Using Medical Factoring to Improve Your Practice’s Cash Flow
The first step in running a successful medical practice is seeing and helping patients. The second step is less glamorous and just as important, and that is figuring out how to collect payments from those clients and their insurance companies. If you’re one of the many medical practitioners who occasionally face cash flow problems as a result of unsettled accounts, medical factoring might be the solution you’re looking for. Allowing a third party to help keep money moving while waiting on collections can help you pay bills and assist more patients.
How It Works
If insurance companies paid off claims in a timely manner, many people would have far fewer financial woes. In reality, it can take up to four months to get your payment. That means you can tend to a patient late in the third quarter and not see a dime until the new fiscal year. The beauty of medical factoring is that it eliminates the long wait for receivables. You can keep your cash flow steady even with outstanding balances. The frustratingly long insurance processing period is taken off your books and handed over to a factoring company.
The payment breakdown is pretty simple: the factor will pay you 70 to 80 percent of an approved medical claim in a first installment. Once they collect from the insurance agency, you will be paid the remaining balance, less the fees they charge for their services. For a small portion of money that’s already owed to your practice, you can settle a balance much more quickly and not have to worry about utilities and payroll and the other expenses that can’t be pushed off just because insurance companies work slowly.
Who Should Use Medical Factoring
Unless your clinic or office is big enough to have a constant stream of working capital, this type of financing can help your situation. The cost of supplies alone can significantly run up a small practice’s bills, and you can’t very well stop providing care while waiting for receivables. Any new or small medical office can benefit from an advance on these payments, as the alternative is usually taking out a more expensive loan or infusing your own cash into your business.
Waiting on payments is the name of the game in the medical field. Unfortunately, if you don’t have a plan for supplying working capital while you wait, you may find yourself on the losing end. Medical factoring can allow your practice to stay funded and continue providing care.