Medical transcription service organizations (MTSOs) rely on cash, and for many smaller sized MTSOs, a strong cash flow is crucial for survival. Anything that has a negative impact on cash flow can break a MTSO; learning to recognize threats to your business’s cash flow and how to navigate them can be the difference between your business failing or surviving.
“It’s the nature of healthcare. [Hospitals] have to carefully manage cash flow in order to make sure they can cover their obligations. Revenues are constantly being squeezed, so one way to manage that is to pay vendors slowly,” said Philip Cohen, founder of healthcare factoring firm PRN Funding, who observes that it’s not uncommon to see net 90-day payment conditions. “Any well-run business can manage a slow-pay situation as long as they understand it going into the relationship. Where MTSOs get themselves into trouble is when they expect to get paid in 30 days and instead get paid in 90.”
Getting a credit report on any potential client before signing a commitment is the best way to get an accurate reading on the client’s payment history as you’re about to effectively lend them money.
Problems in cash flow arise when the MTSO fails to account for float time between gaining a new client and receiving the first payment. MTSOs usually pay medical transcriptionists and other personnel biweekly but bill clients monthly, which means the amount of cash coming in isn’t timed well with the amount of cash the MTSO is expected to pay out on a shorter timeline.
For some MTSOs, medical transcription factoring is a viable option that can help improve cash flow, relieve the pressure of scrambling to free up capital to pay employees, and let you focus on you’re the growth and success of your business.