On the dangers of Interest Free Finance (and an elegant solution)

An interesting conversation during last night’s live webinar for members of The Extreme Business Club – on the subject of “interest-free finance” (IFF).

The consensus on the call was that offering this facility is a last chance saloon to help patients who want treatment but need help with their cash flow management. It is NOT a sales aid to generate curiosity.

The price you pay as a business is enormous, the c.9.00% finance charge often being equivalent to a third of your profit.

Worse if you offer a member’s discount for fee per item treatment in your dental plan plus IFF – goodbye profit margin.

Devastating if you pay an associate to deliver the treatment after all of those charges and discounts have been surrendered. You are probably running at a loss.

Hence the short-term ortho clinics that have vanished overnight, with patients mid-treatment and staff left on the pavement (and there have been a few of those).

What’s going wrong here?

  • The finance charge to the business is too high a proportion of the business profit margin;
  • The impact of dental plan discounts exacerbates the financial problem;
  • The IFF offer is introduced into the conversation far too early – by inexperienced communicators (clinicians and TCOs) who see this as an easy route to the sale.

I was grateful last night to Celia Burns, founder of Nothing but the Tooth, who introduced me to the concept of TAYG/PAYG.

Treat as you go.

Pay as you go.

This effectively allows the practice to self-underwrite their financial arrangements with the patient, designing a bespoke treatment and payment plan in which the patient pays in instalments as the treatment progresses.

Given that you observe some simple rules, there is no need for a consumer credit licence, no need for crippling finance charges, no need for paperwork and financial underwriting.

You (the practice) have, of course, to be canny about who (the patient) you make this offer to.

None the less – it’s an elegant solution to a problem that often creates bewildered owners wondering why they are so busy and yet have no cash flow.

I hope that this will be the first of many fascinating conversations in The Extreme Business Club, aiming to become the world’s largest (and least expensive) online portal for learning about the business of dentistry.


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Chris Barrow

Chris Barrow has been active as a consultant, trainer and coach to the UK dental profession for over 20 years. As a writer, his blog enjoys a strong following and he is a regular contributor to the dental press. Naturally direct, assertive and determined, he has the ability to reach conclusions quickly, as well as the sharp reflexes and lightness of touch to innovate, change tack and push boundaries. In 2014 he appeared as a “castaway” in the first season of the popular reality TV show “The Island with Bear Grylls”. His main professional focus is as Coach Barrow, providing coaching and mentorship to independent dentistry.

One thought on “On the dangers of Interest Free Finance (and an elegant solution)”

  1. Hi Chris, if practices are loosing money due to IFF and Plan discounts, their pricing structure is incorrect. I can help them on this

    No more than 25% of their total patient base will use IFF – Therefore, the finance ‘charge’ for those that do is spread over the entire year’s sales/profit margin.

    IFF ‘charges’ are a tax deductible expense.

    Question: How many treatments would be lost if IFF was not available?

    Celia Burns PAYT is a fine option, but IFF means 92% of the payment is upfront – Good for cashflow.

    Average IFF charges are below 8% these days

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