Medical Factoring: Solving Cash Flow Issues for Medical Practices

Many types of businesses encounter cash flow problems at one point or another. It is particularly common for medical practices. While there are various ways for these organizations to bring more cash in on a regular basis, one of the most frequently used techniques is medical factoring. This is the process of selling unpaid invoices to a factoring company. Your business receives between 70 and 80 percent of the invoice amount, and once the customer pays the factoring company, you receive the rest minus a fee. Instead of waiting for months on end to get more cash, you can bring in money more effectively with factoring.


Cash flow is a significant issue. Every business has expenses that must be paid regularly, such as rent and utilities. These are predictable, but your revenue stream may not be as simple to predict. Many invoices give customers up to 120 days to pay off the bill. If many customers take their time with this, then you may not have the funds readily accessible that you need.


Ultimately, the problem comes down to needing to pay expenses in a quicker turnaround than the rate in which you are getting paid. With medical factoring, you now have a predictable source of income. Instead of waiting months to receive money, you get it right away. It is true you are getting less than the true value of the invoice, but in many cases, it is better to get some money now than a little more later.


Some medical practices resort to taking out loans to solve cash flow problems. The issue with this is that you eventually have to pay back the loan with interest. A loan does not solve the problem. It merely prolongs it. With factoring, you are enhancing your revenue stream that can easily adapt as you bring in more customers.


It is relatively easy to qualify for factoring when compared to qualifying for a loan. You often just need to show what the value is of most of your invoices and that there is a clear record that your customers pay them off sooner or later. Another huge benefit is that the factoring company then becomes responsible for contacting clients who are late on payments.


With so many options available to business owners, it is prudent to look into each and every one to decide which is best for your specific company. Medical factoring has helped many practices get back on their feet.

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