Anticipation key to dealing with cash-flow shortfalls

Practice Management. By Mike Norbut, AMNews staff. Aug. 22/29, 2005.

With revenue and expenses not always coming in evenly and consistently, even the healthiest, most successful physician practices can find themselves in a cash pinch on occasion.

There are strategies that practices can employ, however, to get them through times when cash flow is a little lean. From lines of credit to cost control, physicians should be aware of the ways to cover uncertain contingencies as they arise. It could mean the difference between taking home a paycheck that month -- or not.

"Everyone gets used to what they get paid," said Tom Cottrell, a partner with the Fort Wayne, Ind., office of BKD LLP, an accounting and financial advisory firm. "They don't consider the struggles a practice may have."

An insurer might delay payment on claims for some reason. A physician might decide to retire, or medical liability premiums might double from one year to the next. The office manager might leave, or someone working in the billing department might need to go on disability. The possibilities for unusual events that can throw off the rhythm of a practice are practically endless.

These events are more likely to disturb smaller, fledgling practices, but because many of them occur without warning, any practice could find itself short on cash at some point.

"The best of groups can have this happen to them," Cottrell said.

Many groups keep a line of credit open with a local bank to handle short-term cash crunches, and they work quickly to pay off debt so they don't lose too much money to interest.