiries. This generates additional time savings for finance staff while also ensuring suppliers get prompt answers to their payment-related questions.
Understanding vendors and accommodating their payment needs will go a long way in helping dental practices and DSOs strengthen these critical relationships and ensure consistent access to the goods and materials they need to treat their patients. Not only will it make their vendors happier; it will also streamline costs, increase operational efficiencies, and provide a valuable buffer for future supply chain disruptions.
Editor’s note: This article appeared in the September 2023 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
Reference
1.The State of Healthcare AP [whitepaper]. MineralTree. https://www.mineraltree.com/resources/whitepapers/the-state-of-healthcare-ap/