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Hospitals: the solution for responsible cash flow optimization

Hospitals: the solution for responsible cash flow optimization

November 20, 2023 - Mathieu Wemaere

Cash flow management is a significant challenge for the healthcare sector, especially in the current climate of inflation and rising interest rates. This can impact the supply of hospitals, which is crucial for ensuring the availability of vital tools such as drugs, medical equipment, and other necessities.

A typical Belgian hospital manages hundreds, if not thousands, of suppliers, 95% of which are local. It must juggle a wide variety of actors, from pharmaceutical giants to small local businesses, such as laundries, bakeries, and many other independents.

Digit89 stands out as a cash flow optimization solution with the goal of becoming a responsible tool in support of the economic fabric. Although initially designed without specialization in the hospital sector, Digit89 has proven to be a logical and relevant solution to its specific challenges.

I) What is Reverse Factoring?

Reverse factoring is a financing solution that sits between companies and their suppliers. It allows suppliers to receive an advance payment on one or more invoices of their choice without having to wait for the original invoice’s due date. This solution helps them reduce payment terms and thus optimize their cash flow.

⇒ Here’s an article to learn more about reverse factoring: Digit89: Unlocking Working Capital – The Rise of Collaborative Reverse Factoring

II) What is the Role of the Hospital in this Model?

The uniqueness of this collaborative model is that it is initiated by the company for its suppliers. In other words, for suppliers to benefit from this solution, the hospital must first join the platform.

This membership is free for the hospital, which only commits to communicate to the Digit89 platform information about its outstanding suppliers invoices, i.e., the list of all open invoices issued by their suppliers.

This upfront collaboration between the hospital and Digit89 creates a positive dynamic benefiting both the company and its suppliers.

III) What are the Benefits for the Suppliers?

From the perspective of hospital suppliers, once their client joins Digit89 and communicates information related to their invoices, the suppliers can then:

  1. Track the processing of their invoices in real-time: Through the Digit89 platform, suppliers have direct access to all information related to the processing of their invoices by the hospital. They can ensure their invoices have been received, follow the approval status, and even detect encoding errors upfront. All of this is free of charge.
  2. Accelerate the payment of their invoices: Thanks to Digit89, suppliers can request early payment of the invoices of their choice, offering them flexible and affordable access to their cash flow. Indeed, the prior collaboration between the hospital and Digit89 minimizes the model’s risk, making invoice financing accessible to all suppliers (regardless of their size or financial situation) at an affordable discount rate starting from 0.5% of the invoice amount.

Hospital Suppliers: How Digit89 Helps Overcome Cash Flow Obstacles

The Impact of the Digit89 Solution on the Accounting Department at CHR Haute Senne.

IV) What are the Benefits for Hospitals?

First and foremost, it should be noted that for the hospital, implementing this solution is both simple and free. Moreover, it has no impact on the internal cash flow or the balance sheet of the institution, as the invoice financing is handled by Digit89. Finally, the deployment of the solution is entirely managed by Digit89. In other words, the Digit89 team is responsible for providing suppliers with access to the platform and managing the flow of transactions.

  1. For the hospital, this initiative represents primarily an action of support to its suppliers. By allowing them to have real control over their cash flow, the hospital strengthens its suppliers and thus solidifies its supply chain.
  2. It is also a way for the hospital to responsibly optimize its cash flow. Indeed, payment delays play a crucial role in cash flow management. With Digit89, the hospital can maximize its payment terms while offering an attractive payment alternative to its suppliers.
  3. Finally, from an operational perspective, implementing Digit89 significantly contributes to reducing the workload of teams responsible for managing suppliers within the hospital. By providing suppliers with access to a wide range of information, the teams will be significantly less solicited.

Did you know: A supplier spends an average of 10 hours per week, or 74 days per year, soliciting their clients (hospitals) for information about the status of their invoices. ⇒ To learn more: Digit89: Breaking the Vicious Circle – Addressing Europe’s Escalating Late Payments Crisis

Éric Baeyens, CFO of CHR de la Haute Senne: Why Did the Hospital Join Digit89?

V) Why and How Does Digit89 Seek to Become Systemic in the Hospital Sector?

Digit89 is a responsible cash flow optimization tool. Its ambition is to become a true support to the Belgian economic fabric.

Digit89 stands out as a “Multi-Client” platform, consolidating all the hospitals that use it. This allows suppliers to simultaneously consult all invoices issued to these hospitals within a single platform.

In the Belgian hospital sector, many suppliers are common to all hospitals. Therefore, each time an additional hospital joins the platform, it allows more suppliers to find a greater number of their invoices. This translates into an increased impact on their cash flow, thus enhancing the platform’s effectiveness for all involved parties.

Digit89 is a solution accessible to all suppliers, regardless of their size or financial situation. That’s why the Digit89 solution would take on significant importance in the quest to become a supportive tool, becoming systemic.

Digit89 Overview

Today, Digit89 already has three participating hospitals on the platform, with two additional hospitals that will join the platform by the end of the year. The positive feedback is reflected in the subscription of over 250 suppliers to the platform.

Considering that the hospital sector accounts for approximately € 10 billion in annual purchases, the potential impact of optimized large-scale cash flow management is quite substantial.

If you have any other questions or would like to delve deeper into this topic, do not hesitate to contact our team at Digit89.

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