How a GP practice overcame cash flow challenges with Octet’s Points4Pay
General practitioners (GPs) and healthcare practices often face unique financial challenges, especially when navigating payroll tax compliance and managing payments to contracted doctors. One GP practice, with 16 contracted doctors, found themselves in a precarious situation, caught between complying with payroll tax regulations and ensuring smooth cash flow. The healthcare practice then partnered with Octet Finance, who helped them overcome their cash flow challenges while streamlining their payment processes. The introduction of Octet’s innovative solution, Points4Pay, not only helped the practice maintain its financial health but also offered tangible benefits to its doctors.
The challenge
In recent years, the healthcare industry, particularly GP practices, has been facing increasing scrutiny over payroll tax compliance. Practices that employ contracted doctors must navigate complicated tax structures, and any misstep could result in penalties or audits from the Office of State Revenue. For this particular GP practice, the uncertainty surrounding payroll tax rules led to concerns about how they structured their Service and Facility Agreements.
Historically, the practice collected 100% of patient fees upfront and then paid the doctors after deducting a 35% service fee. However, based on advice from their accountant, the practice was advised to restructure their payment flow. The contracted doctors would now collect 100% of patient fees upfront and remit the service fee back to the practice fortnightly. While this arrangement provided better alignment with payroll tax requirements, it created a significant cash flow gap.
The practice suddenly found themselves facing delays in receiving the service fees, resulting in less cash available for operating expenses. This delay, compounded with administrative inefficiencies in tracking and collecting service fees manually, put the practice at risk of financial instability.
The solution
Recognising the widespread cash flow issues facing GP practices and other healthcare businesses with contracted doctors, Octet created, Points4Pay, specifically designed to address these cash flow gaps while reducing administrative burdens and offering additional perks to practitioners.
As Tim Bowring, Head of Sales for Health at Octet, explains: “We saw that healthcare practices were struggling with cash flow and compliance issues related to payroll tax. Points4Pay offers a seamless solution that not only addresses these challenges but also provides real value to both the practice and the practitioners.”
Points4Pay operates by acting as an intermediary between the practice and its contracted doctors. Here’s how it worked for this GP practice.
“We saw that healthcare practices were struggling with cash flow and compliance issues related to payroll tax. Points4Pay offers a seamless solution that not only addresses these challenges but also provides real value to both the practice and the practitioners.”
Tim BowringHead of Sales, Health at Octet
- Points4Pay provided small procurement limits to each of the practice’s 16 doctors, similar to a credit card, to pay for the services provided. This ensured that doctors could receive 100% of patient fees without delay, while Octet managed the remittance of service fees to the practice.
- Rather than waiting weeks to receive service fees from the doctors, the GP practice now received payments from Octet within 24 hours. This significantly improved the practice’s cash flow, ensuring they had enough liquidity to cover their operational expenses.
- With Points4Pay, the manual debiting of service fees was eliminated. Instead of relying on cumbersome direct debit processes, the practice could upload the details of the service fees owed into the Points4Pay system. Octet then facilitated the entire transaction, easing the workload on the practice’s admin team.
- The product also introduced a frequent flyer points program for practitioners. By using Points4Pay to remit their service fees, doctors earned uncapped frequent flyer points on their spending, adding an extra layer of value and loyalty to the practice.
The result
The impact of Points4Pay was immediate and measurable. The GP practice no longer had to worry about cash flow delays or administrative inefficiencies. With the ability to receive service fees within 24 hours, the practice was able to maintain steady cash flow, covering payroll and other operational costs without delays.
“Points4Pay doesn’t just fix cash flow issues,” says Tim. “It provides a true, arms-length, procurement model, simplifying the payment process and strengthening the relationship between the practice and its practitioners, through offering tangible benefits and rewards. It’s a win-win for everyone.”
The frequent flyer points program also became a major selling point for the practice. Doctors appreciated the added value of earning points on their service fees, which could be redeemed for flights and other rewards. The loyalty program helped the practice retain its existing doctors while also attracting new talent.
For GP practices and other healthcare businesses, cash flow management is critical to success. Payroll tax compliance, combined with the complexities of collecting service fees from contracted doctors, can create significant financial pressure. Octet’s Points4Pay provides a smart solution that:
- Improves Cash Flow: By accelerating service fee payments to the practice, Points4Pay reduces days sales outstanding (DSO), ensuring practices have the liquidity they need.
- Lowers Administrative Costs: The streamlined process for collecting service fees significantly reduces the administrative workload for the practice’s staff.
- Enhances Practitioner Relationships: By offering pre-approved finance and the opportunity to earn frequent flyer points, Points4Pay provides additional value to practitioners, improving retention and recruitment.
For healthcare practices grappling with payroll tax compliance and cash flow gaps, Points4Pay offers a comprehensive, compliant solution that improves financial health while delivering added benefits to both practices and practitioners.
As payroll tax regulations continue to evolve, healthcare practices need a reliable financial partner that understands their unique challenges. Tim concludes, “With Octet’s Points4Pay, this GP practice is not only compliant but thriving, having transformed their payment structure into a seamless, rewarding process.”
Discover how Points4Pay can benefit your practice and your contracted practitioners. Register your interest or reach out to our team for more information:
- Email: points4pay@octet.com
- Phone: Call our Healthcare Finance Specialists on 1300 862 838
Octet’s working capital finance solutions for the healthcare industry help by unlocking the opportunities in your supply chain. We also collaborate closely with commercial finance brokers across a wide range of industries.
If you have clients who could benefit from Points4Pay or other supply chain finance solutions, such as Debtor Finance or Trade Finance, contact us today.
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Disclaimer: The above article content and comments are our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.