Five Ways AP Automation Can Ease Burnout, Turnover in a Healthcare Organization’s Finance Department
Key takeaways: Employee burnout and turnover are real threats to a healthcare organization’s mission to…
We all know the phrase “time is money.” And in healthcare purchasing, specifically when looking at days sales outstanding (DSO) and days payables outstanding (DPO), the phrase couldn’t be truer. DSO is the time it takes a supplier to convert invoices to cash and DPO is the time it takes a healthcare provider to pay its suppliers.
These measures of time are heavily intertwined with economic effects that can significantly impact business on both sides of the healthcare supply chain – including cash flow, revenue and credit worthiness to name a few. A longer DSO can affect a company’s ability to invest in future growth, and a longer DPO can affect a healthcare organization’s ability to deliver quality patient care opens in a new tab.
To get a finger on the pulse of DSO and DPO in healthcare supply chain, the Remitra team recently surveyed healthcare suppliers opens in a new tab and providers. On the supplier side, we asked about the pain points experienced with current accounts payable (AP) and accounts receivable (AR) processes and found that “late payments” is the number one source of suppliers’ pain.
Ironically, only 16 percent of those surveyed identified the root cause of these delays, match exceptions, as their primary pain point. Like so many other areas of healthcare, the industry is focused on treating the symptoms rather than addressing the cause.
Remitra data as of November 2021
As a result of late payments, suppliers are forced into longer periods of DSO, with 69 percent of respondents reporting DSO greater than 30 days.
Remitra data as of November 2021
In our provider survey, we asked different-sized hospitals about their average DPO. Of the small hospitals (less than 100 beds) surveyed, 63 percent reported DPO greater than 30 days. Of the medium hospitals (100-300 beds), the number is slightly lower, but still high at 57 percent. And of the large, multi-state providers (350 or more beds) surveyed, DPO greater than 30 days is the highest at 75 percent.
Remitra data as of March 2022
A longer DPO comes with negative connotations. It implies that a healthcare organization has difficulty meeting its invoices on time and has poor cash flow. On the other hand, a shorter DPO shows a healthcare organization’s ability to pay off its credit on time and has a steady cash flow.
One of the biggest obstacles to improving DPO and DSO in healthcare supply chain is the proliferation of manual, paper-based processes opens in a new tab still used industry wide despite the availability of cloud-based, automated ordering, invoicing and payment solutions.
Take a moment to think about your own organization’s procure-to-pay (P2P) process.
These antiquated P2P processes create numerous challenges that are time and labor intensive, not to mention costly, leading to longer DPO and DSO. Paper POs, email PDFs, faxes and snail mail invoices and checks create:
Here’s how the Remitra platform, using the power of automation, helps to eliminate paper, reduce complexities and optimize financial processes for improved DPO and DSO.
Faster, more accurate hands-free transactions. Predictability and faster receipt of payment. A simplified, more efficient P2P process for healthcare organizations and their suppliers. Time truly is money in healthcare supply chain, and automation is the key to making the most of it, leading to improved DPO and DSO.