How Invoice Factoring Can Help Medical Transcription Companies
Medical transcription companies provide great services for hospitals, physicians, and clinics. Working in the healthcare industry can be very rewarding, but there is a continuous cycle of billing clients and sending invoices multiple times until it gets paid that can become tiresome.
Typically, any business that works in the healthcare industry has to wait 30 to 60 days for the client to pay for an invoice, which can really harm the company’s success. Many companies don’t have the luxury of waiting that long to get paid for services that they provided.
A lot of responsibilities that keep the business running needs a steady income to fund all types of operations, but most important to keep paying your employees without any delays. Fortunately, there are options to prevent medical transcription companies from falling behind on bills or being forced to take out a loan.
Invoice factoring companies such as prnfunding.com can help different types of businesses in the medical industry get immediate cash from selling unpaid bills.
There is no need to wait a long time for clients to pay for their invoices. You can solve all of your financial problems by simply factoring your client’s bills for instant cash.
How can I get a steady cash flow from factoring invoices?
Invoice factoring is a financial solution for companies that have to wait more than 30 days for clients to pay them for services that they provided. It is a fast way to get paid within 24 hours without putting your business at risk by running low on finances and potentially taking out a loan from the bank.
The invoice factoring process will involve the business owner, the client who is responsible for paying the invoice, and the factoring company that will collect the invoice money for you.
When you decide to factor the invoice of a client who hasn’t paid, you will sell it for a discounted rate that the factoring company will determine. You will receive 70% to 85% of the total value of the invoice within 24 hours of getting it approved.
Factoring your invoices is the quickest way to have money in your bank account to pay for utility bills, rent, new equipment, and the work that your employees have done.
How does invoice factoring work?
Invoice factoring involves multiple steps that are very straightforward. These steps are the following:
Step 1: Submit your application and the invoices
Once you have found a factoring company that you want to sell your invoices to you will begin the process by submitting an application with all of the documents you are required to send.
Step 2: Receive approval from the factoring company
After you submit all of the documents you need to send to the factoring company, they will review it within 3 to 5 business days. The approval process will include checking the credit history of your client and confirming that they have received the services your business has issued an invoice for.
Step 3: Get the first installment payment from the factoring company
When the factoring company approves your submitted invoices they will pay you in two installments. The first payment will be about 70 to 85 percent of the total value of the invoice and you will receive it within 24 hours of approval.
Step 4: The factoring company will collect the money from the client
The responsibilities of collecting the money from the client will be passed on from you to the factoring company when they approve your invoices and pay you for it.
The factoring company will send the client a notification to pay them for the invoice within 60 to 90 days. Some companies will give your client more than 90 days if it is an extreme case.
Step 5: Receive the second installment payment
As soon as the client pays the factoring company for the invoice you sold to them, they will give you the rest of the money from the invoice minus the factoring fee.
What happens if the factoring company is unable to collect the money from the client?
When you choose to factor your invoices you will have two options, which are recourse factoring and non-recourse factoring. Each of these options lead to different results and it is important to learn what they are to understand what will happen if the client won’t pay.
Recourse factoring is an option that guarantees to make you money as long as the client pays the factoring company. This means that when you factor an invoice you will get paid by the factoring company but you will still carry the financial responsibilities. If they are unable to collect the money from the client for the factoring invoice you will be required to sell a different invoice to them or have it deducted from other invoices you factor. Choosing recourse factoring is a great option, as it will cost you less money to sell your invoices.
Non-recourse factoring is the opposite of recourse. When you sell the unpaid invoice to the factoring company you will not be responsible if the client doesn’t pay for the invoice. It is an excellent way to guarantee that the money you receive from selling your invoice will stay in your bank account, but you will have to factor them for a lower price than the recourse option.
A lot of the time the factoring company does not give their clients the non-recourse option or they offer it with very strict terms. Some of the reasons that factoring companies disapprove of the non-recourse option is if the client has filed for bankruptcy or went out of business when the invoice was factored.
Other reasons that could make a factoring company disapprove of your submitted invoices are if there is a dispute between your business and the client, or if the client is not satisfied with services you provided.
Do I have the option to choose which invoices I want to factor?
Factoring invoices allows you to be extremely flexible with what you want to sell. There are two forms of factoring and they are the following:
Spot Factoring: Spot factoring makes you in charge of choosing the invoices that you want to sell to the factoring company. This option has a lot of perks such as the freedom to pick the clients whose invoices you want to factor and you won’t have to pay for extra fees. There is a downside to this option, which is selling the invoices for a lower price.
High volume factoring: High volume factoring is the most traditional type of invoice factoring. A factoring company will require you to sign a contract with them to ensure that you are in clear agreement that you will sell all or most of your invoices to them. This option limits your freedom of choosing the invoices you want to factor but it is more profitable for you in terms of increasing your income.
Will I have to pay fees to factor invoices?
Every factoring company has its own set of fees that will be taken out from the invoices you factor. These fees are used to process your application and invoices, as well as paying for services, maintenance, and doing credit checks.
Here are some of the most common fees that will be added to your account with the factoring company:
Application fee: This fee is used to evaluate your application and set up an agreement between you and the factoring company.
Setup fee: A fee that is also commonly referred to as a diligence fee. It is an upfront fee that is paid before the factoring company starts to process your submitted invoices. The purpose of this fee is to check your client’s credit history and cover the amount you need to open a factoring account with the company.
Wire fee: When you get paid by a factoring company they use an automated clearing house that won’t cost you money. If you choose to wire transfer the money instead of the automated clearing house option you will be obligated to pay this fee.
Maintenance fee: A maintenance fee is pretty self-explanatory. It is a fee used to administrate your account with the factoring company and to make sure that it is active without any issues.
Early termination fee: When you sign a contract with the factoring company, it could last for 6 months or a year. If you decide to stop factoring invoices you have to terminate your contract with the factoring company, which requires you to pay a cancellation fee.
Monthly minimum fees: Monthly minimum fees are not always applied by every factoring company. It is used to protect the invoice factoring company from income loss in months that you are not factoring enough invoices to meet your minimum.
Factoring invoices will save you from stressing constantly about whether you will be able to meet payroll on time or not. It will also help you to have the ability to grow your company and recruit more employees.