Startup funding is its own enormous industry, and healthcare companies have cornered the market recently. According to a Pitchbook analysis summarized by Forbes, healthcare startups raised $15 billion in venture capital in the first six months of 2018, which was 70% more than they did in the same period in 2017. But, as any business owner knows, an increase in funding comes with its own problems. In particular, VC funding has allowed healthcare startups to kickstart operations, but now they have to grapple with individual clients and the subsequent cashflow challenges.
Common Cashflow Problems – And Solutions
It doesn’t matter what type of business you run; every company is vulnerable to cashflow problems. That being said, healthcare organizations tend to face several very specific issues. These include the high – often unaffordable – cost of medical care and issues with insurance providers. Luckily, these problems can be solved with a few simple solutions.
First, be sure you’ve established clear payment policies. Too often, companies will keep sending bills, but don’t act to collect on unpaid invoices or ever directly address those invoices with clients. Be willing to cut off services until accounts are settled. Companies often avoid this because they’re afraid to alienate clients, but it’s good business to protect your financial interests.
Another way to stabilize your startup’s cashflow is by outsourcing your medical billing. This is a particularly valuable strategy if you’re combining startup technology with a more traditional medical practice. Outsourced billing allows companies to harness the specialized skills of claims specialists – and their technology – and keep in-house staffing to a minimum.
Consider The Extended Office
Outsourcing your medical billing can help your startup manage cashflow, but the approach still has a limited reach. That’s why, if you want a more comprehensive approach, your startup should consider an extended business office (EBO). EBOs are precisely what they sound like – an extension of the traditional office, and that’s what makes them so useful to startups.
Rather than investing in a large staff, training, and technology, and EBO provides financial transparency for clients, insurance claim management, and can take your accounts from pre-registration all the way through to collections when necessary. Additionally, EBOs let your existing staff focus on what they do best – providing innovative healthcare services – while ensuring the financial issues are taken care of with expert attention.
Think Outside The Box
Finally, it’s important for startups to realize that the classic “spend money to make money” approach to building a business needs to slow down eventually, so keep that in mind as you attempt to balance your startup’s cashflow. This means that you may need to do more than just collect on existing bills if you want your business to thrive. You also need to consider other financial elements.
So where should healthcare startups try to re-balance the books? One option is at the level of supplier contracts. If you’ve established yourself as a reliable customer with growing purchase volume, then you’re in a position to renegotiate those contracts. Alternatively, if you can’t reduce the costs, you may be able to rearrange when payments come due. Moving around your bills to better align with income can make a big difference.
Every company eventually finds its own cashflow groove, featuring strategies like discounts for prompt payment, payment plans, and efficiency measures, but most don’t figure out these best practices until they’ve been in business for years. With that in mind, though, healthcare startups should use the recent influx of VC funds as an opportunity to grow wisely.
Set some money aside, revamp the budget, and see how you can maximize income while still providing top quality service.