Shortening the payment cycle can improve accounts receivable

Posted by Dawn Lunde on Mon, Feb 03, 2014 @ 10:00 AM

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Hospitals and clinics can improve their balance sheets by looking at electronic payment systems that improve AR collections.

The benefits of improving the revenue cycle with changes to the payment cycle should not be overlooked by hospitals or clinics when it comes to making an impact on the bottom line. CFOs know that cash provides safety, and cash flows are a big part of what potential creditors will analyze. While many may think that increasing liquidity is an impossible task, an article by financial consultant group Lancaster Pollard disagrees.

The article shows how simple adjustments to the revenue cycle, such as reducing the payment cycle by five days, can have a fairly large impact on the balance sheet. In an example, reducing the payment cycle from 50 days to 45 days provided an organization with $5,000 more in cash and brought the cash-to-debt ratio up 3 percent. 

Improving accounts receivable with bill payment solutions
Billing managers can also improve accounts receivable by taking advantage of new technologies such as electronic payment systems. Bill payment solutions that provide customers with point-of-service payment options, recurring payment plans and card on file authorizations reduces invoicing and accounts receivable, and increase collections and cash flow. While typically health care organizations provide a service and then wait to collect, patient payments that are collected upfront provide much more security. Offices can collect the patient obligation of the bill quickly and improve the revenue cycle.

Tags: Patient Payments, Revenue Cycle Management

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