Home healthcare agencies are important in the medical industry and are able to provide a lot of help to patients by getting them good care, as well as creating jobs for hard working nurses.
Home healthcare agencies have to handle a lot of financial expenses that could become overwhelming when dealing with clients who make it challenging. The biggest financial responsibility of any home healthcare agency is being able to afford staffing costs and paying them on time.
While the home healthcare industry keeps growing larger and larger each year, the revenue can be unpredictable or slow at times due to insurance providers taking months to pay the claims. Medicare, Medicaid, and other insurance companies have their own payment process that could pay for claims quickly or take over 30 days to pay it.
Waiting for the insurance provider to pay can put your business into trouble and make it difficult to run business as usual. Having a cash flow problem will stop any business from growing the way they are supposed to.
The good news is that you can fix that problem easily by looking into the option of factoring your unpaid invoices. This guide will help you learn about everything you need to know to factor your unpaid invoices to keep your receiving a steady flow of cash.
What is invoice factoring?
Invoice factoring is a simple and effective way to fix money problems that are caused by clients not paying on time, which results in delays that will harm the growth of the business.
This option is great for many agencies and different industries that can’t survive without a steady income. It’s a perfect solution for financial problems that are caused by slow paying processes by clients and insurance providers such as Medicare and Medicaid.
With invoice factoring, you won’t have to wait 30 to 90 days to get paid for a claim. Instead, you will have cash in your hand immediately after you file the claim. This solution will help you pay your staff on time, take care of your bills, and expand your business or recruit more caregivers.
Medical factoring has many benefits, but the most important one is that it is a better alternative for loans. It is much quicker than applying for a loan at a bank and you won’t have to worry about debt. You will have much more flexibility with medical invoice factoring than choosing a bank loan.
How factoring benefits your business
Factoring invoices is a great opportunity for home healthcare agencies. In a recent study, 9 out of 10 elders would rather have their own caregiver at home than be placed in a nursing home.
For that constant demand in personal caregivers, the medical staffing has dramatically increased in effort to provide the patients with the care they want in the comfort of their own home.
This growing demand for caregivers has opened the door for many home healthcare agencies to create more jobs. With the help of factoring companies such as prnfunding.com you can now grow your business, develop more job opportunities, and provide patients with excellent care.
Other than having a steady flow of cash to recruit caregivers, you will be able to pay the salary of your employees without delay or having to lower it in order to keep your agency in business. You will also be able to pay off any loan debt that keeps increasing, utility bills, update your office with new furniture, upgrade the computers, and add vehicles for transportation.
With factoring invoices you won’t have to stress about financial responsibilities and figuring out ways to help your agency survive an unexpected economical crisis. You will be able to provide your caregivers with medical equipment and supplies that are necessary to give the patients the support they need.
Having a home healthcare agency requires caregivers that will be available during a time of emergency. Doing so could be difficult if you have a cash flow shortage and that will impact the services of the agency.
Healthcare staffing is growing larger each day and factoring companies understand that a steady income is required for your business to grow.
How does invoice factoring work?
Once you submit a medical claim you will be paid in two installment payments. The first installment will cover the net payable value of the claim, meaning the amount that is expected to be paid by the insurance company, and that amount will be about 70% to 80% of that claim. That first installment will be given to you within 24 hours, depending on the factoring company.
The second installment will be deposited to you as soon as the insurance company pays the claim in full.
Recourse vs. non-recourse invoice factoring
Factoring invoices isn’t always guaranteed to make you money due to the insurance company refusing to pay for a number of reasons. That’s why there are two forms of invoice factoring known as recourse and non-recourse.
Recourse factoring is the most common option, as it is less expensive. On the other hand, it could come with risk. Recourse factoring means that once the factoring company pays you money and processes the invoice, you are not 100% guaranteed to keep that money. If the insurance company isn’t able to pay for the invoice, you are required to return the money back to the factoring company.
Non-recourse is a flexible option when it comes to factoring and it is free of risks. When the factoring company pays you the amount of the invoice, you are not responsible if the insurance company doesn’t pay and the money is kept in your bank account. The downside of this choice is that you get paid less money than the recourse option.
Both choices are great and healthcare agencies often goes with the non-recourse option, as it is best to go with the risk-free option and get paid a higher discounted rate.
What are the steps of invoice factoring?
Each factoring company will come up with an agreement with your agency that will work best for both parties. In general, the process of medical invoice factoring remains the same with every client.
Here are the steps of invoice factoring:
Step 1. Generate invoices
Once an agreement has been signed between you and the factoring company, you will receive instructions on what type of documents you need in order to submit the invoice. Some factors require original invoices to be able to send the request directly to the client or the insurance company who owes the money.
Step 2. Verify the invoices
After the invoices are generated by the home healthcare agency, the factoring company will verify them before approval. The way these invoices are verified is by confirming that the debtor has received the service and accepted it and they are willing to pay that claim in full. It is also important for them to verify that the debtor is not expecting any additional service that was agreed on.
Step 3. Receive the money
As soon as the factoring company has confirmed the invoices and completed the verification process, they will issue the advanced payment to you. The amount will be based on the net payable value that the insurance company or the debtor is estimated to pay.
Depending on the payment method of the factoring company such as direct money transfer or cash, it will take 24 to 48 hours to get paid by them.
Step 4. Notifying the debtor
The factoring company will notify the debtor that they have taken over the invoices and they are required to pay that money to them instead of your agency. That letter will explain to the debtor how the process is going to work and the amount of money they owe, as well as how many days they have to make that payment.
If the check gets sent out immediately to the factoring company, they will deposit that check within a day or two.
Step 5. Rebating the invoice seller
Depending on the type of agreement with the factoring company, they will deduct additional fees such as factoring fees. These fees are applied to every single invoice and it is paid individually.
Other factoring companies will pay it after they have received a sufficient amount that covers the additional fees, while others will only pay rebates after they have received the full payment of the invoice.
Step 6. Providing updates
Factoring companies take pride in providing excellent customer service and building a great relationship with the clients. Throughout the process of factoring, you will be in contact with the factoring company to have updates and receive accurate information.
You will be aware of the overall performance of each invoice with reports that include aging of the outstanding invoices, detailed charges and credit, your account’s balance, the factoring fees that have been charged to your account, collected invoices and the full breakdown of each invoice, and the amount you will be paid if all the invoices get paid.