Summary: Ensuring good payment processing hygiene is crucial for maximizing the valuation of your orthodontic practice, particularly when considering a sale to private equity investors or outside buyers. Key areas to focus on include auditing payment processing fees and reducing administrative costs associated with credit card processing.
Key Takeaways:
- Poor payment processing hygiene can lead to unnecessary costs and harm the long-term valuation of your practice.
- Identifying and reducing avoidable card processing fees, which have significantly increased in recent years, is essential.
- Small fixes, like correcting coding errors and improving data handling, can lead to substantial savings and enhance the practice’s overall valuation.
By Eric Cohen
Is your practice’s poor payment processing hygiene at risk of harming the long-term valuation of your practice when it comes time to sell to private equity investors or outside buyers?
If selling your orthodontic practice is on your radar, maximizing your valuation to drive a successful, profitable sale will be your number one priority. To achieve this, you will need to consider several factors—chief among them, buttoning up your payment processing infrastructure.
The cost of poor payment processing hygiene
Oftentimes, this is a vulnerable part of your business that could be costing you more money than it should. With the payments ecosystem constantly changing and evolving, and credit cards continuing to be the preferred payment method for many patients, businesses with poor payment processing hygiene are at risk of accruing unnecessary costs and harming their long-term valuation in the process.
Areas to audit to ensure a profitable practice sale
When exploring a potential sale of your practice, there are a few areas within any payment processing that you can audit to ensure a successful negotiation. Two of the most important areas include identifying bloated processing fees and brushing up on card processing hygiene.
How to avoid avoidable fees
Credit card processing fees are a necessary evil in this day and age. Since it’s a traditionally unregulated and unchecked space, however, card processing fees have continued to rise in recent years. In 2023 alone, merchants paid $172 billion in card processing fees, an increase of more than 7.5% compared to 2022. While some of these are unavoidable or non-negotiable, other processing costs are negotiable or flat-out avoidable. To reduce these avoidable fees, learn how to identify them on your statement. Alternatively, there are technology solutions and industry experts that can help both identify these fees and advocate on your behalf to reduce these costs for you.
How to reduce credit card processing administrative costs
In addition, there are small but impactful steps you can take to reduce administrative costs associated with credit card processing. For example, incorrect coding within your payments’ infrastructure can lead to increased costs, and improper handling of sensitive payment data can lead to fines for lack of PCI compliance. While these can be frustrating, the same fixes that you can implement to reduce or negotiate processing fees, such as automating certain processes or implementing solutions that help proactively catch operational errors or inefficiencies, can be applied here as well. Examining these fees can have major benefits for a practice as well; for example, $100,000 in yearly savings on processing fees will increase your overall valuation by $700,000.
Create immediate savings and improve the valuation of your practice
Above all else, it’s important to realize that you have full control over improving the valuation of your practice. By negotiating credit card fees, avoiding unwanted non-compliance fines, and ensuring proper setup of your payment systems, you can create immediate savings that help improve your valuation without having to switch your credit card processor, which almost always is a major upheaval. When exploring a potential sale of your orthodontic practice, proper payment hygiene is a secret weapon to make the negotiation process a successful one. OP
This is the final part of a four-part series. Part 1 talked about how credit card processors overcharge 72% of businesses. Part 2 talked about why skipping your annual PCI survey will cost your practice. Part 3 explained how to avoid unfair fees when your payment processor is embedded in your practice management software.
Eric Cohen is the CEO and founder of Merchant Advocate, which works with merchants, including private practice owners, to reduce credit card processing fees from the unregulated credit card industry without having to switch processors.
