Revenue Cycle Management: Practical Use
ShareThe history of revenue cycle management can be traced back to the second half of the 20th century. Indeed, this practice was first applied in the industry of aviation and then became widely popular given the outstanding results that it helped to generate. Revenue cycle management is a practice that consists of trying to anticipate what consumers might need in the future. Indeed, if a business entity has the ability to determine what its clients need in the short or long run, then it will be able to distance itself from its field competitors in a relatively easy way. This is true in almost any case. Popular examples of this reality can be found in the pharmaceutical industry or the defense sector. As you might know, the pharmaceutical sector is composed of giant companies that all invest millions of dollars each year to develop new medications or vaccines that will help improve the lives of sick patients. Every time that a new discovery is made, it is protected with a patent and thus enables the developing company to generate a very large amount of money. The development of new medications can be viewed as part of the revenue cycle management practice. This is because there are millions of individuals who are waiting for new medications to be invented and that will help them get rid of their currently-incurable sicknesses. Thinking that revenue cycle management essentially consists of anticipating the future needs of customers would be a huge mistake. Indeed, this practice is also about determining the precise quantity of products that must be manufactured and the price at which they should be distributed. Many people view revenue cycle management as a process that is designed to not only help a business entity use its resources in a better way but also to reduce its operational costs. Keeping inventory costs a lot of money to companies on a yearly basis. By definition, there is no company that produces with the purpose of maintaining inventory, but instead with the objective of selling everything that it has produced. By implementing revenue cycle management, it becomes possible to find the exact number of products that can be manufactured and for which the business entity will record the least possible losses. It is important to apply the right pricing for a product or a service that has been introduced recently. A price that is considered too high will exclude a large number of prospective customers from acquiring the item, and thus may prevent the entity from reaching its revenue goals. In order to implement revenue cycle management in an effective way, a business entity must spend a great deal of its resources on the collection of data from a given local or regional market. As mentioned earlier, business entities that implement revenue cycle management must be able to identify the needs of their clients as well as their financial constraints. This can only be accomplished if they possess enough data on such individuals. Without these data, these companies will not be able to make forecasts as for how the demand will evolve over the upcoming years. When it comes to the collection of data, it is important to also take into consideration the quality. Using data that are of poor quality will cause the forecasts that will be made from them to also be poor. Not all companies have access to quality data. This is actually one of the reasons why some of them perform better than others. In general, firms that are firmly established are able to obtain data from reliable sources thanks to their access to large financial resources.