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Dental Lab Products
January 2009 | Web Exclusive

6 strategies for collecting YOUR money

by Chuck Yenkner


“No business deal is complete until you get paid.” That’s what one of my first bosses told me early on in my business career.  At the time, I was begging him to allow a large order to ship to a new customer we really knew nothing about.

Lab owners face this same situation each day a case ships to a client. Often we find that our clients, whether new or established, are in arrears when it comes to paying for the case delivered. And this forces us to get up from the bench and make the dreaded collection call.

Collections are frequently a problem for dental labs.  Part of the problem lies in the fact that lab owners get “blinded” as I did by the prospect of increased business and the profits to be made. Three other significant factors also contribute to collection problems.

1.    The belief that dentists are “professionals” and therefore are good for the money owed.

2.    The fear of offending, or even losing, a large client who also owes a large amount of money.

3.    Lab owners in many cases just don’t pay enough attention to this business basic.

Collections 1-2-3

I have news for you. Dentists are running a business too. Some do it better than others. It doesn’t matter how much work they send if you don’t get paid. You did the work; you deserve to be paid!

If your collections are lagging and your accounts receivable are growing, here’s a step-by-step process you need to start right away.

1.    Write a credit policy for your business

Outline your payment terms and options for open accounts, credit card customers etc. Normal open account terms are 30 days, but specify whether from date of invoice or statement. Make sure you communicate your policy to your accounts and to laboratory employees directly involved with clients.

Send the policy to existing accounts with a cover letter. It’s a good idea to send this out on an annual basis to all accounts and to review it with all new accounts. Don’t worry about offending clients. How many dental office waiting rooms have you seen with a sign that says, “Payment is expected at the time service is provided”?  

2.     Reference check new clients

Ask new clients for references (believe me manufacturers and dealers do). You also can ask non-competing labs about your prospective new client. For example, if you are strictly crown and bridge, ask to whom they send their removable work and inquire with the owner of the denture lab about payment habits.  Your local dealer rep may be able to help you here, too. Put a limit on how much work you will do for a new client without seeing some payment.

3.    Consider offering a discount for faster payment.

Many businesses offer 1% or 2% net 10 terms, which means the client gets a discount if they pay within 10 days. Another way to approach this is to offer two-tier pricing. A PFM for example may be $150 plus gold on 30-day terms but $146 if paid in 10 days.

I think it’s a good idea to take credit cards payments to speed up the payment process. However, I recommend against discounting credit card payments since you are already paying 2% to 3 % to the credit card company to offer the service. If you offer credit card service to your customers, ask the client’s office for permission to keep the card number on file and automatically charge the card for the invoices or statement amount on an agreed upon day.

4.    Establish a collection protocol

Your accounting software (or your accountant) should be able to provide you with data on aging accounts by customer. (Total balance owed, amount current, 30 days past due, 60 days past, and over 90 days.) Print this report monthly, review it, and keep it accessible. Assign someone in the lab to call each customer with a 60-day or greater balance. Consider stamping 60-day statements with a red PAST DUE stamp.

I know some labs that kick in their collection calls and procedures at 45 days. The sooner you jump on overdue accounts the better your chances of collecting. Accounts that get over 90 days begin to be at risk because the odds of collecting start to go down. If necessary use a commercial collection agency when the account gets over 180 days. It will cost you 50% of the balance, but at that point something is better than nothing. Require management approval to start work on any cases from accounts with over 90-day balances.

5.    Consider “firing” chronic slow paying accounts

I’m sure most of you know who your problem clients are and how much aggravation they cause. Replace them when the hassle or risk outweighs the profit.

6.    Set an accounts receivable goal for your lab

In a healthy business, accounts receivable should run 10% to 12 % of annual sales.

Oh, by the way we never did ship that order. My competitor got the order, but it took them over a year to get paid.  The boss was right then and his wisdom still applies today.



Chuck Yenkner is founder and President of Business Development Associates, a Connecticut-based firm dedicated to helping dental companies increase sales and profits (www.growyourdentalbiz.com). His clients include DTI Dental Technologies Incorporated, a 15-laboratory chain where he serves as a Vice President of Operations. A veteran with more than 30 years in the dental industry, Yenkner also currently serves as Executive Director of the Identalloy Council.