By Tom Anderson
The cost of running checks to the bank for deposit is not cheap. Costs associated with time out of the office, theft, fraud, desk float and manual data entry definitely affect a dental practice’s bottom line.
Adopting remote deposit capture (RDC) into a dental practice to electronically deposit checks eliminates these costs and reduces check-handling concerns. RDC refers to the ability to scan checks and deposit them electronically in a bank account. This process was made legal in 2004 when Congress passed the Check Clearing for the 21st Century Act (Check21).
Trips to the bank are no longer needed to deposit valuable checks. Check21 technology, now widely used by financial institutions and small businesses, can be easily implemented in a dental office with little IT assistance to save time and cut costs.
What are the benefits?
“Cash flow is the life blood of any small business, including a dentist’s office,” said Dr. James B. Bramson, former executive director of the American Dental Association and an advisor to Digital Check, a check scanner manufacturer. “Using a check scanner to make deposits helps speed the cash management cycle in a dental practice. Remote deposit capture enables dentists to receive access to funds immediately instead of letting the bank float the check.”
By using RDC, patient and insurance provider checks can be deposited during, or even after, banking hours and funds can usually be made available the same day, when deposited before 7 p.m. at most financial institutions. Dental office hours no longer have to match banking hours since deposits can be made anytime.
“This technology allows the office to quickly make electronic deposits directly into the dentist’s bank account from the office. It is more convenient for staff because it eliminates the need to batch checks and go the bank to deposit them,” said Bramson.
In addition to increasing access to funds, RDC can reduce some variable staffing costs. Using a check scanner eliminates transportation risk and costs for travel expenses, employee liability and paid time away from the office. Automating a time-intensive process such as handling payments received via check simplifies accounting and bookkeeping, eliminates double data entry by offering streamlined integration with patient systems and frees up office staff to focus on other areas of the practice.
The process also offers tighter control and security of payments. Checks do not leave the office and can be scanned and processed immediately to prevent checks being misplaced, lost or altered.
Similar to electronic medical records that remove paper from the clinical process, RDC removes paper from the payment and accounting processes. Scanned images of checks and other payment information can be archived in a patient’s electronic file, freeing up precious office space.
How RDC works
Dentists sign up for RDC through their banks or credit unions. RDC requires a personal computer, an Internet connection, a check scanner and an RDC software application. Although some financial institutions offer free scanners to their business and high value customers, others offer the device for a reasonable one-time fee. They also typically charge monthly and/or transaction-based fees for the service.
Electronically depositing checks is straightforward. Users launch the bank’s Web site and log in to the secure site. Next users follow the instructions on the Web site, drop the check into the scanner tray, click the scan button and watch as the image appears on the screen. Once the check scanning is complete, users are asked to confirm that the check amounts automatically read from the check image by the deposit application are correct. The process takes an average of less than five minutes.
Small check scanners are about half the size of most office phones so they take up little desk space. Most dental offices use single-feed scanners where checks are scanned one at a time – ideal for offices that deposit 20 or fewer checks per day. These scanners have many of the same characteristics as their larger, high-volume siblings used inside financial institutions, but they are tailored to the needs of small businesses. For larger offices that need to scan batches of checks, auto-feed scanners are the ideal solution.
Virtual endorsement adds electronic information such as a date, time stamp, account number, and scanner serial number to the image. Some scanners come equipped with an inkjet printer that provides a marking on the back of the check to create a clear audit trail that indicates the processing status (e.g., sequence number, date, account number) which is subsequently captured as the check is scanned. These features reduce confusion during check handling to prevent inadvertent or fraudulent redeposit of the check. Some banks also offer scanners that add a front side franking mark to indicate that the check has been processed electronically.
Dental offices receive checks continuously throughout the day from in-person patient payments or insurance provider payments that arrive in the mail. Staff can scan and deposit checks as they are received or at the end of the day, and funds may still be available the next business day. Scanned checks should be kept on hand for 30 days in case the financial institution or patient has a question about the payment, and should be shredded after that.
The RDC software application manages the entire process of scanning, creating the deposit and transmitting the deposit to your practice’s financial institution. The scanner works in tandem with the bank’s application to convert the check image into a secure digital file and transmits it with the routing/transit number, courtesy amount recognition (CAR) and the legal amount recognition (LAR) information to the dentist’s bank for clearing. CAR is the numerical amount listed in the box field on a check while LAR is the amount written underneath the “pay to the order of” line.
The application, usually available from the bank as a Web-based solution, integrates the deposits into statements and can often import the data into accounting or bookkeeping programs like QuickBooks.
Return on investment
“Credit cards may be used in the office, but a very large percentage of the revenue to a dental office still comes in the form of a check,” said Bramson. “Our informal survey research shows that many offices still receive upwards of 50 or 65 percent of their revenue from patients who write checks at the time of delivery or after being billed by the office. In addition, checks remain the most cost-effective form of payment for both the patient and the practice.”
Taking control of the billing process by cutting down on paperwork may be priceless to some harried staff members, but calculating the return on investment of RDC is a smart business decision for all organizations before they invest in the technology.
Using $632,530 as the average gross billings per year for independent dentists, generalists and specialists (a figure reported by the ADA in its 2007 Survey of Dental Practice – Income of Dentists) and pairing it with the average number of patient visits per week of 85 (the statistic found in the 2007 Survey of Dental Practice – Characteristics of Dentists in Private Practice and Their Patients report), calculating an approximate return on investment is possible.
If roughly half of all payments received are in check form, most dental offices handle approximately 40 checks per week totaling $300,000 in revenue per year. Using remote deposit capture to deposit these 40 checks per week saves the average dental office at least $4,500 annually in recouped employee travel, hourly wages and courier expenses and accelerated cash flow.
RDC is also a cost-effective alternative to pricey credit card payments that require dental offices to pay a percentage of the payment as fees for the service. Making checks the preferred payment method could result in an even greater return on investment.
The ultimate goal of remote deposit capture is to make the dental office as efficient as possible. By improving payment time, the practice can decrease the amount of time and money it spends on accounts receivable.
Tom Anderson is the president of Northfield, Ill.-based Digital Check, a manufacturer and distributor of electronic check scanners. For more information on Remote Deposit Capture, visit www.digitalcheck.com.
By Tom Anderson