Running a medical practice presents unique challenges in order to achieve success. According to one study conducted by U.S. Bank, a massive 82% of all businesses that ended up failing said that cash flow issues were a major contributor to that event. Often, this doesn't just come down to the amount of money coming into an organization—it relates to the timing as well.
Proper cash flow management requires a fundamental understanding that not all types of businesses are created equally. Some, like retail stores, tend to make a significant portion of their income at the end of the year—hence events like "Black Friday" and "Cyber Monday." Others, like landscaping businesses, see the vast majority of their income generated during the warm summer months. If you want to take control of the cash flow for your practice, there are a few key things you'll need to keep in mind.
Insurance companies are shifting costs to consumers perhaps the most critical thing to understand about medical practice cash flow is that the dynamic has changed significantly over the last few years.
More and more, insurance companies are shifting costs to consumers—a burden that they may not be ready to handle. According to one recent study, about 10% of families in the United States have a medical bill they can't afford to pay at all. A further 25% currently have some type of outstanding medical bill. It's an unfortunate situation for all involved, but it requires medical practices to be proactive about how they're collecting for services rendered.
Offer multiple payment options
In terms of cash flow, a way to mitigate risk involves getting as much money from patients at the time of their visit as you can. To get to this point, you need to offer a wide range of different payment options. People can always pay with cash and checks, but you should also offer the option for credit cards, digital services like PayPal or Venmo, and more.
An efficient checkout process is key
Making the checkout process as efficient as possible is also a great way to get to this point. Train your employees to take someone's co-pay when they check-in so that they don't have to wait after their appointment. Ensure that they're informing patients that a statement will be coming with additional charges and outline any that their insurance policy might not cover. The more efficient you can make this process, the more likely it is that you'll be able to collect payment while someone is still in your office. At the very least, it will significantly reduce the amount of time you're waiting on unpaid bills.
Pay suppliers on time
Another step that medical practices can take to improve cash flow involves paying their suppliers on the due date. Sure, we'd all like to be paid ahead of time—but there is a due date on an invoice for a reason. Especially if you're having a hard time managing funds, pay vendors and suppliers on the due date so that you can use that money for more important matters in the meantime.
Monitor your account balance
Beyond that, setting a base balance and a target balance are also important steps to take. A base balance is a predetermined balance in your practice's operating account that allows you to see fluctuations relative to that amount. A target balance can be a useful tool for identifying the progress you're making toward certain income-related goals.
In the end, cash flow management for medical practices has always been tricky—but it is possible to be successful with the right approach. By implementing tips like the above, you'll be able to enjoy all the benefits of this process with as few of the potential downsides as possible.