“What financial tools are for sale to safeguard my company from fluctuations within my revenue cycle since my overhead stays constant week to week?”
This frequently arises as DME/HME providers make an effort to maintain inventory, pay overhead, expand, as well as earn profits. To deal with this problem of “fluctuations in revenue cycle”, you have to determine if the financing tools available move concurrently together with your revenue stream, since income is dependent upon your revenue cycle, not your billing cycle.
Loans, including credit lines and asset based lines, possess a common limitation to solving the issue. Dollar availability is bound and can’t be reused until some portion (or all) is compensated back. For instance, a DME/HME company acquires financing to upgrade equipment, pay expenses and replace inventory. A brand new order depletes that inventory considerably. Although payments from Medicare along with other carriers may lag, expenses including loan repayment, should be compensated and inventory replenished. However, additional credit isn’t available before the existing line continues to be paid back. Consequently, unless of course you’ve established a line of credit sufficient to satisfy the money flow needs you will need later on, loans will not work as they do not fluctuate together with your revenue cycle or expand together with your growth.
Selling stock is yet another financing tool. However, equity financing addresses lengthy term financial questions and isn’t typically utilized as an answer for brief-term income problems caused by revenue cycle fluctuations.
An economic tool that directly follows the revenue cycle is Medical A / R (Marly) funding. It possesses a cash-flow means to fix your capital needs. To put it simply, a specialized funding source purchases your a / r and advances you money. You deliver your products or services and obtain compensated in 24 – 48 hrs. You will find without any limits on the quantity of funding available and no reason to pay back the very first Marly funding before you receive additional funding. The greater receivables generated, the greater funding that’s immediately open to you. This permits your money flow to fit your billing cycle…a classic revenue based financing tool that moves concurrently together with your revenue cycle.