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  • Writer's pictureAshley Van Rosmalen

Why Your Healthcare Practice Should Consider Working Capital Finance In 2023

Picture of a balance sheet on a computer screen

A new year brings new challenges and opportunities for businesses. 2023 will be no different. Setting up a business for success now to be prosperous in the future means turning challenges into opportunities and building a business that can weather the storm in good times and bad.

Leveraging working capital finance is a practical tool to build success in any business. It can be the key to the success of a business - especially in the healthcare industry.

Healthcare practices can benefit from working capital finance from managing payroll to vendor and supplier payments and keeping the lights on.

But like any medical finance, it’s important to research whether working capital is right for you.

This article will explore working capital finance and how it might be an effective tool for your healthcare practice in 2023 and beyond.

What Is Working Capital Finance And How Does It Work?

Simply put, working capital finance is money borrowed from a lending institution for a business to use to cover business operating costs and financial requirements. Working capital finance aligns with a working capital framework. It can be a valuable financing tool for businesses to help assess and manage performance and maintain a healthy balance sheet.

Understanding the working capital position of a business can mean the difference between a great business and one struggling to make ends meet. Businesses must balance their current and future projections to always have enough cash.

How working capital finance is used is relatively simple. The money borrowed allows a business to manage the balance of the business assets, i.e. cash accounts receivable and inventory, which is deducted from the current liabilities, including payroll, loans, debts, and taxes, to determine the business's financial position or capital.

How Can Healthcare Practices Benefit From Working Capital Finance?

Not all businesses are the same and therefore have specific requirements to be successful - including healthcare practices which, in most cases, are purely focused on providing an essential service as opposed to a strictly sales-based environment.

For example, a healthcare practice’s accounts receivable department operates slightly differently from other businesses. When insurance payments are made, they can be considered as a delayed form of an asset as they are only sometimes received when carried out. They can take some time to be fulfilled, depending on the nature of the payment.

On the other hand, Liabilities like purchasing supplies on credit or staff wages need to be paid now, which means that where your money is in the process allows you to understand your working capital better.

Working capital finance framework helps paint a picture, providing a holistic understanding of a business. When a business maps out monthly incoming and outgoing cashflows, it shows where the incoming and outgoing cash position is, allowing for better planning opportunities with a data-driven approach.

Not only does working capital finance help you plan for business success, but it also affords opportunities to hire new staff, upgrade essential equipment and take advantage of bulk buying supplies. Knowing where your money is, makes these opportunities much easier to capitalise on.

Why Healthcare Practices Need Working Capital Finance In 2023

The past few years have not been without their challenges and uncertainty, so implementing a working capital financing strategy for your practice could positively impact the future of your business and approach turbulent situations with greater confidence.

When there are seasonal fluctuations in any business, i.e. quiet and busy periods, it’s important to know you have enough working capital to help weather the storm. Financing can help alleviate stress in these periods, allowing practices to cover costs in quiet times and prepare and plan for the future when times are busy.

Almost all businesses will have times when additional working capital is needed to fund various things, ranging from supplier payments, staffing and government obligations, so ensuring access to capital when needed is essential.

Things To Consider With Working Capital Financing

Working capital can help your business navigate the uncertainties that may lie ahead in 2023 and beyond. But remember, working capital finance isn’t a short-term fix. It’s a strategy for building a sustainable business.

When considering working capital finance as a solution, remember that striking a balance between incoming and outgoing capital must be a work in progress.

As such, financing should be considered a tool for your working capital strategy rather than as the solution.

While working capital finance can benefit businesses, it may only benefit some. Consult with an experienced broker to ensure you make the right decision for your business needs.

If working capital sounds like something your business could benefit from in 2023 and beyond, arrange a 30-minute, no-obligation review of your finances with one of our Finance & Insurance Partners brokers, where we can help discuss the right solution for your healthcare practice.


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