How to Measure Your True Cash Velocity and Shorten It by Weeks Without Adding Staff

Hi and happy Tuesday,

A multi-location group thought “days in A/R” looked fine. 

A payer-level review of cash velocity told a different story: 

• Lag to submit was 4 days

• Adjudication averaged 18 days

• Rework added 9 days, and 

• Patient collection added 14 days

Total cash velocity was 45 days. 

By fixing submission lag and avoidable rework, they cut 11 days in one quarter. No new hires.

What cash velocity really means (how to measure it)

What cash velocity really means (how to measure it)

Cash velocity is the time from date of service to money in the bank. Track the full chain, not a single Key Performance Indicator.

The Real Formula That Matters

Not when insurance "processes" it. Not when the Eligibility of Benefits arrives. When the dollars hit your operating account.

Let's break down what every extra day costs you:

If you have $100,000 of accounts receivable that moves from 30 days past due to 60 days past due, you lose $200 to inflation alone, and that's before accounting for the increased probability of non-collection and operational strain.

The 5-layer velocity framework (that actually works)

After analyzing practices that successfully shortened their cash cycles by 20+ days, we identified five non-negotiable layers:

Here's how three practices shortened their cycles without hiring anyone:

The calculator

Plug in your last 30 days of data

1. Average charge entry lag = _________ days

2. Average submission lag = __________ days

3. Average payer adjudication = _______ days

4. Average rework time = ____________ days

5. Average patient collection time = ______ days

Cash velocity = A + B + C+ D + E

Rule of thumb

If administrative denials exceed 5 to 8%, prioritize quality gates and documentation checklists before investing in more staff time.

The bottom line impact

A practice collecting $200,000 monthly with a 70-day DSO has $466,667 tied up in receivables. Reducing DSO to 45 days frees up $166,667 in working capital, instantly.

That's enough to:

• Add two operatories

• Upgrade to digital scanning for entire practice

• Fund expansion to a second location

• Eliminate high-interest debt

Top performers target RCM costs at around 2% or less of revenue, and the velocity of cash flow is critical, especially when compensating doctors on collections.

Next week, I’ll reveal the claim scrubbing innovations coming in the next 18 months, and how they’ll transform your revenue cycle.

See you next Tuesday,
Dino Gane-Palmer