Cash and working capital improvement will be critical to success in the year ahead and improvements in order-to-cash cycle time is the priority according to new research announced by Global Healthcare Exchange, LLC (GHX). The GHX-commissioned Institutional Investor market report “Driving Performance Through Automation,” based on a survey of 100 financial executives from healthcare suppliers, reports that 88 percent of executives say pressure to improve cash and working capital performance will increase in the coming year. Additionally, 45 percent say such pressure will increase substantially.
According to the report, healthcare financial executives at suppliers from medical equipment and device manufacturers, pharmaceuticals, and distributors are under pressure to improve their cash and working capital positions over the next year as interest rates rise and competition intensifies. At risk are company growth plans where working capital improvement is essential.
One of the key areas of focus for finance executives during the next year is improving receivables/order-to-cash cycle time. Simultaneously, they report receivables/order-to-cash cycle time as being the most difficult goal to realize with the key impediment being the lack of automation. This lack of automation is contributing to healthcare suppliers spending significant time and resources resolving receivables issues, diverting resources away from more constructive, value-generating activities, such as customer service and working capital optimization.
“Manual processes continue to hold back the industry in terms of optimizing financial performance and efficiency, which is why we see intensified interest and activity around invoice and payment automation,” said Matt Houston, executive director, financial services products, GHX. “As an industry, our opportunity, and imperative, is to take a holistic approach to solving this challenge, one that involves finance, supply chain, and IT teams actively engaging to drive automation across the entire ecommerce cycle. This will allow us to cut billions of dollars in cost from healthcare delivery.”
Healthcare suppliers participating in the research all reported sales of at least $250 million annually, and extending to over $1 billion. According to respondents, inadequate payment automation is a major barrier to payment-term standardization and reliable contract matching. Suppliers are bogged down in a complicated web of hard copy agreements, paper invoices and physical checks, and report that this lack of automation also decreases visibility into order-to-cash activities.
In fact, 58 percent of respondents say their companies distribute 20 percent or more of their invoices in paper and more than three-quarters of respondents (78 percent) say that fewer than half of the invoices they deliver are paid electronically. Eight-one percent of respondents confirm that their companies would realize “meaningful financial benefit” if they were to deliver more invoices electronically, and 83 percent say they would gain a meaningful financial benefit if they could receive more payment electronically.
To read the entire Institutional Investor “Driving Performance Through Automation” market report and to access a corresponding infographic, go to www.ghx.com/institutional-investor-infographic.
Global Healthcare Exchange, LLC (GHX) drives costs out of healthcare with cloud-based supply chain management technology and services in order to help enable better patient care and savings by maximizing automation, efficiency, and accuracy of business processes. GHX offers healthcare providers and suppliers an open and neutral electronic trading exchange that delivers procurement and accounts payable automation, contract and inventory management, vendor credentialing and management, business intelligence, payment management and other supply chain-related tools and services. For more information, visit www.ghx.com and The Healthcare Hub.