Like most industries, the medical industry has its problems maintaining a positive cash flow, with payments from customers and insurance companies often arriving late or not at all. In order to manage gaps in cash flow which are caused by this irregular incoming revenue, a number of options have to be considered, just for the sake of day to day survival.
One of the best of these options is accounts receivable financing, and here is how the medical industry currently benefits greatly from this financial practice.
Medical industry accounts receivable financing
Many healthcare organizations have made the decision to establish Accounts Receivable financing with a factoring company, so they can receive instant cash rather than wait for insurance companies to send payments. The good thing about this practice is that the number of invoices which are sold to a factoring company is entirely up to the medical organization – it can be all of their invoices, or any other number of invoices which generate a significant amount of cash.
How it works
After medical service has been provided and invoices been generated for a client, a medical facility is free to approach an alternative lender to sell those invoices for a percentage of the face value, usually between 80% and 90% of the invoice amount. The factoring fee charged by the alternative lender will generally be between 1% and 5%, and this amount is subtracted from the payment received from customers, after which the remainder is returned to the medical organization.
Advantages to medical industry
In addition to solving a great many cash flow issues, having ready cash on hand allows the medical industry to obtain significant discounts from suppliers of pharmaceuticals and other materials by paying early for them. That cash can also be used to provide additional services for patients, and can stimulate growth for the hospital itself by attracting high-quality talent.
Quick cash for your company
Most small businesses eventually encounter situations where cash is needed very quickly, in order to react to stresses of day to day business. When this happens to your company, one way of removing that financial stress may be through accounts receivable financing. At Durham Commercial Capital, we often work with clients in this area, and we would be glad to work with your company as well, so please do contact us to find out more about the option.