Financial Medical Partnership

Good cash flow is crucial for business


2 Aug 2011 by FMP Accountant

Every business relies on cash flow to make purchases, pay employees and, most important of all, to make a profit. A company can look good on paper even if it has no cash coming in. But to be truly healthy financially, cash flow is essential for any business. Having cash on hand is what allows businesses to cope if anything were to go wrong. No one hopes for the worst when it comes to business, but itís good to be prepared for it anyway, in case your company experiences a drastic loss. Good cash flow will ensure your company is ready for everything. In a private medical practice, cash flow is just as important as it is for any other company. With an increased cash flow to your office, youíll be better suited for any unexpected costs that may rise without warning. Good cash flow is like a safety net; if you are bringing in enough cash, youíll be able to cope in any situation. Most medical officesí cash flows are not fully optimised because payments for care take a long time to be processed. Therefore, there is a lag time between when services are provided and when cash is received as payment. This lag greatly inhibits cash flow, although medical practices will always have payments coming in from services rendered in the past. However, cash flow is considered best when the time between invoicing and payment is kept to a minimum. Waiting more than a month for a bill to be paid is not good for cash flow. Thereís an easy way to improve cash flow in any medical practice--switching from paper to electronic billing. Electronic billing brings your payments to you faster because invoices are sent directly to insurerís computers. Thereís no long waiting for invoices to be prepared and mailed. And electronic billing also allows users to track their bills, so youíll always know the status of your payment. With an e-billing system you can expect insurance payment in five to 10 days, a turnaround time which is drastically improved from the four to six weeks required for paper billing. With payments more readily available through electronic billing, your businessís cash flow will increase. And increased cash flow brings with it peace of mind. With an e-billing system, youíll feel secure in the knowledge that your business is ready for any emergency because you have cash coming in to cover the unexpected.

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