Managing Cash Flow in a Dental PracticeSubmitted by Mission Financial Planning on November 15th, 2017
Managing cash flow is key to being a financially healthy business. Most dentists know their monthly cash flows, with a keen awareness of when payroll, credit cards, rent, labs and the other big bills are due each month. But managing cash flow is not just about increasing next month’s production or reducing expenses.
Surprisingly, we don’t see many practice owners using cash flow tools to project beyond the next payroll. Can you predict what your bank balance will be in 6 months? Do you have a goal for what that number should be? The purchase of new equipment, hiring new staff or funding your retirement may depend on your ability to accurately project cash balances.
While your balance sheet is a snapshot of a point in time, and your P & L shows what you produced and spent in a certain period of time, a Statement of Cash Flows can help you identify everything affecting cash, allowing you project forward into time.
Your Statement of Cash Flows lets you run your business from a position of knowledge and confidence. It gives you a look at trends and current activity in three areas of the business: operations, investing and financing. It’s a great “big picture” tool, but can also address details like “where does all the money go?”
Managing cash flow is not only about income and expenses, it is also about managing long term debt and lines of credit, negotiating payment terms on both sides - with patients as well as vendors, controlling inventory, and figuring out how to survive variable cash flows. We have 20 tips for managing cash flow, I’m sure there are many more. We've opened up comments below, what are some of your strategies?