Executive summary. Pharmacy cash flow is set by three dates: when inventory is paid for, when the claim is adjudicated, and when the money actually lands.
Definition
The cash-conversion cycle measures the elapsed time between paying for inventory and collecting cash from the related sale or claim.
Map the actual events
Map purchase order, invoice, receipt, dispense, claim submission, adjudication, remittance, and deposit as separate events. Collapsing them into “sale” hides the working capital the business is financing.
Include reversals, returns, partial payments, and late remittances. They are common, and they are where a tidy dashboard starts to mislead.
Use cash measures with operating context
A shorter cycle is worse if it was bought with stockouts. Read cash measures beside fill rate, expiry exposure, patient access, and contractual obligations.
A forecast should expose its assumptions: demand, lead time, payment cycle, purchasing terms. A user who cannot see them cannot challenge them.
Frequently asked questions
Can adjudicated claims be counted as cash?
No. An adjudication supports an expected receipt. Cash is realized when payment arrives and reconciles.
Referenced standards and further reading
- SBA: Manage cash flow ↗U.S. Small Business Administration
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