When you decide to delegate the task of managing the procure-to-pay cycle of your dental clinic, you notice an important question: Should it be an in-house resource or an external service provider? It’s an important decision because the correct one can mean you’re on top of all your vendor payments and supplier fees. Consequently, helping you avoid worries about lab fees, late fees, invoice bottlenecks, or compromised vendor relationships.
On the other hand, choosing an accounting approach that doesn’t align with your clinic’s current workflow can have negative consequences. Some of which may lead to hidden transactions, unnecessary cash outflows, and damage your clinic’s financial health.
Making the right decision requires you to know what each of the respective accounting approaches entails, like the back of your hand. Also, how each approach fits into your clinic’s RCM cycle, and whether the current approach that works best presently will also be the same one in the future as your clinic expands.
Since both in-house and dental AP outsourcing approaches carry their respective pros and cons and are susceptible to operational risks, having this insight also prevents you from wasting valuable clinical hours on administrative bottlenecks.
This blog aims to provide insights to enable dental practice owners to effectively manage accounts payable and incorporate dental accounts payable best practices that optimize cash flow. It also helps to strengthen vendor relationships and ultimately protect their bottom line.
What does In-house Dental Accounts Payable Entail
In-house dental accounts payable involve the practice hiring an in-house resource dedicated to managing and overseeing the practice’s financial obligations. Often, common in small to medium-sized dental practices, the internal resource’s responsibility encompasses the post-visit portion of the RCM cycle. It can also include administrative functions, ensuring that the outflows (expenses) are managed efficiently to match the timing of cash inflows (insurance/patient payments). This in-house approach to accounts payable gives dental practices direct control and full visibility over their cash outflow and aligns them within their own workflow.
What does Outsourced Dental Accounts Payable Entail
Dental AP outsourcing to an expert to take care of some or all aspects of a dental practice’s payments. The third party utilizes sophisticated software to convert paper forms, approve, and file transactions. Outsourcing can be viewed as an improvement to the financial operations under the revenue cycle management framework. The main advantage that a dental practice gets through outsourcing is expertise. It helps in improving efficiency and compliance and reduces administrative work. Outsourcing eliminates manual data entry processes, resulting in secure transactions and timely payments.
Pros and Cons for In-house Dental Accounts Payable
In continuation with what was stated in the introductory part, each accounting strategy has its own strengths and weaknesses. The right choice will be based on your personal preferences. To help you choose the best approach, the table below outlines the strengths and weaknesses of engaging in-house manpower for accounts payable. This will assist in making an informed decision.
| Feature | Advantages (Pros) | Disadvantages (Cons) |
|---|---|---|
| Control & Visibility | Complete oversight of the procedures, work sequences, and payment schedules. | This can give a misleading sense of safety and increase the likelihood of fraud if duties are not properly separated. |
| Accessibility | Immediate access to staff to answer questions; able to walk over and chat. | Dependent on one person; if they are sick or on vacation, work stops. |
| Communication | “In-house” voice allows direct, personal control over vendor communication. | High-level, specialized expertise in dental-specific, complex tax/compliance may be lacking. |
| Team Culture | Strengthens team dynamic; in-house staff feels like part of the family. | Risk of “divided attention” if the staff member is also handling front-office duties. |
| Cost | No recurring monthly vendor fees for basic AP. | Higher overhead costs (salary, benefits, payroll taxes, desk space, software licenses). |
| Training | You can train them exactly to your preferences. | Constant training needed to keep up with changing dental insurance/tax regulations. |
| Efficiency | Faster internal approvals. | Susceptible to human error, missed charges, and delayed payments due to inefficiency. |
Pros and Cons of Outsourced Dental Accounts Payable
In the process of dental AP outsourcing, a dentist’s practice will move away from the manual and internal handling system toward an automated external approach. This change can help lessen the burden on administration and make payment processing easier for items such as laboratory bills and dental supplies.
However, it also changes how the practice manages cash flow and vendor relationships. Internal AP processes are typically shaped by the practice’s workflow and operational style. In contrast, dental AP outsourcing providers operate independently of these internal factors, following their own procedures and systems. The following table outlines the pros and cons of outsourcing accounts payable for your dental clinic:
| Feature | Advantages (Pros) | Disadvantages (Cons) |
|---|---|---|
| Cost & Efficiency | Reduces overhead expenses such as recruitment, onboarding, and employee benefits for in-house staff, resulting in savings of 30-50% on accounts payable processes. | Outsourcing service charges represent an extra variable expense. |
| Expertise & Accuracy | The use of specialists who specialize in invoices and regulations in dentistry helps minimize errors made by people. | Lack of familiarity with your practice’s unique corporate culture due to reliance on outsiders. |
| Technology & Speed | The adoption of modern, automated, and paperless technologies ensures faster and more accurate processing of invoices. | There is a lack of direct oversight of payments and their timeliness, resulting in a loss of control. |
| Risk Management | Enhanced security protocols and division of responsibilities minimize the likelihood of fraud. | Data security risks exist; therefore, confidentiality agreements must be strictly adhered to and legally binding. |
| Process Control | Ensures that vendors receive timely payment, avoiding interruptions in the delivery of equipment and laboratory services. | Flexibility in making last-minute changes is reduced compared to the presence of in-house staff. |
| Staff Focus | Allows in-house administrative personnel to concentrate on other tasks, such as interacting with patients. | Onboarding is required to bring third-party providers up to speed with your processes. |
When to choose In-House vs Outsourced Dental Accounts Payable
Having learned about the pros and cons of both accounting methods for AP, it all boils down to one thing: how can your time and money be best spent? When choosing between handling accounts payable internally or outsourcing to a dental AP provider, consider factors beyond just the accounting methods. But rather, making the correct choice also requires internal analysis of your dental practices and identifying which gaps you’re trying to fill in your current AP process and within its current capacity. This will help you find an optimal solution that maximizes overhead efficiency and allows you to focus more on providing patient care services. The next part will provide some scenarios to guide you in finding the best method for settling your bills, regardless of your internal staffing constraints.
Choose In-House AP if:
- You Have Access To In-House Strengths: You have an honest, trusted office manager or bookkeeper who is knowledgeable regarding specific dental accountancy software. Your bookkeeper will not be swamped when it comes to invoice processing, accounts reconciliation, and vendor payments, and can therefore take care of all of your accounting needs in-house.
- You Like Total Control: You like the ability to be involved in managing cash flow, vendors, and physical checks rather than having someone else manage such issues for you, even if the other party works in your own office. Having AP in-house enables you to have real-time information regarding any money leaving your practice.
- Your Transaction Volume is Low or Stable: You run a small or stable practice or a single-office practice. You do not require specialized and pricey accountants since the number of invoices you receive is manageable by an in-house part-timer.
Choose Outsourced AP if:
- You Want to Scale Fast: You want to add chairs, employ more associates, and even start another office, but you need a solution that will grow with you without the hassle of hiring more accounting staff. It’s much easier to opt for dental AP outsourcing and simply have someone else absorb the higher volume of invoices and bills.
- You Have a High Overhead: You’re already paying people to complete the necessary paperwork and documentation, costing you money with payroll costs, payroll taxes, and other benefits. If only there were a way to save 30% – 40% off your overhead cost, just by outsourcing it.
- You Want to See Patients: You don’t have time to do more insurance billing or pay run processes, because the staff is busy doing all of that work. Outsourcing makes sure the staff gets more face time with patients and makes everything run much more smoothly at the front desk.
- You Struggle with Retention: When your bookkeeper leaves, all hell breaks loose. You need someone who can pick up where the bookkeeper left off without disrupting your operations in any way. They ensure that the bills are always paid on time, relationships with vendors are good, and everything is accounted for.
Key Takeaways
For any dental office, an effective accounts payable system is essential for smooth running and financial stability. In its blog post, the author looks at both in-house and dental AP outsourcing solutions, discussing their strengths and weaknesses. In-house accounts payable offers flexibility, control, and better communication, but can be costly and require investment in training and technology.
The advantages of outsourcing accounts payable include increased efficiency and cost savings due to streamlined processes. Outsourcing the work to a professional partner gives the possibility to utilize state-of-the-art technology, something that might not be available in-house. Also, dental AP outsourcing helps practices free up time from complicated financial calculations to concentrate on what is really important: treating patients. In the end, whether to choose in-house or outsourced accounts payable will depend on several factors.
