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All the Best Cash Flow Practices for Medical Practices
According to one study conducted by U.S. Bank, a massive 82% of all businesses that ended up failing said that cash flow issues were a major contributor to that event. Often, this doesn't just come down to the amount of money coming into an organization — it relates to the timing as well.
Proper cash flow management requires a fundamental understanding that not all types of businesses are created equally. Some, like retail stores, tend to make a significant portion of their income at the end of the year — hence events like "Black Friday" and "Cyber Monday." Others, like landscaping businesses, see the vast majority of their income generated during the warm summer months.
Medical practices also present their own unique challenges. Therefore, if you really want to take control over the cash flow for your practice, there are a few key things you'll need to keep in mind.
Medical Practices and Cash Flow: What You Need to Know
Perhaps the most critical thing to understand about medical practice cash flow is that the dynamic has changed significantly over the last few years.
More and more, insurance companies are shifting costs to consumers — a burden that they may not be ready to handle. According to one recent study, about 10% of families in the United States have a medical bill they can't afford to pay at all. A further 25% currently have some type of outstanding medical bill. It's an unfortunate situation for all involved, but it requires medical practices to be especially proactive about how they're collecting for services rendered.
In terms of cash flow, a way to mitigate risk involves getting as much money from patients at the time of their visit as you can. To get to this point, you need to offer a wide range of different payment options. People can always pay with cash and checks, but you should also offer the option for credit cards, digital services like PayPal or Venmo and more.
Making the checkout process as efficient as possible is also a great way to get to this point. Train your employees to take someone's copay when they check-in so that they don't have to wait after their appointment. Make sure that they're informing patients that a statement will be coming with additional charges and outline any that their insurance policy might not cover. The more efficient you can make this process, the more likely it is that you'll be able to collect payment while someone is still in your office. At the very least, it will significantly reduce the amount of time you're waiting on unpaid bills.
Depending on the type of practice you're running, you may also consider instituting a policy to bill patients for appointments that they miss. A missed appointment is so much more than just a minor inconvenience for doctors and staff — it's literally taking up time that could have been used to provide care to another patient. Therefore, it may be a good idea to keep a credit card on file and let people know that if they don't cancel an appointment they can't keep ahead of time, they will be charged a flat fee. Usually, it's recommended to tell patients that they need to cancel at least 24 hours in advance.
Another step that medical practices can take to improve cash flow involves paying their suppliers on the due date. Sure, we'd all like to be paid ahead of time — but there is a due date on an invoice for a reason. Especially if you're having a hard time managing funds, pay vendors and suppliers on the due date so that you can use that money for more important matters in the meantime.
Beyond that, setting a base balance and a target balance are also important steps to take. A base balance is a pre-determined balance in your practice's operating account that will allow you to see fluctuations relative to that amount. A target balance can be a useful tool for identifying the progress you're making toward certain income-related goals.
In the end, cash flow management for medical practices has always been tricky — but it is absolutely possible to be successful with the right approach. By making tips like those outlined above a normal part of your operations, you'll be able to enjoy all the benefits of this process with as few of the potential downsides as possible.
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Get to Know Prestige Accounting Services Group (previously Prestige Wealth Accounting Group)
Offices in Flemington, NJ and Califon, NJ
Our Mission: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we are on a mission to redefine the tax experience for individuals and small businesses. With a focus on personalized service, strategic planning, and expert guidance, we aim to empower our clients to succeed financially with confidence and ease.
Expertise in Action: With a wealth of experience and a team of dedicated professionals, we specialize in individual and small business tax preparation. While we excel in all areas of taxation, our passion lies in serving the unique needs of small business owners in New Jersey. We understand that small business taxation requires specialized knowledge and attention to detail, which is why we go above and beyond to ensure our clients receive the guidance and support they deserve.
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Why Choose Us?: What sets us apart from other New Jersey tax firms is our commitment to excellence and innovation in the field of taxation. We don't just prepare tax returns; we provide strategic insights, proactive planning, and actionable advice to help our clients achieve their financial goals. With a team of two CPAs, an EA, and an ERO, we have the expertise and resources to deliver exceptional service and results.
Your Success is Our Priority: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we measure our success by the success of our clients. We are dedicated to building long-lasting relationships, providing unparalleled service, and helping our clients thrive in today's ever-changing tax landscape.
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