Transforming AP Process in Health Care Sector: How Automation Can Tackle It
The healthcare sector is continuously evolving; relying on manual accounts payable processes can no longer be sustainable. Not only can it hold a health institution’s back, but the inefficiencies and additional costs associated with manual processes go against the broader mission of AP Process healthcare providers – to deliver high-value and cost-effective care.
Streamlining the AP process can help healthcare providers better manage their cash flow and working capital, increase ROI, and enhance operational efficiencies while improving relationships with suppliers. Optimizing accounts payable allows hospitals to allocate AP process professionals better to focus on significant activities and implement strategic initiatives. This article presents the compensations of renewing AP and why using automation to enable better this effort could be essential to future success and staying ahead of the competition.
The Current Situation of the Healthcare Sector
As the healthcare sector shifts from fee-for-service to value-based care, many struggles to find their way, looking for opportunities to become more financially agile while improving patient outcomes. To grab the opportunities and remain open to whatever unknowns come next, healthcare organizations must learn and adopt ways to increase their financial bottom-line. One way is to optimize cash flow into the hospitalize by strengthening payer reimbursement and patient payment. Conversely, healthcare providers can also ensure that any cash leaving the institution is well-timed and well-spent.
Healthcare institutions should always look to pay suppliers and other partners while improving stronger relationships. The combination of efficiency and strong partnerships can support a more effective and reliable supply chain. Simultaneously, accounts payable professionals must be careful to comply with rules because errors in this area can lead to payment delays, consequences, and other problems that can negatively affect payments.
For many healthcare providers, accounts payable remains mostly a paper-based effort. Although larger health institutions typically lead the charge of implementing automated systems, smaller entities – especially those with a lot of direct spending – often lag.
Problems with Paper-Based Accounts Payable Processes
There are several drawbacks to manual AP processes. Especially, when there are high volumes of paper invoices, AP process professionals can get overwhelmed with manual entry, leading to input errors, inaccurate matching with purchase orders, and risk of non-compliance with reporting rules, payment delays, and much more.
Manual methods don’t allow organizations to gain insight into their payables data over time, which prevents them from finding trends and discover performance opportunities. Without real-time data, healthcare providers can’t plan strategically, which can negatively affect their capability to embrace new payment models or sustain robust economic health.
As with hospitals, healthcare suppliers are under pressure to enhance cash flow and working capital amid rising interest rates and increasing competition, improving order-to-cash cycle times a top priority.
Suppliers also struggle with hospitals’ manual AP processes. For instance, they may have to wait on overdue receivables or commit time to follow up on late payments. They have to handle bundles of paper if each of their healthcare partners engages in manual processes. Moreover, each healthcare organization has its way of doing things, and the supplier must respond to those diverse needs, adding to the complexities and resource intensiveness of managing incoming payments. Moreover, a paper process does not give the supplier any insight into its performance against agreed payment terms or to find opportunities for better financial results.
The common problems organizations face with paper-based accounts payable processes are:
- Time-consuming and costly
- More chances for errors
- High chances of theft or fraud
- Lack of accurate data for strategic planning
How Automated Systems Help Healthcare Providers and Suppliers
The best method to overcome the drawbacks of manual processes is to adopt automated payment processes. For healthcare organizations, digital payment options can accelerate invoice approval and improve AP efficiency, enabling managers to shift AP professionals from low-level tasks sending checks to focusing on more crucial tasks.
Automated systems allow organizations to match, approve, and pay invoices electronically, promoting a shorter and productive transition cycle. This move can eliminate reliance on paper, printing, and postage. Digital solutions also give healthcare providers greater visibility into the payment process, letting them track where payment is and generate reports to identify trends and changes. Hospitals also can take advantage of rebates, early payment discounts, and extended payment options that drive revenue into the department.
Not only do digital systems help healthcare providers, but they also can be valuable for suppliers. An automated solution allows suppliers to collaborate with health institutions better and get them on board with a more streamlined, consistent, and efficient digital process.
Various Options Available for Automated Payments
Once an organization commits to an automated purchasing and payable approach, it must then decide which option to follow. Implementing a mix of options can yield the most significant efficiencies and strongest cash flow. Having multiple options allows the accounts payable department to optimize its automated payment process for the greatest ROI.
Some of the most common payment options comprise Automated Clearing House (ACH) systems and bank-provided P-card programs. These methods are ahead of checks, yielding moderate enhancements in payment visibility and additional revenue through refund programs. They also give suppliers flexibility in how they receive payments, which can promote better relationships, and they also minimize dependency on paper, making the AP function efficient and compliant. P-cards can be especially beneficial for small purchases because they remove some of the paperwork related to small checks.
Simulated cards are the next step in the development path, and they have been popular among healthcare providers and suppliers over the years. These cards require a one-time use, auto-generated credit card number that an AP department sends to the supplier. The supplier then logs into the finance system to redeem payment. This option also offers rebates and is known to be a secure method for exchanging payment.
Advanced accounts payable software lets healthcare facilities pay using various digital payment options, including ACH, corporate cards, and more. By using an online AP system, organizations can capitalize on the best method for a particular vendor. Through these methods, health systems can take advantage of rebates, early payment discounts, and much more that bring revenue back into the organization. AP teams can normalize approval workflows and reconciliation for all payment types, so that team can seamlessly receive, process, and pay invoices while on the go.
The key benefits of accounts payable automation are:
- Eliminates the use of paper
- Better rebate opportunities and profit margins
- Requires less time and effort to process payments
- Improve cash management and finance teams’ efficiency
- Makes AP teams more strategic partners in the organization
- Ensures compliance with regulations
- Improves visibility into spend and spots opportunities to optimize payments
- Reduce payment fraud.
Getting Started with Automated System
Adopting an automated AP system doesn’t have to be costly or time-consuming. Today, software providers offer cloud-based systems with less implementation process. Your employees don’t require extensive training, and the software providers handle the complete implementation process. Since the technology is cloud-based, the need for an internal IT environment minimizes healthcare institutions that don’t have to be involved in regular software upgrades or complex installations. The solution can also easily integrate with your existing finance systems.
Most software providers guarantee the success of every payment. Healthcare organizations can take advantage of potential rebates and early payment discounts. The advanced AP solution can help a healthcare institution shift its AP department from a cost centre to a revenue maker, capable of providing insight through comprehensive reporting. The online solution also lets an organization utilize payment data in procurement conversations and negotiations.
While moving towards an optimized AP process, organizations should evaluate their current situation and determine growth opportunities. Such an analysis measures existing performance and allows an institution to benchmark itself against industry standards. The more detail a health system can generate about its current invoice-to-payment process, the more knowledgeable it will be to recognize shortfalls, find growth opportunities, and determine whether automation is the right choice. Also, this effort can lay the base for selecting the right technology provider.
As suppliers start demanding more streamlined payment options and rejecting commercial cards to minimize interchange fees, a healthcare organization may like to leave in a situation where it needs to make a switch. If an organization delays the change, it could miss out on significant revenue opportunities such as rebates and early payment discounts. Healthcare providers should also continue to spend a lot of money on outdated processes that are inefficient and inaccurate. As the financial landscape moves towards advanced technologies, healthcare facilities will need to rethink how they move toward payment processes and embrace the idea of digital payment options.
By implementing an automated system, healthcare providers can transform their AP departments, streamline processes, execute payments on time, and cut costs. These advancements can further enhance collaboration between healthcare institutes and their suppliers, develop strong supply chain relationships, and enable better patient care.
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