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Medical Supplies Invoice Funding � The Ongoing Process

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By Phil Cohen

Even though business owners who own medical supply companies can benefit greatly by factoring their invoices, many of them do not because they are unfamiliar with the medical supplies factoring process and the solutions that it provides. In actuality, factoring is one of the oldest methods of providing working capital to help businesses solve their cash flow needs. This article breaks down the medical supplies invoice funding process in four easy steps.

Step One: Deliver Goods, Submit Invoices for Factoring

The beginning procedures for medical supplies factoring is not much different than a business owner’s normal invoicing process. After the medical supplies have been delivered and accepted by the customer, the business owner creates an invoice for the order and sends it out to the customer.

At any time after the invoice has been issued to the customer, the business owner can sell his/her invoice to a factoring company. This is usually done electronically by emailing copies of the invoices along with corresponding delivery confirmations to his/her factoring account manager.

Step Two: Medical Supply Factor Notifies and Verifies with Debtor

In addition to emailing the invoices and delivery confirmations, medical supply company owners will also submit a signed assignment form to the factor, in which the business owner lists out the invoices he/she wishes to sell.

The first thing the account manager does when he/she receives a new schedule of invoices to process is to look for new debtors. A debtor is the person, business or organization who purchased the medical supplies and has agreed to pay the medical supply company for those goods. If the account manager sees a new debtor, he/she will notify the customer in writing that the invoice has been sold to a medical supply factoring company, and as a result of the sale, payments should be remitted to the factoring firm.

If there are no new debtors, the account manager simply confirms the validity of the invoices with the debtor. This can be accomplished by reviewing delivery confirmation statements in conjunction with speaking with the person who ordered the medical supplies and verifying that they are satisfied with the products.

Step Three: Funds Advanced on Medical Supply Invoices

Once the account manager is confident that the debtor has received and is happy with their medical supply shipment, and he/she has notified accounts payable on where to direct payments, the next step is to purchase the invoices and advance funds.

Typically, medical supply factors advance 70-90 percent of the face value of the invoices they purchase. This advance is usually done via an electronic funds transfer (i.e. same day wire or an overnight deposit). In most cases, a medical supply company is able to receive money the same day it issues an invoice to its customer for the goods.

Step Four: Payments Received, Reserve Dispersed

At the time of notification, the debtors are directed to send payments for the ordered medical supplies directly to the factoring firm. When the factor receives the payment, the initial advance is deducted in addition to the factoring fees. The remaining balance (reserve) is dispersed back to the medical supply company. Sometimes, this ‘reserve release’ is distributed the same day the invoice closes, and sometimes there are pre-determined reserve release days. It depends on how the factor has reserve release days outlined in the factoring contract.

So contrary to popular belief, factoring for medical billing companies is not complicated. In fact, it can be broken down into four simple steps. The medical supplies business owner delivers goods to his/her customer and sends the customer an invoice. Afterwards, he/she presents a copy of the invoice to the factoring firm. The account manager conducts the notification/verification procedures and collects on the invoice. In the meantime, the medical supplies business owner receives cash up front to fill other orders.

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Phil Cohen

About the author

Philip Cohen is the founder and President of PRN Funding, LLC. PRN Funding is an extraordinarily focused niche player in healthcare funding. With years of…... Read More

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