Invoice Finance for Pharmacists

As an integral component of the healthcare industry, pharmacists are responsible for ensuring that patients receive the appropriate medication. Running a pharmacy business, however, represents a formidable challenge, particularly when it pertains to cash flow management. A considerable number of pharmacists find themselves in the situation of having to wait for an extended period – sometimes weeks or even months – to receive payment from insurance providers or other clients. This delay in payment may cause a dearth of cash and negatively affect the ability of a business to pay suppliers, employees, and other expenses on schedule. The good news is that invoice financing is an excellent alternative for pharmacists who want to enhance their cash flow. This post aims to delve into the mechanics of invoice financing, as well as its advantages and how it can help pharmacists manage their cash flow more effectively.

Introduction to the challenges pharmacists face in managing cash flow

Pharmacists are an important part of the healthcare industry because they provide patients with essential medicines and healthcare products. Even though pharmacists play a crucial role, managing a pharmacy is difficult, and many find it difficult to maintain a healthy cash flow. Inventory management is one of their biggest challenges because they need to keep a steady supply of medicines and healthcare products to meet demand.

Additionally, insurance companies and other third-party payers frequently offer deferred payments, which severely disrupt cash flow. In addition, unexpected expenditures, such as the purchase of new technology, store maintenance, or the repair of equipment, can put a strain on finances.

Another obstacle pharmacists face when managing cash flow is seasonal fluctuations in demand. The demand for sunscreen, insect repellent, and other summer-related products rises during the summer months, whereas the demand for flu vaccines and related products rises during the winter months.

Pharmacists may face financial difficulties as a result of any one of these issues, but invoice financing is a viable option for boosting cash flow. Pharmacists can get the money they need to run their business by using invoice financing.

Click to read our article: 6 Reasons UK Pharmacies Should Outsource their Accounts

What is invoice financing and how does it work?

Companies can get a cash advance on unpaid invoices with invoice financing, a financial tool. Businesses can choose to receive an immediate cash injection rather than waiting for customers to pay their invoices. This will allow them to cover their expenses, manage their cash flow, and invest in growth opportunities without taking on additional debt.

Pharmacists can use invoice financing to effectively manage their cash flow and avoid cash flow gaps caused by late invoice payments from customers. By using receipt support, drug specialists can get to the assets important to cover overheads, buy stock, and put resources into promoting and development exercises.

Invoice financing is a simple process. A third-party financier licensed to advance them a percentage of the invoice value is available to a pharmacist once they have issued an invoice to a customer. Depending on the provider and the customer’s creditworthiness, the percentage of the invoice value that is advanced typically ranges from 70% to 90%.

The financier deducts their fees and transfers the remaining funds to the pharmacist when the customer pays the invoice. Pharmacists looking to improve cash flow and maintain a stable financial position can benefit from this procedure because it is a cost-effective and efficient solution. Pharmacists can gain access to the working capital they require to succeed and expand their businesses by capitalising on the value of their unpaid invoices.

Benefits of invoice financing for pharmacists

Pharmacists may find that invoice financing is an excellent choice for bolstering one’s finances. It is a type of financing that lets businesses get money from unpaid invoices even before customers pay them. 

From invoice financing, pharmacists can benefit in the following ways:

1. A stronger cash flow: Pharmacists have the ability to improve their cash flow by prompting the payment of any outstanding invoices. This is especially important for people whose invoices are being paid by insurance companies, as this can frequently cause lengthy delays.
2. Faster payment: With receipt support, pharmacists can get installment for their exceptional solicitations in a couple of days. They may feel less anxious about having to wait for payment to arrive before they can pay for their expenses as a result of this.
3. No insurance required: As an unsecured loan, invoice financing does not require pharmacists to pledge an asset as security. Pharmacists who lack the assets to secure a loan may greatly benefit from this.
4. Customizable: Invoice financing is adaptable and can be tailored to meet the specific needs of pharmacists, such as the amount of money they want to borrow and the repayment terms.
5. Boosted credit rating: Invoice financing can help pharmacists improve their credit by giving them a way to pay their bills on time. For pharmacists who have previously struggled with bill payments, this could be extremely helpful.

Who can qualify for invoice financing?

For pharmacists seeking to enhance their cash flow, invoice financing can be an outstanding choice. Nonetheless, not all merchants may meet the eligibility criteria for this kind of financing. Most frequently, invoice financing is offered to corporations that possess a substantial volume of invoices and a dependable customer base. Hence, pharmacists that have a consistent flow of invoices and customers may be entitled to this form of financing. Additionally, a lot of invoice financing companies mandate corporations to have operated for a specific period, which typically ranges from 6 months to a year.

When gauging eligibility, invoice financing companies also contemplate creditworthiness. Certain invoice financing enterprises may necessitate a minimum credit score to be eligible for their services. Nonetheless, other factors such as the company’s financial statement robustness and its payment record could be scrutinised by other invoice financing firms.

It’s worth noting, however, that the requirements for eligibility may change based on the invoice financing firm. Consequently, pharmacists must conduct extensive research on various financing companies to find one that is perfect for their needs and qualifications. By doing this, pharmacists can avail themselves to the advantages of invoice financing and advance their cash flow.

Click here to watch our webinar on raising finance to buy a pharmacy.

How to apply for invoice financing

To apply for invoice financing, you need to follow a simple application process. You will have to furnish your pharmacy’s name, address, and invoice details, which are intended to be financed. The invoice amount, due date, and the customer’s name must be included as well.

Furthermore, you are obligated to submit bank statements and tax returns to assess your creditworthiness, which is critical for the lender.

The lender will examine your application after collecting the necessary information before granting your loan request. Upon approval, the funds will be available to you within a few days.

When applying for invoice financing, it is critical to select a reputable lender who has a history of assisting pharmaceutical companies like yours in securing financing. To get the best deal, compare financing offers from various lenders. By implementing an effective financing strategy, you could boost your cash flow and expand your pharmacy business.

Understanding the cost of invoice financing

As a means of enhancing cash flow, invoice financing can work wonders, provided you have a clear comprehension of the costs connected with this particular financing option. Basically, when you opt for invoice financing, you are vending your due invoices to a lender in exchange for an advance sum of cash. The lender would then recover the sum owed on the invoice from your clients, and you would receive the rest of the payment (minus the fee).

The costs that come with invoice financing depend mainly on the lender and the terms of the agreement. In general, there are two different charges that are related to invoice financing- a discount fee and an interest rate fee.

The discount fee is the percentage of the invoice amount that the lender levies for providing the cash advance, and this varies from 1-5% of the invoice amount, depending on the lender and the creditworthiness of your clients.

The interest rate fee is the interest rate imposed on the cash advance and is generally computed on a monthly basis. This fee is different depending on the lender and ranges from 1-2% each month.

It is crucial to thoroughly examine the terms of the agreement with the lender and fathom all the charges related to the invoice financing. This will assist you in establishing if this method of financing is appropriate for your business and if the fees are reasonable enough to outweigh the advantages of enhanced cash flow.

Click here to read our article on How to finance a healthcare business.

Tips for using invoice financing effectively

Invoice financing can be a very useful tool for pharmacists who need to increase their cash flow. However, just like with any financial product, its usefulness is determined by its efficiency. 

To get the most out of invoice financing, consider the following:

1. Know what you need for cash flow: Understanding your cash requirements is essential before engaging in invoice financing. How much cash do you require to cover your day-to-day costs and how quickly do you need it? This is important information that will help you choose the best invoice financing option and ensure that you get the money you need when you need it.
2. Choose a trustworthy financier: Since there are a lot of companies that offer invoice financing, you need to find a partner who is reliable, honest, and trustworthy. Find a partner who provides excellent customer service, straightforward terms and conditions, and reasonable rates.
3. Take charge of your invoices: Being proactive with your billing is essential if you want to get the most out of invoice financing. Ensure that your invoices are accurate and sent out on time, and promptly follow up if payment is not received. The quicker your invoices are paid, the sooner you will be able to get the money you need.
4. Make prudent use of the funds: When you get money from invoice financing, you need to use it wisely. Prioritise your spending and make a clear plan for how the money will be used. Don’t put the money to waste on long-term or unnecessary investments that won’t pay off right away.

Pharmacists can use invoice financing to their advantage, increasing their cash flow and expanding their businesses, if they follow these guidelines.

We trust that after reading this, you have gained a more comprehensive comprehension of how pharmacists can expand their liquid assets with the help of invoice financing. With invoice financing, waiting for insurance companies or other third-party payers to settle the payment after 30, 60, or 90 days will no longer be a concern. This option allows for prompt compensation, granting pharmacists the ability to shift their focus towards enhancing their business and providing better service to their patients. Should you be struggling with financial constraints, invoice financing might just be the solution required to elevate the success of your pharmacy.

Click here to know more about funding options for pharmacists in the UK

Reviewed By:

Nigel Crossman

Head of Commercial Finance

Nigel is a former banker and head of commercial finance at Samera. He specialises in raising finance, negotiating deals and structuring finance applications for healthcare businesses.

Dan Fearon

Finance Manager

Dan is a former banker and the head of our dental practice sales team. He specialises in asset finance for healthcare businesses and dental practice sales.

Arun Mehra

Samera CEO

Arun, CEO of Samera, is an experienced accountant and dental practice owner. He specialises in accountancy, financial directorship, squat practices and practice management.