Cash Flow Management Requires Strategy

“What financial tools are available to protect my business from fluctuations in my revenue cycle since my overhead stays constant week to week?”

This question often arises as DME/HME providers strive to maintain inventory, pay overhead, expand, and even make a profit. To address this issue of “fluctuations in revenue cycle”, you must ascertain whether the financing tools available move concurrently with your revenue stream, since cash flow is determined by your revenue cycle, not your billing cycle.

Loans, including lines of credit and asset based lines, have a common limitation to solving the question. Dollar availability is fixed and cannot be reused until some portion (or all) is paid back. For example, a DME/HME company acquires a loan to upgrade equipment, pay expenses and replace inventory. A new order depletes that inventory significantly. Although payments from Medicare and other carriers may lag, expenses including loan repayment, must be paid and inventory replenished. However, additional credit is not available until the existing line has been repaid. Consequently, unless you have established a credit line sufficient to meet the cash flow requirements you might need in the future, loans won’t work because they do not fluctuate with your revenue cycle or expand with your growth.

Selling stock is another financing tool. However, equity financing addresses long term financial questions and is not typically used as a solution for short-term cash flow problems resulting from revenue cycle fluctuations.

A financial tool that directly follows the revenue cycle is Medical Accounts Receivable (MAR) funding. It provides a cash-flow solution to your working capital needs. Simply put, a specialized funding source purchases your accounts receivable and advances you cash. You deliver your product or service and get paid in 24 - 48 hours. There are virtually no limits on the amount of funding available and no requirement to repay the first MAR funding before you can receive additional funding. The more receivables generated, the more funding that is immediately available to you. This enables your cash flow to match your billing cycle…truly a revenue based financing tool that moves concurrently with your revenue cycle.

Sun Capital HealthCare (SCH) specializes in medical accounts receivable funding. SCH is unique being experienced in how the healthcare business works and focused solely on medical accounts receivable (MAR) funding and understands working capital needs, focusing on keeping funding costs as low as possible.

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