Joe Fortini is the Vice President of Customer Success at 

, a company specializing in accounts payable and payment automation. Joe and his team work closely with client organizations across the end-to-end AP process to incorporate best practices, optimize workflows, and maximize business value. Prior to joining MineralTree Joe spent 10 years as Senior Vice President of Account Management at Smart Tuition, a Blackbaud company.

Joe Fortini

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 published its 7th annual State of Accounts Payable (AP) Report – a comprehensive 360-degree view of the AP landscape across a range of industries. The report highlights specific AP-related challenges and opportunities for dental practices and Dental Service Organizations (DSOs) and how they impact finance teams in those organizations. It also reveals some valuable opportunities for dental practices and DSOs to improve their back-office operations.

AP challenges abound for dental practices and DSOs

The events of the last few years have upended traditional ways of doing business – affecting everything from the workplace to supply chains to vendor payments. This is especially true in dental practices and DSOs.

A stubborn reliance on paper checks and manual processes hamper business operations

Many dental practices still rely on manual invoice and payment processing, costing time and errors, as well as late payments and penalties. 42% of the healthcare-related AP teams surveyed by MineralTree still issue more than half of their payments by check, compared to only 31% of non-healthcare organizations.

Greater invoice volumes exacerbate the situation

On average, dental practices and DSOs process a greater volume of invoices and payments than non-healthcare businesses. For example, the number of healthcare-related AP teams processing over 2,000 payments per month (13%) is more than twice that of non-healthcare organizations (6%). For DSOs, the number can be even higher. As a result, payments tend to be delayed.

This dentist-run DSO provides comprehensive practice management and administrative support services for practices across the northeast US. Formed through the merger of three separate companies, it has grown through acquisition, affiliations and new practice openings, building a strategic network with over 30 offices in four different states offering general and specialty dental services.

While that growth has helped significantly increase revenues, it has also created challenges related to its Accounts Payable (AP) process. It doubled the number of invoices its small AP team had to manage. In addition, it created a decentralized operating model that made it much more difficult to collect, process, and route invoices for approval.

Making things even more challenging was the fact that the DSO was already processing a large volume of invoices each week, an effort that relied on manual data entry, paper-based processes, and other time-consuming steps. The company would receive invoices directly from suppliers as well as from its various offices. The invoices, some as long as 12 pages, were a mix of paper and electronic, as well as scanned PDFs that included multiple invoices, making it extremely difficult to manage.

This forced the DSO’s controller to manually key all invoice data into QuickBooks, manage approvals with the CFO and cut and mail a high volume of paper checks each week. If she didn’t address it every day, it quickly spiraled out of control. So, when 500 invoices a month quickly became 1,000 — it became clear they needed to automate their AP process.

There were a few core requirements to make AP automation work for the DSO:

Seamless integration with QuickBooks to eliminate manual data entry

Electronic payment capabilities to reduce the cost and effort of check payments

A cloud-based solution that provided the CFO—or any user—complete visibility into invoice and payment details, no matter where they happened to be.

Once it settled on the right AP automation solution, the DSO was quickly up and running. Today, most of the company’s invoices are sent to a specific AP email account, making it easy for the controller or any user to quickly examine the invoice and send it directly to the AP system. For those invoices still received via mail, AP specialists quickly scan and upload PDFs into the system. Whether the invoices are emailed or uploaded into the system, the automated invoice capture process kicks in, extracting relevant data from each invoice.

From there, the AP specialist processes and posts the invoices. Then, the controller simply goes into the system once a week, runs a report, and chooses which invoices to pay. The entire process is much faster and more efficient, enabling the DSO to easily stay on top of all invoices. More importantly, AP automation has freed up the finance team’s time to focus on higher value activities – proactively communicating with vendors, performing more cash flow analysis, and improving process and efficiency.

More payment delays result in more vendor inquiries

According to the research, 43% of AP teams spend six 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.

There is still a shortage of qualified staff

The staffing supply/demand crisis highlighted by the Great Resignation has lessened to some extent, but companies are still finding it difficult to find qualified finance professionals at a time when invoice volumes and workload continue to increase. And even if finance leaders can bring more AP professionals on board, it may not be enough to address the inherent inefficiencies and problems of manual AP processing.

Hybrid work puts added pressure on AP team

Fully remote or hybrid work has become an established practice in most organizations. Finance leaders expect more than 72% of AP team members to work remotely, at least part of the time, in 2023, according to MineralTree’s research. While remote work has been gaining favor for several years, it creates significant difficulties for AP professionals processing invoices and payments manually. In addition to the time-consuming inefficiencies, manual processing requires AP professionals to go into the office to pick up invoices and checks, as well as continually follow up with people to approve invoices and authorize payments.

Supply chain disruptions put more focus on vendor relationships

As in other industries, supply challenges have interrupted the flow of essential dental equipment and supplies. But the stakes are higher when it comes to proper dental care. So, no surprise that 75% of healthcare-related AP teams say that the importance of vendor relations has grown. This means dental practices need to do more to meet their vendors’ desire for faster, more accurate payments.

AP complexity grows in DSOs and multi-entity practices

Many dental practices have centralized back-office operations supporting multiple offices. These situations create challenges when trying to centrally manage AP across those offices while supporting the unique requirements of both practice-level and office-specific vendors.

Despite the myriad challenges outlined above, forward-looking finance teams in dental practices and DSOs are making progress by embracing modern technologies to streamline their backend processes and take cost out of their payment functions. Digitizing the AP process relieves the burden of tedious manual tasks, removes inefficiencies, and digitizes the approval and authorization workflow to eliminate internal payment delays and speed up the entire process. It also enables work from anywhere, so AP teams can operate effectively in remote and hybrid work environments.

All the companies surveyed by MineralTree reported that by automating AP they have been able to do more with less. Sixty-one percent are processing more invoices with the same number of AP professionals, while others are using the freed-up time to reallocate professionals to more strategic tasks.

In addition to automating invoice processing, many finance leaders are automating payments and experiencing compounded benefits as a result, including staff time savings, faster payments, operational cost savings, increased fraud protection, stronger vendor relationships, and valuable cash rebates and rewards.

However, some finance teams may not have the bandwidth to help vendors navigate the ePayment process. To overcome this obstacle, some solution providers offer payment services that handle ePayment enrollment and management as well as vendor payment inquiries. Since these providers have a dedicated team to manage the entire process, they are able to provide faster service to vendors while freeing up their finance teams.

The many issues outlined above will continue to present challenges for dental practices and DSOs for the foreseeable future, but forward-thinking finance leaders can embrace technology and services to help overcome them and achieve more efficient and profitable operations at the same time. They can also use automation to gain valuable visibility and insights into their financial operations to create payment strategies that improve cash and spend management and strengthen their financial position now and for the future.

Articles

Insights from MineralTree's 7th annual State of Accounts Payable (AP) Report.