When management gurus like Peter Drucker, entrepreneurs like Richard Branson, and finance educators like Robert Kiyosaki all offer the same advice, it makes sense for the rest of us to listen!
Here’s what these renowned experts—and countless others—agree on:
Entrepreneurs believe that profit is what matters most in a new enterprise. But profit is secondary. Cash flow matters most.”—Peter Drucker
Never take your eyes off the cash flow because it’s the life blood of business.”—Richard Branson
Making more money will not solve your problems if cash flow management is your problem.”—Robert Kiyosaki
Healthy cash flow is a prime metric for business success, and your ability to execute on this standard will determine your practice’s long-term financial prospects.
Here is an example of why cash flow is critical, especially during hard times and downturns:
A COVID-19 Cash Flow Case Study
Large physician practices need robust banking relationships to maintain liquidity and lines of credit in tough, as well as everyday, times. But when COVID 19 struck and all elective procedures were shut down in the State of New Jersey, a 100-provider specialty practice discovered that, through an administrative oversight, their banking line of credit had lapsed and they had literally no access to cash.
HCFA worked closely with the practice’s Chief Administrative Officer and Board to evaluate existing banking relationships and secure a healthy line of credit. In addition, HCFA revised accounts payable timelines and negotiated payment deferrals with landlords and key vendors.
Most importantly, HCFA and the practice’s CAO secured a multi-million dollar Paycheck Protection Program (PPP) loan for the practice. This application required significant amounts of detailed analysis, record-keeping, and monitoring of expenditures, staff hours, and much more—all of which required a higher level of financial acumen and skill than the practice had previously been able to access.
Thanks to these measures, the practice was able to thrive throughout the pandemic, and is now in the process of finalizing a sale.
What Are the Pre-Requisites for a Healthy Cash Flow?
Physician practices that aspire to maintain a healthy cash flow must complete the following tasks:
- Identify and apply for an appropriate line of credit (LOCs are crucial for supporting operations during times of economic uncertainty).
- Build an appropriate banking relationship and work with that bank to optimize cash management and evaluate the structure of your accounts.
- Manage accounts payable functionality and payment practices.
- Improve their management of cash on hand.
Don’t have the in-house expertise to execute this checklist? Never fear.
As a trusted advisor with more than 25 years of healthcare finance experience, HCFA President Jane Kaye will guide you through the process of establishing and maintaining health cash flow—informing, advising, and clarifying decisions that are essential to the long-term fiscal health of your practice.
Remember: Nothing is more important than establishing and maintaining healthy cash flow. It will see your practice through good times and bad, through times of change, and through whatever challenges the future holds.