Manage and Preserve Your Cashflow

Manage and Preserve your Cash Flow:  

Top 10 business steps for practice owners to better manage and preserve cash flow

By Doug Fettig, CPA, MBA

“Once a balance becomes more than 90 days past due the odds of collecting that balance drop significantly.”

Before we get to the steps you can take to help manage your cash flow, here is my first suggestion; take a breath and pat yourself on the back!

You are continuing to operate your practice during the most unexpected and unprecedented economic jolt of our lifetime – the COVID-19 pandemic. While many of you may have received PPP loans, your “new normal” may include a somewhat lower level of production. 

The silver lining in all of this? Many of you are taking steps to run your practices more efficiently; from utilizing technology and telehealth services to rethinking your process and patient flows. In speaking with many doctors over these past six months, I’ve never been more impressed, and I’m convinced we are going to get through this and come out stronger and more unified.

Now that you have made it through the initial COVID “cash flow shock”, here are some simple steps you can take to help preserve and manage your cash going forward.

1. Communicate with your team, and then communicate some more. I know this isn’t an actual cash flow step but it’s a critical leadership step that will have a massive impact on how successful your team and practice will be. This will have a direct impact on your practice profitability.

Now is the time to be honest and transparent to let them know that these are unprecedented times and that we will get through this together. At the end of this article I have included links to resources to help you address specific scenarios regarding your team and potential options for you to consider in the near-term.

You may have difficult, emotional decisions you must make regarding your team. If you have to have a difficult conversation with a team member acknowledge the difficulty at the start of the conversation.

Again, be open, transparent, and honest with your team. They will repay you many times over with loyalty and appreciation.

2. Talk to your creditors and vendors. If your cash flow situation hasn’t recovered to where you can comfortably meet your monthly obligations, ask if you can stretch out payment terms wherever possible. This will allow you to conserve cash as you juggle reduced office hours and continue to pay critical team members.

3. Manage your accounts receivable. Have your team (or your outsourced collections service) consistently call/text patients with outstanding accounts receivable balances. Be creative in structuring repayment plans for those patients who able to pay in full. 

It’s imperative that you proactively manage those balances. Once a balance becomes more than 90 days past due the odds of collecting that balance drop significantly.

4. Talk to your bank. If you have a line of credit established, consider leveraging it. If you don’t, explore opening a line. Remember, this is different from ’08-’09, this is not a financial crisis – it’s a healthcare crisis. Also, many banks and states are instituting mortgage payment relief programs.

5. Considering leveraging a 0% interest credit card offer. This is certainly not an ideal solution, but it can provide a temporary window to preserve cash.

While you might pay a fee (say 3% on the balance) it would allow you to bolster your short-term cash position by 12-18 months. HUGE CAVEAT – make sure you pay the balance before the grace period expires or you’ll be hit with a massive interest fee. You should think of this as a short-term loan that MUST be repaid prior to the due date.

6. Contact your insurance carrier and review your policies. Now that the unthinkable has occurred, make sure that your insurance policies going forward provide you with the appropriate amounts and types of coverage to protect you in the future.

7. Contact your CPA and/or financial adviser to assess where you are financially and any additional steps you can take to strengthen your short-term position. Nobody understands your finances and your goals like your finance professional. Now is the time to lean on their advice and expertise.

8. Consider refinancing your existing debt. Rates are at historic lows and this is one of the quickest and easiest ways to increase your cash flow. The entire process can be done online/remotely and quickly. Here at HPA we can guide you through the refi process and help you determine how much your monthly cash flow could increase.

9. Communicate with your Patients going forward! In an attempt to help patients feel safe and comfortable, many of you increased the level of communication you had with your patients at the start of the COVID crisis, keeping them informed on the reopening timetable, your new sanitation processes, etc.

Don’t stop now! Keep up that same communication cadence with your patients and continue to keep them informed and connected to you. Continue to let them know that you will be coordinating with them regarding their care and that you appreciate their understanding during these evolving times.

10. Reach out to the team at HPA.  Our model is built to help independent dentists and physicians thrive in this “new normal”.

We are excited as we revolutionize healthcare by partnering with doctors; building an alliance that enables dentists and physicians to:

  • join to obtain equity and liquidity
  • improve practice profitability by benefiting from discounts on a wide variety of services, supplies, and equipment
  • all while maintaining your independence and keeping control of your practice – and achieving your retirement goals.

Click here for a brief explainer video on the HPA model and feel free to reach out to me or and the team here at HPA for additional information – our amazing team of dedicated professionals is committed to guiding our dentists and physicians through this difficult time.

Doug Fettig, CPA, MBA
Doug has over over two decades of experience as a CPA and finance professional. He has the unique ability to understand dentists’ needs and help them lead their practices using strong business principles. His insight as a dental CPA allows him to effectively communicate business concepts to dental practices while strategically addressing tax, investment, and retirement planning.

Doug’s expertise includes:

  • Dental business planning
  • Talent acquisition
  • Business leadership
  • Retirement Plannin