July 25, 2024
If you think accounts payable is just about paying bills, it's time to reconsider.
Thanks to both internal and external factors, many dental practices continue to struggle with cash flow. This makes it harder to grow and puts additional stress on everyone involved.
The key to solving this pressing issue lies in rethinking how your accounts payable process works. It doesn’t matter if you're a small, single-location practice or a growing multi-location operation, automating your AP function can reshape how your practice approaches both financial strategy and decision-making.
The results are tangible benefits that extend far beyond the accounting department including improved cash flow, focusing resources on revenue generating activities, and more.
In this article, we'll explore how rethinking your approach to AP can enhance your financial reporting, improve decision-making, and ultimately contribute to the growth and success of your dental practice.
While accounts payable is a critical function for any business, many dental practices are still stuck with inefficient, outdated processes. This includes a heavy reliance on manual data entry and processing. Staff members often spend hours inputting invoice details, a task that's not only time-consuming but also prone to errors.
Based on research and averages across industries, for every 10,000 data entries people make would commit between 100 and 400 errors. To use a more specific circumstance, let’s say your practice orders regularly from three separate suppliers.
When closing the books each month, your staff needs to:
As practices grow, this clearly isn’t sustainable. Manual AP processes can potentially work for a single-location practice will likely buckle under the increased invoice volume of a multi-location operation. More locations means more invoices which requires more staff all of which increases the chances of errors occurring.
Many practices attempt to avoid this problem entirely and simply put those suppliers on autopay using a practice credit card which is a mistake in its own right.
The best solution isn’t to use a credit card but to resolve the root cause of the issue: inefficient AP processes. This is where automation steps in and the impact can be huge.
By leveraging technology to streamline AP, dental practices can transform their financial reporting and decision-making processes to be more forward thinking and geared for practice growth.
Enhanced Accuracy and Efficiency
One of the most immediate and impactful benefits of AP automation is a drastic improvement in accuracy and efficiency.
If we use the same rule of 10,000 data entries, instead of 100 to 400 errors, automated systems would make between 1 and 4.1 errors. Once the system is set up, AP automation systems come equipped with intelligent features that pre-fill fields with vendor information, pricing, and automatically carries over other invoice details. For newly submitted invoices, features like optical character recognition (OCR) can automatically read invoices and log the correct data in the system.
This not only removes human error from the process but ensures consistency and accuracy across all transactions.
The efficiency gains are particularly notable for multi-location dental practices. With a centralized AP automation system, practices can process invoices for all locations from a single platform, streamlining operations and providing a unified view of expenses across the entire organization. Centralization eliminates the need for separate AP processes at each location, saving time and reducing the potential for discrepancies between different office locations.
Moreover, AP automation significantly reduces the risk of duplicate payments, a common issue in manual systems. The software can automatically flag potential duplicates, saving practices from costly errors.
Another powerful feature of AP automation is three-way matching. With so many steps between quote to paid invoice, there are many opportunities to miss crucial information along the way. Systems equipped with three-way matching can compare purchase orders, invoices, and proof of delivery, ensuring everything lines up perfectly. Any discrepancies are immediately flagged for review, dramatically reducing the risk of overpayment or fraud. For dental practices juggling multiple suppliers and complex orders, this feature alone can save countless hours and prevent situations like paying for supplies that never arrived.
Oftentimes, practices will be able to drastically reduce the time from receipt to payment from weeks to days. This speed goes a long way toward building a quality relationship with vendors and could lead to added advantages such as better pricing or priority service compared to other practices.
While important, this approach is about more than just preventing errors. No matter what the size of your practice, time saved through automation means resources can be directed elsewhere.
Better employee experience and productivity
For most dental practices, wearing multiple hats is the norm. But when it comes to finances, too much overlap can spell trouble. AP automation helps you implement proper controls without hiring a whole finance department.
With automated workflows, you can ensure that the person who approves an invoice isn't the same one who processes the payment. This separation of duties is a key factor in preventing fraud and errors, giving you peace of mind and making sure any potential auditors are pleased.
Consider a typical three operatory dental practice. Often, the dentist or a single office manager handles everything from patient care to bill payments. They might approve invoices, process payments, and reconcile accounts – all while trying to focus on patient care. This setup, while common, leaves the practice vulnerable to potential errors or oversights.
These problems aren’t just for small practices. Multiple locations only exacerbate the issues.
By implementing AP automation, such a practice can set up a workflow where one person, say the office manager, reviews and approves invoices in the system. Once approved, the system automatically routes the payment for processing, which the dentist can quickly review and authorize with a click. This simple change adds a crucial layer of oversight without complicating day-to-day operations.
Moreover, any staff members who were previously bogged down with manual data entry and invoice processing can now focus on more strategic tasks. This shift in responsibilities opens up new possibilities for practice growth and improved patient care.
Improved financial visibility and control
Practices that lack visibility into their accounts payable processes are more prone to cash flow issues. This is caused by an inability to clearly see where and when their money's going out.
Making your AP process faster and more efficient through technology comes with the added benefit of allowing your team far more insight into the financial health of the organization. Since all the information and data will be accurate and centralized within a single system, it won’t be isolated to spreadsheets living on one team member’s desktop.
This is important because most AP automation platforms for dental practices will be able to give your practice more visibility through built in reporting tools.
Your practice should be able to effectively track and measure improvement of vital AP metrics such as:
Then, coupled with data from your procurement system, you can start to identify trends and spending patterns from various angles. This might include examining spending across different product categories, vendors, or time periods. For instance, you’ll be able to better spot pricing changes over time with certain suppliers that might be cause for renegotiating.
These sorts of insight go beyond just looking at past history.
Tracking these metrics are invaluable for budgeting and forecasting into the future and managing your cash flow. By having a clear view of upcoming payments, practices can optimize their payment timing to coincide with cash flowing into the organization.
This visibility allows practices to then make the most out of stocking up in times of a strong cash position or or to strategically timing payments to maintain optimal cash reserves.
Strengthening Compliance and Audit Readiness
Let's face it: audits aren't exactly a walk in the park. But for many dental practices, especially larger DSOs, they're an unavoidable reality.
Whether it's for regulatory compliance, financial due diligence, or just good business practice, being audit-ready is crucial. This is where automated systems can really shine, turning a stressful, teeth chattering experience into a breeze.
Gone are the days of rifling through filing cabinets for legacy records prior to an audit or scrolling through endless spreadsheets and systems. AP automation creates a real-time, digital breadcrumb trail for every transaction. Want to know who approved a payment and for what amount? That’s all neatly logged for you and easily accessible.
This level of detail isn't just about keeping auditors happy (though it certainly does that). It's about giving you a clear picture of your practice's financial health at any given moment. You can see the entire lifecycle of an invoice, from receipt to payment, with just a few clicks.
Another added benefit of this level of insight is fraud prevention.
Finally, there’s the consideration of either expansion, investors, or perhaps even selling your practice down the line. Having your financial house in order is crucial. Having comprehensive, easily accessible financial records that clearly demonstrate your practice's health and efficiency make all the difference in any process requiring due diligence.
Imagine being able to pull up detailed spending reports, vendor payment histories, and cash flow projections at a moment's notice. That's the power AP automation puts at your fingertips. It transforms your financial data from a headache into a powerful tool for strategic decision-making and growth planning.
Get started with AP automation with Method
Streamlining your accounts payable process is more than just paying the bills. You're freeing up valuable resources, gaining deeper financial insights, and positioning your practice for growth.
This modern approach to AP transforms a once tedious task into a resource to make strategic business decisions so you’re able to grow your practice, your way.
Ready to see how AP automation can revolutionize your dental practice's financial operations?
Take the first step towards a more efficient, accurate, and growth-oriented future by requesting a demo of Method Pay today.
Don't let manual processes hold you back any longer! Experience firsthand how our platform can help your practice smile all the way to the bank.
