Positive cash flow is the lifeblood of your veterinary business, but there is much more to managing cash flow of your hospital than just looking at the balance in your bank account.
This guinea pig knows she has positive cash flow, so she's cool with spending a few bucks on a cool piggy bank. (mariesacha/stock.adobe.com)Running a business seems straightforward enough: Revenue comes in, bills get paid and the business owner takes home lots of money. Right? If only it were that simple!
Cash (management) is king
Cash flow management is vital to small business success, yet poor cash management is the bane of organizations of all types and sizes. Just like not paying attention to your household budget, poor cash management in your veterinary practice can mean living from deposit to deposit and always trying to catch up to meet expenses.
… poor cash management in your veterinary practice can mean living from deposit to deposit and always trying to catch up to meet expenses.
Positive cash flow is about controlling recurring costs, speeding up (and actually receiving) payments and making sure that your balance sheet is in order. For veterinary practices, that encompasses many things. We need to set reasonable revenue projections. We need to proactively bring clients to the practice. We need to learn how to market our practices effectively. We need to make it easy for owners to connect with us and easy for them to pay us for the services we provide. We need to stay on top of late-paying or nonpaying clients by reviewing the accounts receivable schedule.
Your practice management software and accounting software can provide management reports that can help you, but you have to ask for the reports and then look at them. It's up to you to make appropriate decisions as to how to work with the information you have.
A checklist to maximize cash flow
• Do you accept all major credit cards? American Express may be costly for your practice, but many times your best clients prefer this card.
• Do you use automatic payments for recurring expenses? Be sure to monitor your invoices weekly or monthly.
• Do you track your account receivable schedule? Make the information available to your entire team, and train them all how to deal with late payers.
• Do you have a line of credit? Use it appropriately to get your through slow times.
• Do you let clients pay multiple ways? There are companies that can assist clients who need help with paying for services. CareCredit and ScratchPay are two examples.
• Do you know your cash flow statement? Your cash flow schedule is the financial statement that owners and accountants rarely use. Warren Buffett says it's the first statement he looks at when considering whether to add a company to his portfolio. I say, if it's good enough for Buffett, maybe I can learn something.
Be persistent. Make monitoring cash flow part of your weekly or at least monthly meetings with your team and absolutely with your financial advisor, consultant or accountant. They can help you set up processes to manage and improve cash flow.
Elise Lacher, CPA, is co-founder of Strategic Veterinary Consulting.