Cash flow management for medical practices.

What to track.

• Starting cash
• Expected insurance collections (by week, by payer)
• Expected patient collections
• Payroll — including provider compensation and bonus timing
• Rent, supplies, vendors, taxes, debt service
• Provider draws and partner distributions
• Ending cash by week, vs. minimum operating threshold

Why a 13-week forecast.

Thirteen weeks is the sweet spot: long enough to see the next quarter’s pressure points (tax deadlines, big vendor payments, payroll cycles) but short enough to forecast collections with reasonable accuracy. Updated weekly, it shifts the practice from reactive (“the bank balance dropped”) to proactive (“we have a crunch coming in week 7”).

Common problems.

• Cash thresholds aren’t defined — the practice doesn’t know what “safe” looks like.
• Payroll coverage is calculated by feel, not by forecast.
• Provider draws happen on a calendar, not based on what the cash position will support.
• Tax surprises and large vendor payments derail the month.

Benchmarks worth comparing against.

For an independent medical practice, healthy cash flow looks like:

• Operating cash on hand — at least 60 days of expenses, ideally 90.
• Owner draw discipline — predictable distributions, not whatever’s left in the account.
• Days payable outstanding — aligned with terms; not a habit of paying everything the day it arrives.
• Tax reserve — held separately, not commingled with operating cash.
• Loan and lease coverage — debt service covered by operations, not by deferring vendor payments.

Mistakes that drain practice cash quietly.

• Equipment leases nobody reviews. Many practices carry leases on machines, software, or service contracts they no longer use at full utilization.
• Inventory ordering on autopilot. Supplies, vaccines, injectables, and reagents tie up cash. Par levels rarely get reviewed once set.
• Staffing levels set at the peak. Without flexing to actual demand, payroll absorbs the cushion the practice should be building.
• Owner distributions without a model. When draws are taken based on bank balance instead of a target, the practice never builds reserves.

The 13-week view.

The single most useful cash tool for a practice is a 13-week rolling cash forecast. It shows what’s coming in, what’s going out, and where the gaps are. It surfaces conversations about timing before they become problems — whether to delay a hire, accelerate a payer follow-up, or fund a tax payment. The forecast is updated weekly, not built once. The value is in the rhythm, not the spreadsheet.

Questions practice owners ask.

How much cash should we keep? Enough to cover 60–90 days of operating expenses, separate from any tax reserve and any line of credit. The line of credit is a bridge, not a cushion.

When should we use the line of credit? For timing gaps tied to growth or known events, not for ongoing operations. A line drawn down month after month signals a structural cash problem, not a liquidity event.

Should we pay down debt or hold cash? Depends on the rate, the cash position, and the next 12 months of plans. A general rule: never pay down debt below your minimum operating reserve.