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What you’ll learn in this guide:
No doubt you’re familiar with the challenge of waiting months to get invoices paid if you work in healthcare or in a business that serves the healthcare industry. Given the intricacies of each company’s unique billing requirements, government regulations, and Medicaid or Medicare receivables standards, it’s little wonder invoices can take months to be paid! Unfortunately, too many payment delays can leave healthcare providers struggling to cover operating costs.
Big and small health-related businesses can benefit from medical invoice factoring, also called medical receivables factoring, healthcare factoring, or just simply medical factoring. With invoice factoring for small businesses in the health industry, healthcare professionals can enjoy the benefit of consistent cash flow, and have the ability to cover any cash flow gaps, simplify accounts receivable, and fuel growth – just by getting invoices paid in days.
Recently, the American healthcare system’s expenditures were staggering, reaching an estimated $4.5 trillion. Not far behind, Canadian healthcare spending was projected to hit $344 billion in 2023. Amid these towering figures, healthcare providers face a universal challenge: the drawn out delay in invoice payments, often stretching between 90 to 120 days, particularly in the United States.
Important facts about medical invoice factoring:
There are two types of medical factoring services:
If you’re in the healthcare or related business sectors, the extended wait times for invoice payments might be all too familiar a challenge. The complex web of individual medical billing requirements, stringent government regulations, and the specifics of Medicaid or Medicare receivables standards are just a few reasons why invoices can take an age to settle. These delays can leave healthcare providers in a bind, struggling to keep up with essential operating expenses.
If you’re in the healthcare field, you might be familiar with some of these challenges that have a considerable impact on cash flow:
Both large and small organizations within the health-related business space stand to gain from what’s known as medical invoice factoring, also referred to as medical receivables factoring, healthcare factoring, or simply medical factoring. This financial strategy offers a lifeline for consistent cash flow, providing the means to fill any cash flow gaps, simplify the accounts receivable process, and drive growth – all by ensuring that invoices are paid in a matter of days.
By turning to medical factoring, healthcare providers can sidestep these challenges, converting outstanding invoices into immediate capital. This not only reduces the waiting time to get paid significantly (up to 97% according to FundThrough’s 2020 customer data) but also provides a reliable financial buffer that allows for continuous operation and growth, even in the face of the industry’s inherent payment obstacles.
FundThrough offers a few unique advantages compared to other factoring companies:
FundThrough provides unlimited working capital based on the size of your outstanding customer invoices. This process is designed to be straightforward and fast, leveraging AI technology to provide healthcare providers and their service companies with the working capital they need, based on their outstanding invoices.
How FundThrough’s medical invoice factoring service works:
1. Issue Invoice: Healthcare providers or businesses servicing the medical industry issue invoices for services rendered or goods provided.
2. Request Funding: Submit these outstanding invoices to FundThrough via our intuitive online platform. This step is made effortless, whether you’re manually uploading your invoices or connecting your account through seamless integrations with accounting software like QuickBooks or OpenInvoice.
3. Get Funded: Upon submission, FundThrough reviews the invoices and your customer and, once approved, advances the full amount to you, the healthcare provider or business, less a transparent fee, often within just a few days. This immediate infusion of cash allows businesses to address their financial needs without delay, whether it’s for payroll, purchasing supplies, or investing in new technology.
4. Customer Repayment: The final step in the process involves the original invoiced customer paying the outstanding amount directly to FundThrough, according to the agreed net terms. This step closes the loop on the transaction, allowing the healthcare provider to remain focused on their core operations without worrying about the collection process.
Medical receivables factoring offers a lifeline to healthcare providers and adjacent businesses, ensuring they have the necessary funding to not only maintain but also grow their operations. This financial tool is particularly valuable in an industry where cutting-edge technology and high-quality care are paramount, but cash flow can often be unpredictable. Here are some of the key reasons medical offices and healthcare-related businesses might turn to factoring:
When partnering with a medical factoring company or healthcare factoring company, there are a few important points to consider:
Industry Experience: If a factoring company has already funded healthcare companies in the past, working with you will be easier. They will know the intricate ins and outs, saving you the hassle of having to explain multiple details specific to medical or healthcare transactions.
Speed and Efficiency: Many factoring companies still use manual, paper-based processes, leading to a slow and expensive process. Look for a company that uses technology and automation to save yourself time and effort in getting funded. That’s what invoice factoring is supposed to deliver in the first place!
Fee Transparency: All factoring companies charge a funding fee that could range from 1% to 5% per 30 days. But they don’t all tell you about hidden fees – like service fees, sign-up fees, or annual fees – that can leave you with less of your invoice than you thought.
Advance Rate: This refers to the percentage of the invoice amount that the factor is willing to give you upfront. Many factoring companies only have advance rates of 80%. With FundThrough, you get the entire invoice value, less the factoring fee, upfront.
Partner in Your Success: This should be a given, but it’s often not. Whoever you choose should be invested in your long-term success. At FundThrough, that means finding solutions to help you get funded, dedicated account management, and treating your customer like our own Fortunately, when your small business is growing fast, but cash flow is tight, FundThrough offers the best factoring solution to fit your funding needs.
Although medical factoring and healthcare invoice factoring are often used interchangeably, they are different.
Medical Factoring addresses the needs of physicians, dentists, eye doctors, medical specialists, and other health care providers who provide direct care to patients, but risk cash flow issues from slow-paying third-party payers. These payers might include Medicare and Medicaid, the government , HMOs/PPOs, and private insurance carriers. It’s also called medical receivable funding, medical receivable factoring, or medical account receivable financing.
On top of that, they still need to purchase supplies such as life-saving medications, pay staff such as pharmacists and technicians, and other business expenses. Staying on top of cash flow is essential to keeping their important work running smoothly. By factoring outstanding invoices and unpaid insurance claims, independent pharmacies can ensure they always have the necessary cash on hand.
Especially for independent pharmacies who might not have access to traditional funding sources like a franchise pharmacy would, the ease of application and less strict qualification requirements of pharmacy invoice funding make it an ideal funding source to bridge cash flow gaps or simply have enough cash on hand to cover operating expenses.
Medical invoice factoring can be used by any healthcare provider that works with private insurers or government insurance programs. Companies may include:
Healthcare factoring is also for vendors that rely on payments from healthcare providers, including:
Self Care Catalysts (SCC) partnered with FundThrough to accelerate its cash flow, making it possible for SCC to pay various fixed costs and keep up with their billion-dollar healthcare clients. SCC clients include pharmaceutical manufacturers, hospital systems, academic institutions, and clinical research organizations.
Besides the problems that medical invoice factoring solves, the advantages are plenty:
FundThrough pays invoices in days for industries outside of this list as well.
Fortunately, when your small business is growing fast, but cash flow is tight, FundThrough offers the best factoring solution to fit your funding needs.
Source: 1. American Hospital Association (AHA) https://www.aha.org/system/files/media/file/2020/01/2020-aha-hospital-fast-facts-new-Jan-2020.pdf
Your questions answered.
When you factor an invoice, you are essentially selling your unpaid invoices to a factoring company—FundThrough. In return, you receive an advance, which allows you access to working capital. The remaining balance is paid to you when FundThrough receives payment from your customer.
Factoring, also called invoice factoring, is when a domestic company receives an advance against unpaid accounts receivables.
Forfeiting is a type of international trade financing. It deals primarily with medium- to long-term accounts receivables and is a financing option used by exporters to receive 100% financing based on exported goods’ value.
No, medical invoice factoring is not a loan. It is instead an advance on your unpaid accounts receivables. Your credit does not matter, and your credit score will not be impacted when you factor invoices.
Interested in possibly embedding FundThrough in your platform? Let’s connect!