The Advantages Of Invoice Factoring For Medical Practices
Medical businesses, from small clinics to larger health organizations, are in a growth sector of the economy. However, cash flow problems can get in the way of things that are needed to foster expansion and generate opportunities. Invoice factoring is one way that many medical practices address their cash shortages. Although factoring is used in almost every type of business, it’s especially useful in healthcare industry where bills can regularly remain outstanding for long periods of time. Other receivables, such as insurance plans, may also take months to resolve. This increasingly popular financial service takes your accounts receivable and transfers the responsibility of collection from you to a third party, known as the factor. Here are some of the benefits as they apply to medical businesses.
Invoice factoring is most useful when conventional loans don’t cover an expense or you need to gather funds quickly to pay for time sensitive accounts, like payroll or equipment maintenance. That’s because the organizations that provide these services give you cash in hand for your outstanding accounts receivable.
Any business can benefit from having more capital available. If you need to leverage against cash on hand or other equity, increasing the amount of that resource in reserves can have a drastic influence on your potential loan amount. You can also use the capital directly to invest in any number of growth stimulators, such as staff or equipment.
Bill collections and insurance paperwork are two of the most time-consuming office tasks in most medical practices. Financing your accounts receivable with factoring organizations alleviates pressure on both you and your administrative staff. That means less errors and less headaches, letting you focus on providing the best care possible.
In an invoice factoring situation, the collateral is the account receivable itself. The factor company takes on the risk of collecting the outstanding payment in exchange for a fee. That means that you don’t have to put any part of your business on the line in order to increase cash flow. This is especially important for medical businesses that want to focus on growth, as it allows equity to be leveraged toward growth instead of being tied up in operational costs and incidental expenses.
Through reduction of collateral requirements and simplification of paperwork, invoice factoring provides a welcome relief to many medical businesses. Imaging centers and family practices alike can always use a faster turnaround time on invoices. Approaching a factor company or a banker to ask about this type of financial product might be the first step towards increased liquidity and predictable, sustainable growth of your services.