Optimizing Cash Flow Through Effective A/R Follow-up

A streamlined cash flow is necessary for your healthcare organizations to successfully run your day-to-day activities but it can be negatively influenced due to irregular follow-ups on accounts receivable. The capital in accounts receivable in terms of overdue payments must be as less as possible in order to maximize funds in the cash flow to execute operations. 

ByadminonAugust 07, 2023

By implementing favorable practices to incentivize accounts receivable follow-ups, you can effectively settle your cash flow. This blog will focus on such practices that are especially suited for healthcare organizations and can facilitate them in augmenting their cash flow.

cash flow

What is Cash Flow in Healthcare?

Cash flow is an essential framework for healthcare organizations that involves money moving in and out of them. The inflow of money can comprise insurance reimbursements and patient payments. Whereas, the outflow of money typically includes salaries, investments, and operating expenses. A positive cash flow indicates more inflow of money than outflow and enables you to expand your services and provide better healthcare. 

How to Optimize Cash Flow With Robust A/R Follow-Up?

Healthcare organizations can heavily optimize their cash flow by effectively managing their accounts receivable and implementing ideal follow-up practices. Let’s look at some important A/R follow-up practices that healthcare organizations can execute to maximize their cash flow.

    1. Tracking Accounts Receivable

It is important for you to rigorously track matters pertaining to your accounts receivable. By doing this, you can quickly identify and address any issues regarding overdue payments. 

You can distinguish the factors that cause those issues ranging from a payment lost in transit to a simple oversight. In case of detecting any recurring trends, organizations can implement stricter measures to rectify them and manage their accounts receivable.

    2. Improving Data Quality 

The quality of billing and client data can also be improved to regulate cash flow. For this, accurate details only can integrate the invoicing databases and software into the automated system of the accounts receivable. Specific resources can be designated so that the details entered into that system can be regularly checked to avoid any payment delays.

By ensuring that the correct information is sent to the correct place, healthcare organizations can make their accounts receivable process more efficient. Simultaneously, their cash flow system can be optimized and the number of invoices sent out can multiply. Moreover, billing clients sooner every week instead of every month can maintain a more consistent income for organizations, ease out payment tracking, and reduce the billing time.

    3. Automating Accounts Receivable

It is always useful for your healthcare organizations to automate the system overseeing your accounts receivable as much as possible. Manual measures like tracking the payments on spreadsheets are more likely to cause extra work. This can result in delays and employees overlooking important matters.

Fortunately for you, there is a wide variety of applications that provide specialized services to automate processes and effectively manage their accounts receivable. Processes like giving out alerts in case of overdue payments and creating invoices can be easily operated by such applications.

    4. Evaluating Credit Terms

Healthcare organizations must also routinely evaluate their credit terms with clients in order to manage follow-ups about their accounts receivable. Credit terms comprise specific terms and conditions for the contracts established between healthcare organizations and their clients. General standards of setting credit terms as due in a certain number of days or upon receipt can be applied.

Specific aspects of clients like payment history have to be considered in order to evaluate credit terms with them. Hospitals and clinics must also refrain from implementing risky measures like giving longer credit terms that can potentially damage their cash flow.

    5. Providing Several Transaction Options

Convenience for clients is also vital for your organizations that can elevate accounts receivable and boost cash flow. You can increase it by providing them with a variety of options to conduct transactions and handle the accounts receivable system. Collecting accounts receivable can be massively hindered if clients are restricted to just a few payment methods.

You can consider providing trouble-fee methods like bank deposits, electronic transfer funds, credit cards, and electronic payments. Additionally, an electronic billing system can be implemented with which clients can easily download invoices and save them into an accounting system. In this way, your hospitals and clinics can save time on your delivery procedure, prevent relevant problems, and effectively manage their cash flow.

    6. Routinely Conducting Audits

Healthcare organizations must also conduct audits of their accounts receivable system on a regular basis. They can focus on the number of clients and frequency of accounts receivable to assess the recurring payment habits of their clients. Audits can prioritize key indicators like inventory rotations, payment schedules, and time for collections.  

Audits can be linked with an automation system to maintain a dashboard for processing the accounts receivable follow-ups. By doing this, audits can be utilized to develop ideal cash flow strategies depending on the trends of the account receivable.

    7. Promptly Invoicing Client Transactions

Invoices must also be sent out as soon as possible so that your clients are given ample time to conduct their payment transactions. This increases the steadiness of cash flow as you are able to maintain your account receivable follow-ups.

In most cases, clients have to undergo multi-step checks before they are able to conduct their transactions. Payments are also more likely to be made between biweekly or weekly intervals.  

    8. Using Third-Party Agencies

Healthcare organizations can also compartmentalize their operations by using third-party agencies to oversee payment collections. This is especially helpful in instances where clients have overdue payments. An interest surge or payment plans can be tested out at first but organizations can always implement this option to save time and effort.

Managing accounts receivable can become difficult for them if the terms and conditions of payments are not fulfilled by their clients. Therefore, it is recommended to select an ideal third-party agency that meets the criteria for collecting payments.

    9. Simplifying Payment Application Process

You can simplify your payment application process for clients so that payments are made and bills are paid conveniently. By regulating this, billing and payments can be easily tracked and follow-ups for late payments can be executed effortlessly. With these steps, payment processing can enhance the cash flow pipeline by eliminating any possible arguments between the transactions.

To direct your operations, you can test out these implementations by determining the preferences of your clients in terms of payment methods. Payments can be assigned to specific invoices instead of crediting client accounts and made to the relevant accounts on the day of receiving. Furthermore, those accounts must also be reconciled as soon as possible so that any irregularities in cash receipts can be followed up promptly.

    10. Rewarding Your Clients

In terms of cash flow and accounts receivable, rewarding your clients in good standing can be more beneficial for you than penalizing those with overdue payments. Therefore, rewards like discounts after consistent on-time payments can be given. 

Additional positive aspects of payment for your organizations like using automatic transactions through debit and credit cards can also be rewarded. With an automated accounts receivable system, rewarding your clients can be more favorable as payment policies can be implemented without any extra work.

 

cash flow

The Bottom Line

Your healthcare organizations can expand their cash flow by pivoting your operations and processes on smoothening out follow-up mechanisms for your accounts receivable. For this, you can focus on foremost practices like keeping an eye on your accounts receivable, improving the quality of billing and client data, and many more.

Cloud RCM uses cutting-edge technology and provides ideal services to provide comprehensive management solutions for the accounts receivable systems of organizations. Join us today and unlock adept expertise and customized solutions to skyrocket your cash flow with exemplary accounts receivable follow-ups.

Frequently Asked Questions (FAQs)

    1. How do you increase cash flow from accounts receivable?

You can increase cash flow from accounts receivable by evaluating your credit terms with your clients and monitoring your accounts receivable system. The system can be automated as well along with the invoices being managed promptly.

    2. How do you optimize accounts receivable?

 Accounts receivable can be optimized by prioritizing collection efforts, developing new collection strategies, and providing quality customer experience. The payment and invoicing processes can also be systemized with the staff aligned on the accounts receivable collections.

    3. What strategies do you use to optimize cash management?

Strategies for optimizing cash management can include offering discounts on early payments and conducting credit checks on clients. The inventory can also be improved with the usage of electronic payments only.

    4. Why is effective managing of accounts receivable important?

Effective managing of accounts receivable is important as it generates cash inflow by increasing sales and profits for organizations. By extending credit options, clients are motivated to utilize organizational services and build professional relationships by attracting more investors.

    5. How can companies improve their cash flow by effectively managing their accounts receivable?

Companies can improve their cash flow by generating invoices timely and processing payments effectively for their accounts receivable. Communication with clients can be established with ideal credit policies implemented as well.

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