The medical industry is one which is constantly facing the problem of slow payments, and a high volume of outstanding accounts receivable. It’s also difficult to keep track of all those invoices and to carry out a regular billing process, all of which distracts employees from their real function as medical personnel.
This makes Accounts Receivable financing ideal for use in the medical industry, as will be shown below.
Customized Accounts Receivable financing processes
Because the medical industry lends itself so well to Accounts Receivable financing, a number of financing companies have customized their products specifically for medical applications. In this scenario, a healthcare facility would sell off some of its Accounts Receivable to the financing company, and the claim which is owed to the hospital is then assumed by the factoring company.
When patients’ invoices are sold to a factoring company, an amount somewhere between 80% and 95% of the face value of those invoices is immediately given to the healthcare facility, in exchange for a factoring fee, usually between 1% and 5%. The factoring company then assumes responsibility for collecting on those invoices, and remits the difference between its original payment to the hospital and the invoice amount, minus the factoring fee, when the invoices are ultimately paid off by the insurance carrier.
Advantages of medical Accounts Receivable financing
Since funds are generally released to the medical facility within one or two days of selling the invoices, the hospital doesn’t have to wait on incoming payments anymore. Not only does this establish positive cash flow, but it also allows the medical industry to realize supplier discounts for medical products. It permits the debt capacity of the medical institution to stay strong, because no debt is taken on to acquire the financing made available by a factoring company. In the longer term, it will also allow the medical facility to grow and possibly expand their facilities, as well as to increase the efficiency of their overall operations.
Accounts receivable financing with Capital Connex
If you think accounts receivable financing may be right for your company, we’d like to hear from you. Contact us at Capital Connex so we can discuss some alternatives which might benefit your medical industry company.