From Manual to Automated: Navigating Financial Waters in Clinical Trials

Picture this: you’ve poured your heart and soul into developing a groundbreaking medical treatment. The clinical trials are underway, and hopes are high. But amidst the clinical trials excitement, there’s a looming challenge—financial management.

In the life sciences industry, where every step forward represents a leap in medical progress, the importance of financial management cannot be overstated. According to the Medius 2022 Financial Professional Census survey of 2,750 senior finance professionals worldwide, only 28% of organizations believe they are reaching financial excellence with automated end-to-end processes. Shockingly, for accounts payable (AP) teams, nearly half (43%) of invoices require manual intervention. The survey also found that the majority (62%) believe they work with payment software that is outdated.

Deloitte’s CFO Signals survey for Q4 of 2023 also revealed that 76% of CFOs recognize the pivotal role of digital transformation and technologies in achieving their company’s strategy. These figures clearly highlight the pressing need for better financial management strategies.

Navigating the financial aspects of clinical trials can be tricky, from dealing with delayed payments to handling piles of paperwork for invoicing. Yet, by implementing the right strategies and tools, these obstacles can be overcome, paving the way for seamless operations and successful clinical trial results.

Longer Payment Terms and Retainage

Imagine waiting months to receive payment for your services, while expenses continue to accumulate. Unfortunately, this scenario is all too common in the clinical trial industry. Sponsors and Clinical Research Organizations (CROs) often impose longer payment terms and retainage, impacting cash flow for trial sites. This delay in payment can hinder essential operations, such as payroll and maintaining necessary resources for the trial.

Case in Point Scenario

ABC Clinical Research Site conducts a Phase III clinical trial for a new cancer treatment. Despite meeting all milestones and delivering quality data, they struggle with cash flow due to extended payment terms imposed by the sponsoring pharmaceutical company. This delay affects their ability to hire additional staff and invest in necessary equipment for the trial.

Actionable Approach

Introducing automated financial management software can streamline the invoicing and payment process, mitigating the impact of longer payment terms on trial sites. For instance, imagine if ABC Clinical Research Site implemented a software solution that automates invoice generation and tracks payment schedules. With this system in place, they can ensure that invoices are sent promptly and accurately, reducing the burden of manual invoicing, and improving cash flow management.

Burden of Manual Invoicing

Manual invoicing processes add another layer of complexity to financial management in clinical trials. With countless invoices to prepare and track, site staff find themselves overwhelmed, leading to delays and inaccuracies in payment processing. This inefficiency not only strains resources but also prolongs the time it takes to receive crucial funding for ongoing trials.

Case in Point Scenario

XYZ Pharmaceutical Company sponsors a Phase II clinical trial for a new diabetes drug. However, their finance team struggles to keep up with the manual invoicing process, resulting in delays in processing payments to trial sites. As a result, trial sites experience financial strain and frustration, impacting their ability to effectively conduct the trial.

Actionable Approach

By automating the invoicing process, software solutions alleviate the burden of manual invoicing for trial sites. Take, for instance, if XYZ Pharmaceutical Company implemented a software solution that streamlines invoice creation, approval workflows, and payment tracking. With this system in place, the finance team can generate invoices with just a few clicks, ensuring accuracy and timeliness in payment processing. Moreover, real-time visibility into invoice status and payment schedules enables proactive management of financial resources, optimizing cash flow and supporting uninterrupted trial operations.

Revenue Recognition

Revenue recognition in clinical trials is a multifaceted process, often dependent on the achievement of milestones throughout the trial. However, the complex nature of these milestones can lead to delays or uncertainties in recognizing revenue.

Case in Point Scenario

ABC Hospital participates in a Phase I clinical trial for a novel vaccine. However, due to unforeseen challenges in patient enrollment, the trial experiences delays in reaching key milestones. As a result, revenue recognition becomes uncertain, impacting the hospital’s financial planning and budget allocation.

Actionable Approach

Sophisticated financial management software offers advanced revenue recognition capabilities tailored to the unique needs of clinical trials. For instance, if ABC Hospital implemented a software solution that automates revenue recognition processes and integrates with trial milestone tracking systems, they could ensure accurate and timely recognition of revenue. Automated alerts and notifications would notify stakeholders of milestone achievements, enabling proactive revenue forecasting and financial planning. Additionally, comprehensive reporting tools would provide visibility into revenue streams, facilitating informed decision-making and strategic resource allocation.

Research and Development (R&D) Costs

Accurately managing and forecasting R&D costs is essential for maintaining budgetary integrity and ensuring the timely completion of trials.

Case in Point Scenario

XYZ Biotech embarks on a Phase III clinical trial for a potential treatment for Alzheimer’s disease. However, they struggle to accurately track R&D costs, leading to budget overruns and delays in trial completion. This lack of financial oversight jeopardizes the success of the trial and undermines investor confidence in the company.

Actionable Approach

Integrated financial management software offers robust R&D cost tracking and forecasting capabilities, empowering trial sponsors and CROs to effectively manage budgetary constraints. Consider if XYZ Biotech implemented a software solution that centralizes R&D cost data and provides real-time visibility into expenses. With this system in place, stakeholders can monitor budget adherence, identify cost-saving opportunities, and anticipate R&D cost fluctuations. Additionally, automated expense tracking streamlines administrative tasks, freeing up valuable time for financial planning and analysis activities.

From Manual to Automated: Next Steps

Navigating the financial challenges of clinical trials is crucial for the success of medical advancements. By addressing issues like lengthy payment terms, manual invoicing, revenue recognition complexities, and R&D cost management, the life sciences industry can streamline operations and optimize resources. Implementing tailored software solutions enables trial sites and sponsors to enhance efficiency, accuracy, and transparency in financial processes.

This shift from manual to automated processes empowers stakeholders to focus on advancing research and improving patient outcomes, driving progress and innovation in clinical trials. Embracing innovative technologies in financial management will be instrumental in shaping the future of clinical research and positively impacting global health.

Ready to streamline your clinical trial financial management and unlock new possibilities in medical research? Contact Sikich today to speak with a solution expert or learn more about how our tailored software solutions can revolutionize your financial management processes. Together, let’s accelerate progress and make a difference in clinical trials.