Accounts Receivable Factoring for Nurse Staffing Companies

The cash flow gap is a common challenge to nurse staffing agencies.  It can take months for the hospitals and nursing homes to pay invoices for staffing services yet the nursing staff needs paid every week or two.

Factoring companies can help by providing small business funding to Nurse Staffing Agencies, but should they choose recourse or non recourse factoring?

This article from guest author Philip Cohen of PRN Funding explains the difference.

Recourse and Non-Recourse Nurse Staffing Accounts Receivable Factoring: What’s the Difference?

By: Philip Cohen

What is nurse staffing recourse factoring?

For the most part, recourse factoring is the most common and the most affordable nurse staffing financial help available to business owners. In this type of factoring arrangements, the accounts receivable factoring company will require an agency owner to buy an invoice back if the client does not pay within a specified amount of time. Moreover, the nurse staffing agency owner accepts full credit risk for any and all accounts receivables that it sells to the factoring company.

What is nurse staffing non-recourse factoring?

The other accounts receivable factoring option that owners have is non-recourse factoring. In a nutshell, non-recourse nurse staffing financing agreements hold the factor entirely responsible for an unpaid invoices if the following is true:

If the hospital, nursing home or vendor management system (VMS) goes bankrupt during the time an agency owner’s invoice was factored.

If the hospital, nursing home or VMS goes out of business during the time an agency owner’s invoice was factored.

It’s important to keep in mind that non-recourse accounts receivable factoring does not cover the following situations:

• Very late payments when there is no insolvency
• Disputes/challenges with nurse staffing services
• General collections issues

Naturally, both options have pros and cons that an owner should consider before choosing which type of agreement to make. Typically, they will receive lower factoring fees and/or higher advance rates if they choose to enter into a recourse factoring relationship. On the other hand, a non-recourse accounts receivable factoring arrangement buys nurse staffing business owners’ protection if a hospital nursing home or VMS goes bankrupt. Ultimately, agency owners need to review their accounts receivable factoring contract in detail with a lawyer to determine which type of arrangement, recourse or non-recourse, is the best fit for their agency.

About the Author: Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the healthcare staffing invoice financing market place. Through a process known as factoring, PRN Funding provides business owners with the financial resources needed to grow and effectively compete in the industry. Contact Philip Cohen at toll-free 866.776.5407 or via email at pcohen@prnfunding.com. Please visit PRN Funding, LLC on the web at http://www.prnfunding.com.

Article Source: Ezine Articles – Recourse and Non-Recourse Nurse Staffing Accounts Receivable Factoring: What’s the Difference?

Accounts receivable factoring is available to a variety of industries including medical, construction, transportation, manufacturing, staffing, and other business to business services.  Factoring companies provide an advance on invoices so businesses don’t have to wait 30-60 days for payment from customers.

What is Non-Recourse Factoring?

The most popular form of invoice financing is “non-recourse” factoring, accounting for roughly 85% of all factoring transactions.

Just like the name implies, the client is not financially obligated to the factoring company in the event an approved and funded invoice is not paid. Read more

What is Recourse Factoring?

When looking for a Factoring company it is helpful to understand if their funding methods are “recourse” or “non-recourse” factoring.

With recourse factoring the company selling the invoices (the client) is basically guaranteeing the invoice will be paid in full. Read more

Medical Coding Factoring Terms

When a medical coding service is considering selling their receivables to a factoring firm, it’s important to familiarize themselves with some common factoring terminology. This is a quick reference guide outlining some of the more commonly-used factoring terms to help medical coding business owners navigate seamlessly throughout the entire factoring process.

ACH (Automatic Clearing House) – One method factoring companies use to electronically transfer funds into an Account Creditor’s account. When an ACH is initiated, the funds are made available electronically in the Account Creditor’s account on the next business day.

Account Creditor – You, the client and provider of medical coding services.

Accounts Receivable – The money that is owed to an Account Creditor for the services it has provided to customers on credit. The amount indicated on an issued invoice.

Advance Rate – Money provided immediately to the Account Creditor-expressed as a percentage of the total invoice amount. Frequently, factoring firms advance between 70-90% of the invoices it buys.

Account Debtor – The purchaser of medical coding services who is responsible for paying the invoice, (a.k.a. your customer.)

Cash Flow – The measurement of cash coming into a company via accounts receivables and cash going out of a company via accounts payable and payroll.

Collateral – An asset that is promised or given to a funder to guarantee the discharge of an obligation by the Account Debtor.

Discount Fee – A fee assessed by a factor that purchases accounts receivable. Traditionally, the discount fee is determined by the size of the invoice, the length of time it takes to collect the funds and the creditworthiness of the customer.

Face Amount or Face Value – The total amount of an invoice.

Medical Coding Factor – A company that provides operating capital to businesses through the purchase of their invoices.

Medical Coding Factoring – An alternative financing arrangement, in which a factor purchases the accounts receivables of a company, advances a specific percentage of the invoice immediately and then collects on those invoices.

Medical Coding Invoice – A legal debt instrument which indicates the amount due from a customer to pay for delivered medical coding services.

Non-Recourse - The period of time in which the accounts purchased by the factor remain the factor’s accounts and do not revert to the Account Creditor if unpaid due to an insolvency event. The factor accepts full credit risk for any and all accounts that it purchases during this period.

Notification – The process whereby the factoring company communicates to an Account Debtor that an invoice has been purchased from the Account Creditor and that the Account Debtor is to pay the factoring company directly.

Recourse – The period of time in which accounts purchased by the factor are able to revert to the account creditor if unpaid due to an insolvency event. The client accepts full credit risk for any and all accounts that it sells to the factor during this period.

Reserve – Amount of money that is not immediately provided to the company factoring its accounts receivable when the account is purchased by the factor, expressed as a percentage of the total invoice amount. (Advance Rate + Reserve = 100% of Total Invoice)

Reserve Release – The Reserve, minus the discount fee, is transferred by the factor to the client after payment is received.

UCC (Universal Commercial Code) – The laws dealing with commercial business.

UCC-1 – The financing statement (Form UCC1) filed to perfect a security interest in named collateral.

Keeping this medical coding factoring terminology guide close by during conversations with factoring firms will help medical coding business owners better be able to speak and understand the “factoring language.” Using this article as a reference also allows medical coding business owners to save time by focusing on asking the right kinds of questions to locate the best medical coding factoring firm for their company.

Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the medical coding invoice funding market place. Through a process known as factoring, PRN Funding provides business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding provides medical coding agencies with flexible and immediate access to capital. We give you the freedom to factor what you want, when you want, whom you want, for as long as you want. Prior to founding PRN Funding, Mr. Cohen was an executive officer of The MRC Group, a national provider of Medical Transcription Services. Contact Philip Cohen at toll-free 866.776.5407 or via email at pcohen@prnfunding.com. Please visit PRN Funding, LLC on the web at http://www.prnfunding.com/

Article Source: Ezine Articles – Medical Coding Factoring Terminology

Recourse and Non-recourse Factoring

The big difference between recourse factoring versus non-recourse factoring is the party at risk for bad debt.

Understanding this important distinction will help a business select the right financing terms when factoring invoices and accounts receivable. Read more