{"id":76904,"date":"2024-10-01T00:00:14","date_gmt":"2024-10-01T04:00:14","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=76904"},"modified":"2025-08-12T11:47:29","modified_gmt":"2025-08-12T15:47:29","slug":"cash-flow-problems-veterinary-clinic","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/cash-flow-practice-smarter-1024\/","title":{"rendered":"8 Ways to Avoid Cash Flow Problems at Your Veterinary Clinic"},"content":{"rendered":"

Recently, I needed to get ready for a weeklong desert road trip. Oil? Check. Extra water? Check. Snacks? Check. Spare tire? Check. Two days and 600 miles into the journey, I was driving down U.S. Route 163 on the Utah-Arizona border and couldn\u2019t help but smile when Monument Valley Navajo Tribal Park came into view. My smile froze the second my low-fuel signal lit up. The critical question became, \u201cCan I make it to the next gas station?\u201d<\/p>\n

Have you ever been caught off guard financially in your veterinary practice? Maybe you received a text notification that your business bank account had reached the set minimum, and you thought, \u201cCan I cover the next payroll?\u201d or \u201cWhere did all the money go?\u201d<\/p>\n

The movement of money through a company is known as cash flow. A U.S. Bank study revealed that 82% of business failures were due to cash flow problems.<\/p>\n

Here are eight steps to minimize the risk.<\/p>\n

1. Understand How Money Flows Through Your Practice<\/strong><\/h3>\n

Your business has cash and non-cash events. For example, a rent payment made by credit card is a cash transaction. Asset depreciation is a non-cash transaction. For our purposes, cash represents any direct or indirect payment, whether it involves actual cash or not. Cash flow statements, which show how money flows through your practice, differ from income statements. The latter include non-cash transactions and exclude cash transactions that might be on the balance sheet. Financial institutions often use cash flow statements to determine a practice\u2019s ability to meet its obligations. They are vital when you want to refinance a loan, obtain additional funds or sell your practice. In the last example, the bank wants assurance of positive net cash flow in the future so that the new owner can repay the loan.<\/p>\n

2. Check Your Payroll<\/strong><\/h3>\n

Payroll consumes most of the revenue in a veterinary practice. One way to shrink payroll and preserve cash is to minimize overtime and replace contracted labor with employees. Contracted veterinarians and technicians often cost more, but they can be a temporary fix if employee turnover is high.<\/p>\n

3. Implement Effective AR Policies<\/strong><\/h3>\n

Your practice management software might tell you revenue is high, but your bank balance says otherwise. Are you getting paid for all the services your team provides? Ensuring the collection of client payments before or at the time of service is a crucial part of managing accounts receivable. You must reevaluate or change your policies if your accounts receivable is more than 1.5% of revenue. For ideas on doing it, check out my CE article, \u201cLearn to Manage Your Accounts Receivable,\u201d at go.navc.com\/AR.<\/p>\n

4. Free Strapped Cash<\/strong><\/h3>\n

Veterinary hospitals need inventory, but excess inventory is cash on a shelf. Ideally, you sell all the products you stock before paying for them. For example, you ordered 10 boxes of a flea and tick preventive because a bulk purchase was cheaper. The due date is in 30 days. The question is, can you sell the entire supply within 30 days? If you can\u2019t, you are tying up cash. Some vendors might extend the payment terms, like net 60 or 90 days, which is to your advantage. Knowing how many products you sell in a given period can help you plan order quantities better. When possible, negotiate with vendors on price and due dates to help solve a cash flow problem.<\/p>\n

5. Discipline the Owner<\/strong><\/h3>\n

I met one practice owner who used the business\u2019s checking account like a personal piggy bank for shiny objects and general expenses, like groceries, dental appointments and a gym membership. Whenever she saw money in the business account, she tapped it. For many reasons, I strongly recommend not mixing personal expenses with business \u2014 always maintain separate accounts. Since owner draws are handled differently, depending on your company\u2019s legal structure, talk with a CPA about the best way to get cash out of the practice when needed. Solo practitioners must exercise discipline.<\/p>\n

6. Safeguard Your Practice<\/strong><\/h3>\n

Cash flow problems can stem from undetected employee embezzlement. Minimize the risk by segregating duties, such as placing different individuals in charge of tasks and diligently fulfilling your management and ownership duties. For example, consider assigning the collection of cash, the deposit of money in the bank and the reconciliation of bank deposits to separate employees. Ensure that none of them can void, delete, refund, discount or alter payments in the practice management computer system. I recommend a similar approach to inventory management. Employee theft is becoming more commonplace.<\/p>\n

7. Negotiate Expenses<\/strong><\/h3>\n

Let me tell you a secret. Not every clinic pays the same price for the same product or service. You can utilize online platforms to compare prices across vendors. Many professional and group purchasing organizations<\/a> have pricing agreements as a member benefit. Furthermore, asking vendor reps about discounts and special pricing opportunities never hurts. Negotiating is another tactic, like with laboratory and landscaping services, routine equipment maintenance, timecard systems, online educational courses, and insurance and marketing products. Don\u2019t think, \u201cOh, that\u2019s the price.\u201d You can shop around and negotiate. Use your practice\u2019s size and purchase volumes as leverage to get better rates. If you like the vendor and its quality of work, consider a contract to obtain discounts and other benefits. Loyal customers are more likely to get price cuts or extended payment terms. There is no downside to asking.<\/p>\n

8. Adjust Your Prices<\/strong><\/h3>\n

When the price you pay for a product increases, your practice management software should automatically update the cost and apply the predetermined markup. Contact your PIMS representative to inquire about best practices for pricing automation. If your software doesn\u2019t support it, have someone periodically check the cost of the products you buy and the client price.<\/p>\n

Remember my road trip scare? Don\u2019t wait for the fuel light to come on. Monitor cash flow regularly to ensure you have enough liquidity to keep your practice open. And remember that cash is king.<\/p>\n

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LEARN MORE<\/strong><\/span><\/h3>\n