Filling a large number of scripts doesn’t necessarily mean your pharmacy has good cash flow. A healthy profit margin doesn’t either. Good cash flow means that you have enough money on hand to pay the bills when they need to be paid, and you don’t have a lot of debt accumulating on your balance sheet.
In short, cash flow keeps your business sustainable. Rapidly growing businesses often have poor cash flow, as the growth typically has to be financed. This often leads to not having the money available when they need it to handle expenses. This problem also plagues established businesses that can find more cash going out than cash coming in.
At the end of the day, improving your cash flow is about converting sales to cash in the bank in a timely manner—so you have cash when you need it. Numerous elements influence how long it takes from the time a patient pays for a prescription to the time you see that money (co-pay and reimbursement) in your bank account. However, you can positively influence some of these elements to improve your business. Start with these three.
1. Improve your reconciliation
Payments from third party payers are a huge part of your business. You can improve your cash flow by simply ensuring that you actually receive the payments due to you from third party payers. When you accurately and consistently reconcile your third party claims, you’ll know if you have any missing monies or payment discrepancies, and you can more accurately determine when payments should arrive.
As a pharmacy owner, you’re busy. Hire an accountant to handle your reconciliation, or use an electronic reconciliation service that makes third party reconciliation easy. A service like EnsurePay, an electronic third party reconciliation service through PBA Health, enables you to reconcile your third party payments in minutes. You can also easily track your expected payments, generate updated reporting of claims status and identify individual claims issues.
2. Establish a line of credit
When it comes to cash flow, a good working relationship with your bank is key. At some point while you own your business, you’ll likely need to take out a line of credit to pay your vendors, rent, taxes and other expenses that come up. A line of credit provides short-term, low-cost funds to meet the day-to-day expenses of your business when your cash flow isn’t sufficient. Just make sure to establish a line of credit with your bank before you actually need it. Bankers are eager to loan money to businesses that do not need it.
3. Know how to calculate cash flow
When you understand how cash flow works, you have a better ability to influence it to improve your business. You need to understand how and where the cash flows in and out of your business. With just a few simple formulas, you can determine the fundamental elements that affect cash flow day-to-day and month-to-month for your pharmacy, and how to influence it for better cash flow. Check out our cash flow guides, complete with formulas and step-by-step instructions, to learn how.
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Proven Strategies Guaranteed to Boost Pharmacy Cash Flow (+Advanced Formulas)These little-known strategies and advanced formulas will free up cash and grow your pharmacy. Read the article.
