Your Business

How to recover money owing to you

No-one in animal health enjoys conflict. But if practices are to operate profitably, they must know how to recover debt from non-paying pet owners. By Tracey Porter

However you look at it, $11,000 is a heck of a lot of dough to write off.

For that amount of money an animal health specialist could purchase roughly 300-plus ear examination otoscopes, 185 cat dental scaling kits or 45 canine general surgery kits.

It could also fund a month’s salary for a locum vet, help set up a new examination room or be used to fund a decent practice management software package.

Coincidentally, $11,000 is also the largest amount specialist debt collector Paul Metcalf has ever had to collect on behalf of one of his veterinary clients.

Metcalf, who founded his Queensland debt collection agency CollectMORE eight years ago, says the debt was incurred for the treatment of a prized racehorse.

The customer refused to pay because he blamed the vet for being unable to successfully treat the animal which was no longer able to race.

The bad debtor took the position that the loss of income far outweighed the $11,000 he owed so the customer “figured they cancelled each other out”, Metcalf says.

“I explained that obviously it didn’t quite work this way and whilst it was unfortunate that the treatment wasn’t a success, I reminded him of the no-guarantee clause in the contract the vet made him sign beforehand.

“He was still adamant he wouldn’t pay and welcomed legal action but when I explained that his other income-producing horses were at risk of seizure if the courts granted our vet client a warrant, then he paid.”

Sadly, this clinic is not alone in its experience of bad debtors.

The debtor problem

In 2017, the Australian Small Business & Family Enterprise Ombudsman released a report that found that one in two businesses had over $20,000 owing to them in late payments and that one in four respondents had bad debts of more than $10,000.

The telephone is the single greatest asset for getting paid and I always urge vets to not be scared of the phone and remind themselves that they deserve to be paid.

Paul Metcalf, CollectMORE

“The telephone is the single greatest asset for getting paid and I always urge vets to not be scared of the phone and remind themselves that they deserve to be paid.”

Paul Metcalf, CollectMORE

Despite acknowledging the large impact late payments or non-payments can have on the cashflow of the business owed the outstanding debt, the report found that in general, businesses were reluctant to chase outstanding debts under $10,000 as the legal and administrative costs are often greater than the debt amount.

While a lack of cashflow is the leading cause of business insolvency, the Payment Times and Practices Report noted that the time to recover the debts was also found to offset any possible benefit to cashflow.

But Metcalf says there are many things veterinary practice owners can do to recover what money they are owed while also protecting themselves against bad debtors.

Ensuring payment

Metcalf, who as part of his job now travels around Australia teaching SMEs and large corporates how to get paid, recommends practices start by ensuring that they explain to the customer that the animal will only be released once payment is received.

It is also worthwhile having the customer sign something before treatment begins or medication is provided.

“Ideally this would have a clause as follows: ‘By signing this, you agree to indemnify us for any debt collection fees we may incur in having to pursue you for payment’.

They should also consider the option of incorporating a service such as VetPay or Openpay, both of which ensure the vet gets their money up front from the service supplier as soon as the patient has received treatment.

In the case of Openpay, payment (less relevant fees) is guaranteed to your practice the next business day, and the pet owner pays 20 per cent on the day, and the remaining in instalments to Openpay over a pre-selected payment term.

Picking up the telephone and having a chat is another way bad debtors can be coerced into paying outstanding invoices, Metcalf says.

“By virtue of their caring and understanding nature, vets are conflict-averse and normally rely on emailing the customer rather than calling. The telephone is the single greatest asset for getting paid and I always urge vets to not be scared of the phone and remind themselves that they deserve to be paid. As long as the cost of the service was agreed on before treatment, then there is nothing to be afraid of. In fact, the customer expects a call, and so many issues can be sorted out by having a constructive conversation over the phone.”

Vet bills are often unexpected and certainly not budgeted for so be flexible and offer affordable alternatives to payment in full.

Paul Metcalf, CollectMORE

In the event customers are unable to pay in full, he recommends offering payment plans.

“Always aim to be paid within three months so if the customer owes $1200, ask them to pay $100 per week.  As mentioned previously, vet bills are often unexpected and certainly not budgeted for so be flexible and offer affordable alternatives to payment in full.

“Be sensitive and respectful if the animal has passed away but don’t apologise for wanting to be paid. Having said this though, if the animal has died then it is always best to let [owners] grieve for a couple of weeks at least.”

In the event you have attempted the suggestions above but still find your clinic labouring under a large amount of bad debt, your next step is to consider legal action to recover the monies owed.

However, Rolf Howard, a commercial litigation lawyer and a managing partner at Owen Hodge Lawyers, says while the need for legal action should not be the first response to any unpaid vet fees, there are a number of options available to those practices seeking to recover monies owed.

Vets who are owed money have the option to seek an examination summons, a move which is intended to help the creditor examine the debtor’s financial position, if unknown.

They may also be able to seek a garnishee order, which seeks to recover the judgement debt from the person who owes money to the debtor.

There is also an option to apply for a writ of execution where the sheriff’s office can be directed to seize and sell the debtor’s personal assets and pay off the creditor.

Lastly, they can apply for a writ against land, which directs the sheriff or his officers to seize and sell the debtor’s real property and pay off the creditor.

Howard warns that any intended legal action must first be weighed up against the challenges practices must face in the recovery and collection of debts. These can include the time taken for claims to go through the court process, the inconvenience of attending court; the costs involved in pursuing debts and the difficulties in enforcing judgment on debtors.

At the end of the day, whether practices choose to engage in legal action, use the services of a debt collection agency or write off the debt, Metcalf says it’s important that vets do not set themselves up for future pain by presenting themselves as a soft touch.

“Vets are a business, not a charity and it’s vital that they constantly remind themselves of this,” he says.