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19 October 2016
Cash flow is the oxygen of business. The more effectively you manage it, the more successful and profitable your practice will be.
It sounds simple but how can health professionals achieve this? A good place to start is by consolidating your banking with one provider. This will give the practice greater control over receiving payments and will also provide business advisers with a clearer picture of the practice so they can provide more support.
Chantai Brown, Senior Specialised Banking Manager of NAB Transaction Banking , says that offering patients a range of electronic payment channels via one provider can give a practice faster access to cleared funds and a simplified payment system that is easier to reconcile.
“Linking all patient payment channels like EFTPOS, BPAY, direct debit and a secure online solution like HICAPS, that interface quickly with health funds, will improve your patient’s experience, save you time and help reduce staff administration,” she says.
Also introducing simple strategies can encourage payment of accounts as Brown suggests:
- Communicate and clearly display payment terms prior to treatment.
- Encourage staff to collect cash payment on time by coaching them to handle difficult conversations and recognising their successes.
- Consider payment options for more expensive treatment, such as credit card payments that spread the cost over 30 days or breaking up procedures so patients can pay in installments.
- Emailing invoices to patients keeps them front of mind and easy to access.
- If relevant, make it easier for patients to pay their invoices from the comfort of their home or office online via an e commerce platform
Brown adds a note of caution when it comes to offering payment options. While it’s important to cater for your patients’ various situations, it is also important to understand the cost to the practice of providing these options. For example, the cost of a 5 percent discount for payment within 14 days will slice $50,000 annually from the bottom line of a business with a $1 million turnover. But countering this is the cost of managing overdue invoices.
“You have to work out whether you are prepared to develop and manage a collection plan for overdue invoices and balance the impact on your practice of these delays in payment,” she says.
On the expense side, Brown encourages businesses to review terms with suppliers and create a cash flow forecast, factoring in regular monthly payments, any seasonality and growth projections. “If you can afford to pay a large sum early or upfront, you should – absolutely – negotiate a discount.
Staff can be encouraged to save money by setting expense targets, monitoring them frequently and tying remuneration to outcomes. This engages everyone in cost control and employees don’t necessarily have to be rewarded with money. “Often recognition in front of peers or a thank you card is a welcome reward.”
Brown suggests a three-pronged approach to cash flow management – a balanced mix of working capital sourced from turnover, supplier credit and bank debt, and regular reviews to help monitor costs.
She says that a cash flow forecast and business plan are both imperative for a healthy business.
“A business plan provides a long-term view, with investment phases and goals clearly mapped. A cash flow plan enables a practice to ensure that cash flow is maintained and appropriate buffers put in place to further position a practice to ride out economic cycles and ensure sustainability.”
Your banker will be able to give you further advice on how to best maximise your cash flow.