Practice A collects its money in the industry standard sixty (60) days while Practice B collects its money in 40 days on average. Practice A turns its inventory twelve times per year while Practice B turns its inventory 24 times per year. Look at the substantial difference that managing these two assets more effectively can make to your bottom line.
| Practice A | Practice B | Savings | |
| Annual Billing Volume | $12,000,000 | $12,000,000 | ----- |
| Outstanding Claims (A/R) | $2,000,000 | $1,333,333 | $666,667 |
| Potential Collected Difference assuming a 60% collection to billing ratio |
$400,000 | ||
| Inventory Investment | $300,000 | $150,000 | $150,000 |
| Inventory Shrinkage | 7% | 2% | $ 18,000 |
| Uncollected Claims | 15% | 5% | $233,333 |
| Total Annual Cash Flow Savings | $801,333 | ||
| Cost of Funds (at 6%) | $48,080 |
It’s a pretty safe bet that the physicians in Practice B are much happier. The additional cash savings, instead of being tied up in unproductive assets, are available for investment in new technologies, new ancillary services, or even their personal retirement plans. As an added benefit, the risk of loss is also greatly reduced.
Vista Group can show you how to get from A to B!
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