Generating revenue is an obvious fiscal responsibility in the successful operation of your practice, but that’s only the beginning of the process that leads to a healthy bottom line. Once you have a steady flow of revenue, you must manage the movement of that money with skill and attention to detail.

The principles of professional cash management are not difficult to learn, but they are easy to neglect. Once you accept their importance in your practice, you will find it easier to stick to the rules.

Below are 10 powerful techniques that can help you to improve your cash flow and net income right now.

1) Never allow any of your money to lie idle.

If you do not already have a money market account at your bank, open one and have it linked to your business checking account for telephone or online transfers. Deposit daily receipts into the money market account, where they will immediately start drawing interest.

2) Never deposit receipts directly into your checking account.

Keep a minimum balance in the checking account and transfer cash only as needed to cover checks written. The interest generated by this simple procedure amounts to found money that will flow directly to your bottom line.

Daily receipts should not to lie around in a desk drawer until you or your office manager can get to the bank. Use every cent of your money to make money. That is the hallmark of professional cash management.

3) Do not be timid about using other people’s money.

We’ve all heard stories about professionals who build large, successful practices without ever borrowing a cent, but they are clearly the exceptions. At today’s extraordinarily low interest rates, careful use of credit is one of the most effective practice-building tools.

Many financial professionals are uncomfortable with extensive use of credit for personal affairs. When it comes to business, though, it is a different matter. To begin with, the costs of borrowing are legitimate tax deductions for professional practices. It makes more sense to spread out the cost of your capital purchases than to put stress on your cash flow by laying out large amounts of cash that you could use more profitably within your practice.

4) Consider leasing.

Leasing products like cars for personal use is not a good idea. Most accountants agree that leasing is the most expensive way to maintain a personal car. However, leasing for your business is a different animal entirely.

“The nature of business accounting is such that leasing can be the most sensible approach to many types of capital investment,” says Thomas Normoyle, CPA, of Huntingdon Valley, Pa. “It usually makes sense to lease if you will be able to use the cash in your practice or in your investments to earn a better return than the cost of leasing.”

Not every medical practitioner agrees, of course. “I’ve never leased any equipment,” says Robert R. Griffith, DDS, a maxillofacial surgeon who practices in Abington, Pa. “When I started out, I bought an existing practice that came fully equipped. Since then, I’ve always felt that if I’m going to keep a piece of equipment over the long term, it was better to buy it outright.”

Still, most financial and tax advisers recommend that you consider leasing as one of your alternatives for capital purchases. Talk to your own tax adviser about this the next time you consider a large capital purchase.

5) Spread the word via marketing.

To manage cash, you need a steady influx of the stuff. As long as it’s in good taste, there is no reason to be reluctant to market your practice. As is the case with any business, marketing is a critical element to growth. As one medical professional told me recently, “If you don’t think you’re good, no one else will. You have to tell your story.”

Of course, discretion has traditionally played a major role in marketing medical practices. Many physicians consider some of the conventional advertising media as inappropriate to their needs.

Griffith, whose practice depends heavily on referrals, has found a system that works nicely for him: He distributes a newsletter to the general practitioners in his area. “Local physicians and dentists appreciate the information it contains, and it keeps my name in front of them,” he says.

Whatever the method employed, more medical practitioners are looking beyond referrals for ways to keep cash flow healthy.

6) Do not be in a big hurry to pay your bills.

There is a good reason why checks are slow to come in from people who owe you money. It is because hanging on to cash as long as possible keeps that money available to draw interest or to work in the business.


Cash flow—how much money is flowing into and out of a business—is an easy concept to understand. However, physicians may not be fully aware of the impact that cash flow has on the bottom line. That is probably because the importance of cash management is much easier to recognize in some types of businesses than it is in others.

Take home building, for example. When a builder takes on hundreds of thousands of dollars in short-term debt in order to build some new homes, it’s obvious that he or she must generate substantial positive cash flow in a hurry if the business is to survive.

Not every situation is that dramatic, but generating and managing cash flow are critically important responsibilities for all contractors. Losing control of money has generated more financial headaches for practices than temporary red figures on the bottom line. On the other hand, a sensible cash management system can provide a life-sustaining cushion during those inevitable slow times when the clients aren’t streaming in and the phone isn’t ringing as often as you would like.

Once you accept the importance of cash flow, you will find it easier to stick to the rules of good cash management in your practice.


That is why it is important for you to set up a system to pay your bills just before they are due. It is easy to do and is another rung on the ladder of professional cash management.

Do not jeopardize your credit standing by paying bills late. It is especially important to avoid late payment on credit card bills because of the oppressive penalties that most card issuers have put into place in recent years.

7) Be aggressive about collecting accounts receivable.

If you do any of your own billing, it is important not to allow those receivables to go untended. You have earned that money; you have a right to it; you need it.

While filling out paperwork and dunning late-paying patients may not be your favorite pastime, setting up an accounts receivable file and following through on late payments is as important to your financial success as your professional skills. If your patients learn that you are cavalier about money owed to you, you can be certain they will stretch your patience (and your cash flow) to the limit.

8) Maintain a cash cushion.

Keep enough cash in interest-bearing business accounts to cover normal operating expenses for 3 to 6 months. There is nothing like the peace of mind and self-confidence that comes when you don’t have to be concerned about next month’s office rent or payroll during a slow spell. And remember: Your cushion money is making money for you in those interest-bearing accounts.

9) Develop a personal relationship with your banker.

Handling money is a banker’s job, and most are very good at it. Whatever the size of your practice, it’s a good idea to maintain a personal relationship at the bank where you do business. Discuss your financial picture with your banker. You will get some good ideas and a favorable ear should you ever need a little financial advice or help.

10) Let your computer help you to manage your cash flow.

Whether you use one of the specialized software packages designed for medical practices or a PC with one of the popular financial programs such as Microsoft Money or Quicken, learn to entrust every aspect of your business affairs, including personal investments, to your computer. The financial reports and analyses that modern financial software can produce at the touch of a button can be vitally important tools for improving cash flow and bottom-line income.

On The Web!

See also “Reclaiming Profits in Your Practice” by Catherine Maley, MBA, in the March 2010 issue of PSP.

Even if your practice is large enough to farm out your record keeping, consider putting your finances into one of the popular software packages designed for small business and personal finance. They are infinitely easier to use than they were as recently as a few years ago, and they will teach you in dramatic fashion how much you can benefit from a sensible system for managing cash flow in both your personal and professional life.

Taken individually, good cash management techniques may seem inconsequential. However, when you blend them together in a consistent manner, they will form a significant and permanent contributor to your bottom line and to your economic future.

William J. Lynott is a contributing writer for PSP. He can be reached at .