Cash flow management is a common challenge among service providers, including contractors and independent adjusting firms. Following the latest active hurricane season, many firms are experiencing difficulties in their accounts receivables while still struggling to perform at top service levels on a consistent basis. Without predictable cash flow, vendor firms must find alternative methods to maintain their operations and pay their own workers until they receive compensation for their services.

The vendor-carrier exchange: Revenue management vs. cost control

Most insurance carriers that have timeliness issues in paying their vendors are aware of it and are very concerned with keeping their accounts payables current. Insurance carriers have a fiduciary responsibility to provide adequate review and oversight of all claims, and must provide controls on every loss and expense check that goes out the door.

Many carriers admit certainty that there is some degree of expense leakage in an effort to pay vendors timely. Unfortunately, carriers do not have the data nor the technology to validate or quantify the amounts of overspend.

The challenge facing carriers in timely invoice payment is usually based on scalability, especially following a catastrophic event. They do not have adequate resources to handle the claims volume, particularly the task of reviewing every vendor invoice for accuracy. The problem is compounded when claims volume surges, and in some cases, it can take carriers months to remit payment to the service providers who took care of their policyholders and upheld the carrier's reputation in the face of agents and customers.

Throwing people at the problem

One factor that further drives today's accounts payable and accounts receivable challenges is the addition of personnel resources by both parties to handle manual tasks. For vendors, the manual task of creating and submitting invoices to clients can take days during normal claims volume. In times of volume surge, the challenge amplifies and firms allocate additional human resources or hire temporary staff to assist with this function.