Carlos Orantes, CEO of Alcanza Clinical Research, shares insights into modern-day budgets and payments at the site level and discusses the challenges faced by sites, including holdbacks and delayed payment terms.
Carlos delves into the complexities of financial planning for sites, discussing the differences between revenue projections and cash flow forecasts. Carlos also provides valuable strategies for sites to encourage on-time payments, emphasizing clear communication, negotiation of payment terms, and accuracy in invoicing.
Carlos Orantes, CEO of Alcanza Clinical Research, shares insights into modern-day budgets and payments at the site level and discusses the challenges faced by sites, including holdbacks and delayed payment terms.
Carlos delves into the complexities of financial planning for sites, discussing the differences between revenue projections and cash flow forecasts. Carlos also provides valuable strategies for sites to encourage on-time payments, emphasizing clear communication, negotiation of payment terms, and accuracy in invoicing.
Welcome and thank you for joining the Society for Clinical Research Sites for SCRS Talks. I'm Jimmy Bechtel, the Vice President of Site Engagement with the Society. SCRS Talks is a program that allows our partners and those that we work closely with to take a few minutes to address issues of industry concern, share exciting achievements, And to learn more about our growing community today, we have a long standing supporter and member of the society, Carlos Arantes, the chief executive officer with Alcanza clinical research with us to share a little bit about modern day budgets and payments at the site level and some work that he and his fellow sites are doing in this space. Carlos, it's great to have you with us. Always a good conversation whenever I get a chance to talk with you Why don't you start us off with a little bit more introduction from you.
Carlos Orantes:Well, hi, Jimmy. Thank you for having me today. As you indicated, I'm the CEO of Alcanza Clinical. We're a site network in the United States primarily focused on diversity, equity, and inclusion. So our overarching goal is to remove barriers for participation in clinical research and development. Our tenet here is you know, making sure that we are able to do a great job with our patients and our sponsors. But ultimately we must get paid just like any other site network doing these types of work. So I'm very excited about today's topic and look forward to digging in a little bit with you.
Jimmy Bechtel:Yeah, absolutely. Well, let's do that. Carlos, let's, let's dig in here. You know, at this global site solution summit this past October, as usual you're kind of one of our mainstays and someone that we always go to, to help us bring some of our content to life. You participated in several sessions around site payment, improvement tactics, and kind of that Concept of pipeline forecasting. So start us off. Talk a little bit about some of the challenges that sites are facing regarding the delayed payment terms and expanding on how those challenges impact overall site success and financial stability.
Carlos Orantes:Well, I, I think we could talk about this all day, but I know we have limited time. I'll first, you know, start off by saying that this topic of site payments and the challenges around that, it's been a hot topic for actually quite some time. And unfortunately, you know, there's some basic elements that are still affecting sites. One is holdbacks, they still exist. Then you have payment terms as to when you get paid according to the contract, but then there's the fine print as to when does the clock start ticking and so when you put all these things together, you've got sites that depending on the level of infrastructure that they have to really dedicate the time to understand and negotiate the budgets and contracts and then later to focus on collections. There's a huge gap between the more Resourced sites being able to do a much better job and fare better, and then the smaller sites that don't have the infrastructure, you know, they're left with probably less than favorable terms on all of those facets that I just talked about. So then you, you create that divide, right? Of the more resource sites get more resources and the less resource sites continue to get less resources. And so, you know, I, I think that, you know, has continued to be a problem and as much as this is talked about, not just at every SCRS that I've been to, including the most recent one, but there isn't a clear path to how do we make this better beyond just talking about it. So, I'm, I'm glad to see that SCRS have started several. Payment initiatives that are focused on each of these topics so that you know, not only can we bring together sites and sponsors and CROs because this is a problem that exists for different reasons for each one of those stakeholders. And unless we talk about it openly and work collectively towards a solution that benefits everybody, we're just going to keep talking about it. And we're just going to keep being frustrated by it. So I'm glad to see. You know, this evolution from talking about it to addressing it at the conference and now with three active focus groups around these topics that will eventually result in some very tangible recommendations for each of those stakeholders, the sites, the CROs, or the sponsors.
Jimmy Bechtel:I couldn't agree more, Carlos. And that's, you know, the process, right? The methodology that SCRS follows with our site partners like you to help bring these things to life. We hear that there are problems, so we want to address them. So I too am looking forward to the outcomes of the SCRS payment initiative and appreciate your highlighting really A couple of the main challenges. It's one of those things that we have to keep pounding the drum and keep being the squeaky wheel when it comes to this, because it's not something that we can do alone. However, we know that the sites obviously have a major role when it comes to their involvement and the part that they play when it comes to payment. So can you talk a little bit about how you envision and maybe how you do it building a comprehensive and data driven approach to financial planning, considering of course both challenges around delayed payments and the complexities that I know sites face around accurate revenue projections.
Carlos Orantes:Yeah, so I think two things to address there. One is, you know, revenue projections is different, obviously, from cash flow forecast. Many sites, especially smaller ones operate on a cash basis. So cash is king. The cash that comes in is the revenue that they recognize, but it's very difficult to predict when that cash is coming in. Right? And so, so the biggest issue there is sites, not having enough funding, enough working capital to stay ahead of the curve, especially as they're growing. Right? So the cash that they're getting paid today is for work that was done. You know, long ago could be three months ago or more and and so the working capital needs of sites today. Many sites are operating with significantly lower cash flow available to them. that they should be and many of them are resorting to to borrowing money. So using debt isn't necessarily a bad thing, but when you're using too much debt, that's a problem because you can't service the debt and especially now with the interest rates being so high. So a lot of sites have gotten over leveraged. And so it's really important to be able to predict your cash flow. So if you're on a cash basis, it's really simple to look at what are your expenses that the run rate that you've had, you have fixed expenses, you have variable expenses, right? Fixed such as rent, payroll. variable could be study supplies or, or adjunct labor that you have. And it's really important to be able to gauge and, and you're, you're better off adding even a margin of error to, to estimate that you need more cash flow than you actually do, because then guess what? You have more cash than you need. The opposite would be problematic. I think the more challenging situation is when you're on a on, on an accrual basis. So your revenue is directly based on the activity that you have. And that's where technology really comes into play. This is really important that you have, you know, two components to your revenue forecast. One is forecasting directly from the backlog, which is any study that you have a signed contract that's either actively open and, and rolling or in maintenance, or it's a waiting startup, right? And so those studies that are in the backlog, That's where you have to use the CTMS functions and there's many CTMS systems out there to basically have for each patient that enrolls, there's a revenue waterfall, which is directly correlated to the activities that are outlined in the protocol for each patient. So it is a, I'll say a painful process to go through, but once you get that, you, you can have with a certain level of accuracy, a very good predictor of revenue that's going to come from your backlog. And unfortunately, not all sites have a backlog that can fill their revenue needs. So that's when you flip over to the pipeline, right? So these are studies that are in the business development funnel. And, and there, I think it's even tougher because you don't know when they're going to be awarded, when they're going to get the contract signed and when they're going to start in the clinic. You might have an estimate of that. So there's a little bit of extrapolation that you do there, but you ultimately do the same thing for studies in the pipeline forecast the revenue waterfall, as you did for the backlog studies. You do similar activities for the pipeline studies and then you add those two together and you see where each month gets you and many companies have budgets, right, and then you can see your budget minus the revenue from the backlog, minus the revenue that might come from the pipeline, and then if you have a gap, that's what we call the go get, but you have to go through each of these and it's not something you must update every single day, but you should be looking at it at least monthly so that you can update the activity. And it really depends on the resources that you have, meaning systems, dedicated people to do this. And it's something that we need to as an as an industry help each other out. I was part of the panel here at the last SCRS conference, and I had some sites reach out and say, hey, I, this was a great topic, but I need some additional help. And I really encourage site organizations out there to pay it forward and work with smaller organizations to really help them with this really important topic of forecasting, both on the cash side and on the revenue side.
Jimmy Bechtel:Thanks, Carlos. And I think you know it's obviously quite complicated because there are so many different ways that you can really slice and dice the problem and do what you need to do as a site appropriately and accurately and then it's it's compounded by other other challenges, right? Cash versus accrual and the various different challenges that come along with that. And I think one of the resounding kind of takeaways that I would pull out of what you had said. For our industry partners that might be listening on behalf of the sites is being able to simply accurately inform sites as to when they are getting paid can go a long way to their sustainability and their stability as an organization. You know, even if it unfortunately would be on a quarterly basis, just letting them know that it will consistently be on. said date or X date or, you know, checks in the mail or you know, the wire is going to be going out this week or something, you know, just that, that remittance information. It sounds like can go a long way for the site, regardless of whether or not they're on a cash or an accrual basis or their status simply so that they can do accurate financial projections and make sure that they are going to be able to continue their business long term.
Carlos Orantes:There is no question you're spot on, Jimmy. Cash is king, regardless of whether you're cash or accrual. Sites need to get paid in order to continue operating. And so, having better knowledge and visibility of when you're going to get paid I mean, the sites need to do their job to forecast what they need, right? In terms of cash on a monthly basis. But it's really difficult to predict when you're going to get paid. And somtimes, you even get paid, which is great news, but as you said, the remittance that comes along is what was this payment for and reconciling that creates also an undue burden for for the sites as well. So this has been a topic discussed with CROs and sponsors. And again, I think the 2 biggest ones is up front. Understanding what are the payment terms and making sure that sponsors to some extent, don't try to leave it to sites that are more sophisticated to ask and end up with better payment terms than those that aren't, because that's happening out there. There are sponsors out there that will start with higher payment terms, net 60, and only if you work through it pretty hard will they go down to 45, let's say, or even 30. Same thing with holdbacks. They'll start to, let's start at 15 and, and we'll work them down to five or zero. And so I think as an industry, we've got to have the sponsors just come to grips with, we need the sites, the sites need us, and we need to fund the sites for the work they're doing. And so just level the playing field for everybody. And and we should really focus on driving that because at the end of the day, Yes, I can predict revenue all day long and the most important thing though is going to continue to be cash, especially for the majority of our sites and the landscape that are single sites operating on very small working capital amounts.
Jimmy Bechtel:Yeah, I couldn't agree more. Carlos, it's a it's a great point and one that I hope everyone in that's listening right sites. You have a role to play here. Your voice is really important that through things like our initiatives and the site landscape. Adding your voice to that helps us bring a more strong and powerful message back to the sponsors and CRO's Sponsors and CRO's, I think it goes without saying That there's a major role for you to play in here as well. If you're not on the boat for reasonable payment terms for the sites. So Carlos, what role then you talked a little bit about it, but maybe expand on the role that technology and automation play in streamlining the payment process and refining some of those revenue projections more efficiently.
Carlos Orantes:So clearly. Technology is, I say, both the solution, but also a challenge, right? Technology. is expensive, it's hard to implement sometimes, but without that technology, a lot of these things that you have to do to not only get your payments up and running and collections and, you know, billing and collections, if the less technology you have, the more manual it is, so I, I think sites need to make the commitment or make the decision, they're going to go the technology route and make that investment or be prepared to have it be Labor intensive, but at the end of the day we have to make sure that as sites Technology helps us making sure that the invoicing that we provide is done properly, right? You can set up standard formats. It's also a good reminder to make sure what is your AR balance, and if you're doing this manually or on a spreadsheet, there's a lot more work to be done. And that's why a lot of sites leave invoicing to last because it's very manual. They don't have the dedicated resources or the technology. So they don't invoice, they don't get paid on certain things and then technology also allows you that when you receive funding or payments, how do you apply them? Where do you apply them? And so the reconciliation process. So again, with cash being king I think sites need to really focus on what are the technologies. Part of it could be the CTMS or the financial systems that are out there. And there's, there's plenty out there, starting with QuickBooks all the way to you've got Great Plains, Sage Intact there's a lot of different ones out there. Most companies are on QuickBooks, but you've got to make sure you use the technology. And, and again, if you, If you aren't using the technology that you've purchased that, then maybe you need to outsource some, some of these services. And there's companies out there that are specially built to support small sites. So I would encourage people if again, if you can't do it internally, because you don't have the right staff infrastructure, do you make an investment in technology and or do you outsource to certain third party providers to help you with that?
Jimmy Bechtel:Yeah, I couldn't agree more. Carlos, super, super important for sites to have their ducks in a row. And, one way to look at it is remove all shadow of issue or doubt from on your end so that no one can come back at you and say, Oh, well, this invoice was incomplete or it had missing information or it's inconsistent, et cetera, et cetera. It's wrong. So kind of making sure that that process on your end as a site is ironclad and really buttoned up using technology to help you where appropriate. I think can really go a long way with that. So Carlos, like you said, we could talk about this for hours. But I think we'll kind of start to wrap our conversation up here. Let's talk a little bit about how important it is to have clear expectations and communication. regarding payment terms and processes, and we know how essential that is to that sustainable site and industry partnership. So what strategies can sites implement then to encourage on time payments? What sort of things have you seen as successful again, strategies or tactics to getting what you need as a site in terms of appropriate and on time payment terms?
Carlos Orantes:Sure. So, well, first of all, you've got to negotiate those up front, the best terms possible, holdbacks, net payments and things like that. But I think there's two sides, right? One is making sure that You as a site understand clearly what is requiring of an invoice and what is automatically paid and what triggers those automatic payments. Like, for example, it's data entry in many cases. So if you're late on data entry. Your payments are going to be late and also understanding when the clock starts is important too. If I enter the data today, it could be that there is a batch run at the end of the month by the sponsor or the CRO for the sponsor. And therefore, no matter when I enter it during the month, it's at the end of the month that the batch run is done and then net 30 kicks in. So understanding the terms. Okay. is important, making sure that you know what triggers that term is just as important. Now on the idea of invoicing there's a lot of things that need to be invoiced on studies. You could push back for some things not to be invoicables, make them more automatic, but if you have to trigger invoices yourself, make sure that you understand what are the requirements of the sponsor or CRO, because if there is an error, Sometimes it may not be kicked back for a week or two, it gets kicked back to you, you've got to make the corrections and the clock hasn't even started on the net 30, for example, right? So make sure accuracy is important is there and the only way you'll know the accuracy is there to know what they need. Make sure it's in there. And I think the other thing too, is have a point of contact to make sure that if you have a question on an invoice, Or on a payment, who do you call and vice versa, make sure they, on the other side, sponsor and CRO have the right contact on your end. Make sure you could, you know, for example, set up a general distribution email address for payments at site network, you know, dot com, whatever that is, make, make it easy for the sponsor or CRO to contact you and make sure you know who to contact on the other end, because if there's an issue or a question. That takes up a lot of time figuring out who do I get a hold of. So do that early on so that you're prepared. Those are some simple strategies, but they can have a profound impact.
Jimmy Bechtel:That's excellent, Carlos. And thank you. Thank you for sharing those. I hope that our sites learn something new today. Maybe a new strategy or a new way to use technology that they can employ. But I also hope that our sponsor and CRO partners that were listening also understand the continued importance and emphasis on how and why these site payments and budgets are so important to be paid on time and to be paid on reasonable payment terms. So thank you for being here with us. Thank you for sharing your extensive knowledge on a topic that I know we will continue to advance and put work into and thank you again for being part of the solution in this space as well, Carlos.
Carlos Orantes:Jimmy, thank you for having me, and thank you to SCRS for continuing to amplify the voice of the sites.
Jimmy Bechtel:For everyone listening, make sure that you register for upcoming summits being held throughout the year by visiting the summit page on our website, myscrs. org, where we spend a lot of time talking about topics just like this, live and in person, in a mutli-stakeholder solutions oriented environment. While you're on our website, Be sure to also check out other SCRS publications and resources built for the community in the publications and membership resources section of that same website. We appreciate your participation in listening to today's program. Look forward to having you join us for more great content coming out soon. Thanks for listening.