How Chiropractors Stabilize Cash Flow

There’s more to running a chiropractic business than caring for patients. It’s also a business that needs to remain sustainable in order to stay open and meet those patients’ needs. This means that properly managing your practice’s finances is every bit as important as improving your community’s health. In fact, the two are inextricably intertwined.

One of the most important and potentially daunting aspects of any business’s financial management is cash flow. Particularly during the first few years, but also throughout a business’s lifetime, maintaining steady, sufficient cash flow is essential for continued sustainability and growth. It’s also one of the toughest challenges any small business faces.

Even if your chiropractic practice is making a profit, it can still struggle if it lacks the available funds to pay bills, meet payroll, purchase supplies, and cover all other expenses, from fixed to unexpected. Insurance payments can be delayed, overhead costs can rise, and patient volume can suddenly change. All of this can place added pressure on your bank account.

Fortunately, there are several simple, time-tested, and proven methods for chiropractors to stabilize monthly cash flow. Follow these in your own practice, and you can ensure yourself a lifetime of providing your community with better health and better lives.

The Importance of Cash Flow in a Chiropractic Practice

Cash flow is defined as the money that flows in and out of your hands during a specified time-frame. It is a fundamental indicator of the financial health of your operation. By monitoring your practice’s cash flow, you can get a much clearer idea of its liquidity or ability to handle costs and invest in opportunities for growth.

Businesses depend on cash flow like human beings depend on food and oxygen. This is even more true in a chiropractic business, which involves inconsistent and unpredictable insurance reimbursements, patient volumes, and unplanned expenses. By understanding cash flow both as a concept and as it applies directly to your practice, you can make smarter choices about how to allocate your limited, ever-changing funds. This understanding goes beyond simply watching the rise and fall of your business’s monthly bank statements; it also requires keen, diligent insight into how money moves in and out of your practice.

How Cash Flow Is Determined

At its most fundamental level, cash flow is a calculation of your revenue versus your expenses or the money entering and exiting your practice. Specifically, it is the amount left after subtracting your expenses from your revenue. If this number is positive, you have positive cash flow, which is a good situation to be in; if it is negative, you have negative cash flow and a serious problem.

For a chiropractic practice, revenue comes primarily from patient sessions, memberships or health plans, and product sales, if applicable.

Expenses, meanwhile, include:

• Rent
• Payroll
• Utilities
• Taxes
• Memberships, licensing, and compliance costs
• Investments in equipment
• Investments in marketing
• Software and service subscriptions
• Continuing education

They also include any unexpected expenses and potential growth opportunities.

The problem is that even if your company is bringing in enough revenue to cover its expenses, the timing of it all is critical. When money goes out faster than it comes in, it can strain a business. Unremedied, this strain can make a business unsustainable and set it on a steady and direct course to closure.

That’s why understanding and properly managing cash flow is paramount to a chiropractic business’s financial management. You need to forecast revenues and match them to your current expenses.

How to Manage Cash Flow Effectively

Stabilizing monthly cash flow is not rocket science. How chiropractors stabilize monthly cash flow is by adhering to the same set of simple guidelines. By following the steps and using the tricks and techniques outlined below, you can keep your chiropractic business going and growing for many years to come.

In a nutshell, effectively managing cash flow involves:

1. Examining revenues
2. Tracking expenses
3. Navigating insurance, billing, and payment procedures
4. Comparing your records to your bank statements to identify errors
5. Forecasting revenues and expenses for the upcoming period
6. Planning for expenses to ensure you’re able to meet them

Now let’s examine more closely how to effectively achieve each of these objectives.

Get a Handle on Your Income Sources

Revenues enter a chiropractic practice in several ways, most commonly:

• Cash payments
• Insurance reimbursements
• Memberships and care plans
• Ancillary services like orthotics, massage, and rehab
• Product sales

To better manage this top line of your cash-flow statement, track income from each source individually and identify how quickly and consistently each source makes those payments. Then, whenever possible, reduce your dependence on sources that pay slowly or inconsistently.

Expedite Insurance Payments

One of the greatest detriments to cash flow is delayed insurance reimbursements. To prevent or at least minimize these occurrences, follow these best practices:

• Ensure accurate coding.
• Provide proper documentation.
• Submit claims on a daily rather than weekly basis.
• Consider outsourcing billing.

Wrangle In Your Overhead

Overhead costs can rapidly eat away at a business’s finances if not adequately controlled. Fortunately, it is entirely possible to control your overhead costs without sacrificing your quality of patient care.

To rein in your overhead expenses, start by reviewing these fixed expenses:

• Lease costs
• Utility costs
• Staffing and scheduling
• Equipment financing
• Software subscriptions

Find ways to trim the fat from these expenses. They don’t have to be large, sweeping changes. Every small cut can add up to significant savings over time.

Create a Cash Reserve

A sufficient cash reserve can help your chiropractic business to withstand unforeseen impediments to your anticipated revenue, such as:

• Seasonality
• Insurance repayment delays
• Equipment failures
• Legal and medical matters

If you can ultimately set aside a reserve of two to three months of operating costs, you can weather those storms.

Join the Tech Revolution

In the modern age, financial management software is abundant and can help a chiropractic business track and optimize cash flow. With this software, you can:

• Stay on top of daily collections
• Keep track of outstanding balances
• Forecast expenses and revenues
• Reduce clinic no-shows

Use this software to monitor Key Performance Indicators (KPIs) that will help you maximize your cash flow. Perhaps the most important for a chiropractic practice is Revenue Per Patient Visit. Other valuable stats to know include:

• Patient Retention Rate
• Profit Margins
• Staff Utilization Rates

It can also be helpful to track certain pivotal accounting ratios, namely:

• Operating Margin
• Working Capital
• Return on Investment

There's no need to overwhelm yourself. Pick just two or three metrics that are most relevant to your practice, then add additional ones as they seem appropriate.

Cash-Flow No-No’s: Things to Avoid to Better Manage Your Chiropractic Practice’s Cash Flow

In addition to all the things you can do to stabilize your chiropractic business’s cash flow are several things you absolutely must not do to help sustain and even improve that cash flow. Among the topmost of these are:

• Overinvesting in office space and equipment
• Poor planning for taxes
• Not building an emergency fund

Prioritize Patient Satisfaction

There’s one final key to how chiropractors stabilize monthly cash flow, and it’s perhaps the most invaluable of them all: make patient satisfaction your number one focus. No chiropractic business can survive, let alone thrive, without patients walking in the door.

It is therefore incumbent on you to attract and retain those patients. Even if you’re so successful with some of your patients that they don’t need your services anymore, they can still write you glowing reviews, recommend you to others, and serve as your own walking, talking billboards. You can even incentivize patient referrals through a program.

Another way to help make your chiropractic business a patient-focused practice is with automated post-session surveys. Find out what your patients value; ask them what improvements you can make to better serve them, then make those improvements.

For help with the remaining items on this list, such as payment processing plans for chiropractic offices, call our office today.