Maintaining a Positive Cash Flow at your Research Site

Gina Robles
Site Relationship Manager, PharmaSeek Financial Services
May 31st, 2013

Many clinical research sites struggle to consistently maintain a positive cash flow, a vital aspect of financial health.

Most sponsors employ a “buy now, pay later” philosophy, where “pay later” usually means much, much later. The majority of sites operate under budgets that include quarterly payment terms, which can then take several more months for payments to arrive. This leaves sites suffering from weak inflow and in the position of independently funding study-related expenses for months before seeing any significant compensation.

Slow and late payments can be devastating to sites and to the study as a whole. In addition to direct study-related activities, sites still have to pay other vendors for items such as rent and utilities. These vendors almost always use the standard invoice timeframe of Net 30, which requires that the payee receive payment within 30 days. Reconciling the difference between Net 30 cash outflow and what is usually upward of Net 90 cash inflow is a key challenge in the battle to maintain positive cash flow.

Sites improve performance when they focus on the clinical aspects of a study, rather than cash flow. Therefore, it would be beneficial for sponsors to consider adopting a standard of monthly payments. However, until this occurs, research institutions must be well informed and actively negotiate for reasonable payment terms. If the sponsor proposes quarterly payments, that doesn’t preclude you from asking for monthly payments. If you don’t ask, you’ll never know.

Budgeting Financial Management

1 Comment

One thought on “Maintaining a Positive Cash Flow at your Research Site

  1. The greatest challenge faced by most businesses in cash flow maintenance is ensuring timely payments.here are some tips for getting customers to pay on time :
    1.Follow up on unpaid invoices regularly. Be polite but firm.

    2.Use professional, easy-to-read invoices that make it clear what services are being billed.

    3.Provide an incentive to customers who pay early or on time,

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