See How Account Prism Enhanced Accounts Receivable Management for Improved Cash Flow

Synopsis

In late June 2023, a healthcare practice in California found themselves in a challenging financial situation. Despite having $1.5 million in Accounts Receivable (AR) on their balance sheet, they were only able to collect $500K, or approximately 33%, of the outstanding AR. Recognizing the severity of the issue, the CEO reached out to Account Prism for expert advice on enhancing their cash collection processes.

Challenge

The primary challenge was the inefficiency in the client's cash collection process, which had a significant impact on their liquidity and operational funding. The low collection rate suggested a disconnect between billing processes and collections, potentially due to inadequate follow-up procedures, ineffective communication with customers, or insufficient tracking mechanisms.

Account Prism’s Approach:

Upon undertaking the project, Account Prism proposed a multi-faceted approach to address the cash collection issue:

·?AR Performance Metrics: Prism introduced comprehensive AR performance metrics, including average days delinquent and AR turnover ratio, to measure and track the efficiency of collections over time.

· Vendor Management: We advised the client on renegotiating terms with their Revenue Cycle Management (RCM) vendor, linking the vendor’s compensation to collection milestones. This incentivized the vendor to prioritize collections and work more diligently towards meeting the set targets.

· Process Reengineering: Our team conducted a thorough review of the existing billing and collection processes. We identified bottlenecks and inefficiencies, recommending process improvements and best practices tailored to enhance the collections workflow.

· Staffing Solutions: Recognizing the need for dedicated focus on collections, we supported the client in the decision-making process to hire a specialized collections manager. This role was aimed at tightening the collection efforts and ensuring consistent follow-up on outstanding invoices.

· Client Engagement: Prism emphasized the importance of proactive communication with customers. We helped implement strategies for early engagement and resolving disputes, facilitating smoother payment processes.

Results:

Within months of implementing Account Prism’s recommendations, the client experienced a significant turnaround in their cash collection process. By the end of the first quarter following our intervention, the collection rate increased from 33% to over 62% of AR, markedly improving liquidity and enabling the client to allocate resources more effectively across operations.

Conclusion:

Account Prism’s tailored approach to managing cash collections not only helped the client overcome immediate financial challenges but also equipped them with the tools and strategies to maintain efficient AR processes long-term. This case study exemplifies how strategic consulting, combined with actionable insights, can transform a critical aspect of financial management, leading to sustainable business growth.

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