The cash flow of any business is a great determinant of its financial health. It is the income and expenditure of a business affecting its liquidity. The information about cash flow and its analysis can help you understand where you are spending your money, assist you to make better decisions, fulfill your existing financial obligations and help you plan for the future.
Cash flow is often confused with the profits of a business but remember, profit is just a segment of cash flow. It is a broad term that, unlike profit, doesn’t solely focus on the amount of money left after all expenses are dealt with. You can end up in a circumstance where at the end of the year, your profits are high but you aren’t able
to fulfill your day-to-day operational needs during the year due to unhealthy cash flow.
Cash flow problems occur when you are unable to generate sufficient liquid cash to cover your liabilities. A few causes of cash flow difficulties could be seasonal demand, low profits, unexpected changes and so on.
Dental practices are seasonal in nature and the inflow of patients can never be predicted in this field. There is a high chance that you face cash flow difficulties as the patients won’t show up at the same frequency every month and the invoices might not be timely. This is why you need to be equipped with strategies that can help you avoid cash flow difficulties so you don’t end up under financial strain.
Here we have compiled 5 tips by which dental practices can avoid cash flow difficulties.
1] Look over your cash-flow statement
Usually, dental professionals keep treatment procedures as their focal point. Maintaining financial data records and all other finance-related tasks are delegated to a member amongst the hired staff. This allows dental
professionals to pay complete attention to their patients and enhances the quality of treatment. However, it is recommended that even if you don’t take an active part in maintaining a cash-flow statement, you must definitely scrutinize it. It is always good to have a fair idea of where your money is going. It is crucial to always be aware of your financial standing so you aren’t surprised by emergencies when they pop up and are well-prepared by formulating plans. When you personally monitor your cash-flow statements from time to time, you can avoid the chances of errors and ensure the work is being carried out well.
2] Establish payment and credit policies
Many dental professionals are trying really hard to gain patient loyalty or attract new patients and it is widely believed that a lax payment policy will allow them to achieve this. However, you need to remember the lax collection of payments can be misused by the patients. They might delay payments extensively and impact the running of your business eventually. Therefore, set a predetermined payment and credit policy and let your patients know about it. Stick to your policy and despite that, if the patients stretch your patience, do not hesitate to follow up. It is important to enforce these policies consistently to avoid future collection difficulties.
3] Use technology to your advantage
It is 2022; and if you are still stuck to the paper-pen method and are stocking up files of cash flow details, it’s time you bring about a change. You can shift to the usage of dental billing tools that facilitate rapid processing of payment collection and allow your patients to pay via direct deposits. This improves patient experience to a great level, by saving them the hassle of making payments. You can automate member billing and get all your data in one place, thereby streamlining the process and avoiding every possible error. Adopting and using technology to your advantage will most definitely shield you against cash flow difficulties.
4] Enhance your payment process
If back-end billing and confused patients who are unaware of when to pay bills are your problems; you need to revamp your payment collection process. This will not only improve the collection process but also reduce the
workload of your staff. You can of course extend credit to your customers but know that not all patients can be given this or it will greatly impact your cash flow momentarily, which can have adverse impacts.
5] Keep your banker updated
Your banker or financial advisor can help you deal with cash flow difficulties if they show up no matter how careful you are. They are experts and have numerous alternative solutions to ensure your business isn’t really hampered and runs smoothly.
All in all; reduce your expenses wherever possible, and cut down on unnecessary expenses so that even if your income is suddenly reduced, you can still balance your cash flow. Improve patient payment by automating follow-ups and making smart financial decisions overall. A healthy cash flow can keep you guarded, allow you to always keep your business running no matter what comes your way and can take you a long way to help you reach great heights. So, give it the attention that it needs!