VGM & ASSOCIATESHealthcare MSO

Heartland Session Sneak Peek: Procurement, Inventory Management & Cash Flow

Published in Member Communities on July 07, 2021

I hope you’re excited to attend VGM’s 20th Anniversary Heartland Conference. I’m particularly looking forward to moderating a panel of experts during the session: Procurement, Inventory Management & Cash Flow.

One of the questions I often get is about cash accounting and staying cash flow positive. Here’s a quick run through on the topic with three takeaways, but be sure to join me, and our panelists Jason Plogher, Director of Supply Chain, DASCO Home Medical Equipment and Tim VanAntwerp, Owner, Van's Medical Equipment, at Heartland for more and to get your pressing questions answered.   

Cash Accounting and Cash Flow

Cash accounting recognizes sales and expenses when revenue is actually transacted. The accrual method applies sales at the time of order and expenses on invoice date. In either case, your CPA will want you to be consistent in your methodology. 

DMEs, in general, struggle with cash flow. Tight margins, audits, protracted payments, and limited vendor terms contribute to the cash flow challenge. These areas all intersect and determine the health of a company. 

Put simply, businesses want to get paid more – sooner; and pay vendors less – later. 

Multiple Payer Sources 

When it comes to Medicare, Medicaid and private insurers, the only thing a DME can do is make sure their claims are accurate and complete upon the first submission. With few exceptions, the fee schedule is set in stone. It is advisable to have multiple payer sources – Medicare, private insurances, retail, VA, SNS/LTC, hospices, and others so that no single payer can have a terminal impact upon your business. 

Minimize Liability & Rolling Debt 

On the vendor side, you have many options. Dealing with wholesalers (e.g., McKesson, Medline, Lake Court) can help minimize your inventory liability and rolling debt. However, you may pay more. Going direct to manufacturers may get you a cheaper price but that usually comes with a commitment to larger orders. Your debt exposure increases, and any CPA will tell you that inventory is a liability.  Manufacturers are more likely to provide extended terms. 

Lease for Growth Areas 

Leases are a great tool to improve cash flow. In the case of complex rehab, you can get a lease on a $10,000 chair and pay it off over 12 months to make you cash positive immediately or within months of the transaction. However, I have seen DMEs get quashed by leases. If used for specific areas of growth, leases will work. If a lease is being used to pay a bill for commodes, walkers and crutches, there is a bigger problem operationally. 

The dream scenario is that your vendor pulls up their truck to your back door at 9 a.m. When a customer comes through the door and needs a walker, you go to that truck and get a walker. The customer pays you $40 for the walker and leaves. You go to the truck and pay the vendor $20 for the walker. 

The trick is figuring how to get as close to that scenario as possible. 

Heartland Featured Session 

Get great advice and more during the Heartland Conference Panel: Procurement, Inventory Management & Cash Flow moderated by Gerry Finazzo. During this session, attendees will learn how to identify ways to improve purchasing practices, mitigate inventory liability, identify ways to increase cash flow and lower activity costs. Learn more and register at www.vgmheartland.com.  

TAGS

  1. conference
  2. heartland
  3. hme
  4. tradeshow
  5. vgm

comments powered by Disqus

Get Connected

Stay up-to-date on the latest resources and news provided by VGM & Associates.

Sign Up for Email

From Our Experts

Why Are Respiratory Clinical Outcomes Becoming So Important? thumbnail Why Are Respiratory Clinical Outcomes Becoming So Important? Outcomes has been a buzzword in the industry for several years. But why are outcomes in the home respiratory care space becoming so important? The Importance of Training Techs in the Complex Rehab Industry thumbnail The Importance of Training Techs in the Complex Rehab Industry Worker shortages are prevalent in every sector of the economy; the complex rehab technology (CRT) industry is no exception. ATPs as well as repair technicians are in short supply. But what is being done to help address both of these needs? Training is one of the answers. Oxygen Talk with Ronda Buhrmester - All Things NCD Memos and PHE Waivers thumbnail Oxygen Talk with Ronda Buhrmester - All Things NCD Memos and PHE Waivers We chat with Ronda Buhrmester, Senior Director of Payer Relations and Reimbursement at VGM Government Relations about the changes coming to the oxygen equipment medical policy and how the renewed PHE continues to impact waivers. A Deep Dive into the “Competitive Bidding - A Decade Focused on the Wrong Prize the Case for Medicare Investment in DME in 2021” Study thumbnail A Deep Dive into the “Competitive Bidding - A Decade Focused on the Wrong Prize the Case for Medicare Investment in DME in 2021” Study In today's episode of Industry Matters we talk with Brian Leitten, CEO of Leitten Consulting, John Gallagher, VP VGM Government Relations, and Mark Higley, VP VGM Regulatory Affairs about an updated study, “Competitive Bidding - A Decade Focused on the Wrong Prize the Case for Medicare Investment in DME in 2021." VGM's Jim Walsh Retires as General Counsel thumbnail VGM's Jim Walsh Retires as General Counsel VGM Group, Inc., announced today its general counsel, Jim Walsh, has retired as of December 31, 2021. Walsh will remain involved with VGM as an advisor to the senior leadership team and chairman of the board of directors. Branding Matters. A Lot. To Your Customers and Your Bottom Line thumbnail Branding Matters. A Lot. To Your Customers and Your Bottom Line Your company's brand is the most valuable business asset you own. Branding is the single most important thing you can do to positively affect your revenue. As you begin planning for 2022, give these two things a little love, and your business will grow significantly. Branding Matters. A Lot. To Your Customers and Your Bottom Line thumbnail Branding Matters. A Lot. To Your Customers and Your Bottom Line Your company's brand is the most valuable business asset you own. Branding is the single most important thing you can do to positively affect your revenue. As you begin planning for 2022, give these two things a little love, and your business will grow significantly. Branding Matters. A Lot. To Your Customers and Your Bottom Line thumbnail Branding Matters. A Lot. To Your Customers and Your Bottom Line Your company's brand is the most valuable business asset you own. Branding is the single most important thing you can do to positively affect your revenue. As you begin planning for 2022, give these two things a little love, and your business will grow significantly.

Be Part of Something Bigger

Become a Member