Updated: Sep 14, 2021
Cash Flow management is the process of tracking how much money is coming in and out of your practice. It is essential to keep track of your cash flow as it allows you to know how much money you need to cover your future debts, things like payroll, superannuation, suppliers, maintenance, and Insurances.
Knowing your cash flow status is essential, you'll either have a:
Positive cash flow: This occurs when the cash coming into your practice is higher than the amount of the cash leaving your businesses through the accounts payable. Or a
Negative cash flow: This occurs when your outflow of cash is greater than your incoming cash. This generally spells trouble for a practice and will need to be addressed before moving forward.
Once you are aware of where your Cash Flow is, you will be able to review and look for ways in which you can increase a Positive Cash Flow in your practice.
Here are my top 10 Strategies for Improving your Practices Cash Flow:
1. Have a Payments Policy:
Your patients should be aware of your Payment Terms and Conditions before receiving any treatment. This way there are no surprises when it comes time to pay. Reducing bad debits and angry patients.
For help setting up your Payment Terms and Conditions check out my blog here.
2. Ensure your team is all on the same page:
Train, Train, Train, and monitor your team. Your whole team needs to know your Payment Policies and implement them every time. That way a patient knows what to expect.
How many times have you heard in your practice "Oh no I'll wait for Vanessa, she always looks after me"? As the patient knows Vanessa will let her set up a payment plan?
3. Why Discount?!
There is nothing more confusing to a patient than getting a quote for a crown only to find out their friend got it for $200 cheaper at the same practice and by the same clinician because he gave her a discount! The first patient is now thinking "Why didn't I get one?"
Dr's you may think you are helping a patient out by discounting their treatment, but all you are doing is underselling your services, your education, your products, and ultimately the patients.
4. Reconcile your accounts:
How often do you reconcile Medicare CDBS, DVA Payments, and External payment plan providers?
Most practices have $1000's of unclaimed or failed claims sitting in the Practice Management Software. All your Payment sources need to be reconciled monthly and followed up for part payments or failed claims and resubmitted.
5. Reduce your Bad Debts:
Following up on Bad Debits is a job no one likes to do, and thus often gets neglected until it has reached a point where the practice writes them off.
The best practice is to have a follow-up process for overdue payments in place, that includes levels of escalation with specific times — 30 days overdue, 60 days, 90 days, and so on. If you offer the proper training, the team member responsible for such calls will feel comfortable talking with these patients, and this will result in more money coming into the practice.
Managing cash flow isn’t just about getting more cash to come into your business. It’s also important to reduce the cash going out of your business as much as possible.
6. Know how much you need to break even:
Before you can work towards a positive cash flow, you need to know how much you need to earn to simply break even. Work out your hourly/weekly and monthly overheads. If you go over the break-even point, you’re doing something right. If you are falling short of it (consistently), then there’s an issue that needs addressing.
7. Reduce your expenses:
Take a careful look at your expenses and analyze your outgoings. Ask yourself:
Are these expenses necessary?
If they are necessary, is there a cheaper alternative?
Can you buy in bulk and get a discount?
Check with your suppliers about special deals
It's not about buying inferior quality products but being smart in your buying and ordering processes. Having a solid Stock Management system that your whole team knows and follows is essential in cutting down overhead costs.
8. Check your Old Inventory and equipment:
Do you have piles of mouthwash, toothpaste, tooth mousse, or whitening kits on display? Work out what is selling and what is taking up space and money. Are things about to expire? set up an amazing pack of goodies for patients to win. Still got a long shelf life but just not shifting? Educate your clinicians about the products and the benefits they have for your patients.
Do you have equipment or instruments you are no longer using? Sell them for a quick injection of cash.
9. Streamline your business processes:
Another important aspect of managing your cash flow is making sure your business is running as efficiently as possible. Focus on cutting time, not just costs. Analyze all of your current business processes and judge how efficient the current process is, and if there’s any way to speed up that process.
10. Seek professional help:
Ensuring your accounts are accurate and compliant is essential in ensuring a positive cash flow and thriving business. Avoiding late payment fees, or interest and account processing fees due to incorrect filing with the ATO or incorrect wage and superannuation allocation can be crippling for a practice. Seek assistance from a qualified BAS agent and ensure your practice avoids unwanted penalties and bills.
Richard Branson said
"Never take your eyes off your cash flow because it is the lifeblood of the business"
Learning to manage cash flow is the foundational building block for managing your practice's finances. Once you have got that down, then you can start thinking about how to grow your practice, improve your margins and profit and grow a healthy practice.
Need help to set up and or analyze your cash flow plan for your practice? Then click here and schedule your FREE 30 min Discovery Call and let Seona help you get on top of your Cash Flow!