How Dental Practices Can Manage Cash Flow

Cash flow issues are common among most businesses that rely upon customers to pay their bills following services rendered. Dental practices generally rely on insurance companies for the majority of their cash flow, but even insured patients are also responsible for a portion, and this mix can make things complicated for a practice to count on predictability.

Use the right cash flow management system.

Having the right system in place for cash flow management is critical. This means using up-to-date software and implementing organization and best practices.

"Establish a cash flow management system that shows the true, updated situation of the practice," says Elena García, Financial Director at dentalDoctors1. "This system should put accounts both receivable and outstanding in chronological order and on at least a monthly reckoning basis; knowing the balance at a given moment will allow for decisions to be made with agility. This tool is a must for financial planning because it increases our capacity to foresee and anticipate events and allows us to optimize available resources so as to reduce operating costs."

Put together regular forecast reports.

Your system should include regular cash flow analysis and forecast reports. Be sure to generate and review these frequently so you can stay in front of coming issues and project when times will be tougher.

Pad your business savings account.

Any business should have a business savings account they can turn to in case of emergency or cash flow issues. As time goes on, if you continually pad this account with extra money as it is available, you will be glad you did so when the time comes that you need to draw from it to make up for a lack of cash coming in.

Turn to your own funds if you need to.

If you have extra cash in your personal finances, it may be wise to move some over to your business account to temporarily cover cash not coming in from accounts receivable.

Make sure patients understand your policies.

When patients visit your practice, be sure that they are fully aware of your payment policies and understand they are responsible for any charges not covered by their insurance provider.

Keep an open dialogue with collection agencies.

If you work with collection agencies to obtain late payments from patients who haven't paid their bills, be sure you have a clear understanding of the fees you'll be charged as well as the agencies' practices and priorities.

It's easy for any business to get caught up in revenues and profits, but cash flow is the lifeblood of your business and will enable you to continue day-to-day operations. Not managing it properly is dangerous.



1. http://www.dentaldoctorsinstitute.com/co.516.21.0.1.3-keys-for-efficient-management-of-dental-practice-cash-flow.html