Revenue is vanity, profit is sanity, but cash flow is king! This saying remains accurate over time, and anyone managing a physical therapy clinic understands the critical importance of monitoring cash flow. It's not merely about glancing at your checking account once a month to compare balances. It entails comprehending the business delivered, outstanding receivables, payables, payment schedules to providers, and the timing of revenue from services rendered.
Throughout history, numerous profitable businesses have shown profits on paper but faltered when faced with the tax bill. They lacked the cash flow to cover taxes, payroll, and essential operational expenses, risking their business continuity. This stands as a significant lesson for every business owner. If you're a clinic owner who hasn't considered this aspect, this is the right time!
Clinics that switch to Spry typically experience a 40% improvement in their cash flow. This means they receive the money owed to them 40% earlier than they did with their previous provider—reducing the time from 35 days to just 21 days. Accelerated payment reception empowers better business decision-making by ensuring quicker access to owed funds.
Additionally, our billing service fees are only 4%. While many competitors charge 6% or more, our lower fees can save you thousands of dollars annually while expediting your payment process. Consider the impact on your business when you have the assurance of having funds in the bank sooner.
1. Insurance against rough times - Post-Covid, we've navigated recessions, cost-of-living crises, and a global labor shortage, making business operations more challenging than ever. In such uncertain times, nothing offers better peace of mind than knowing you have a fully capitalized business with ample cash reserves to cover all bills and payroll. A fully capitalized business typically ensures having 2–3 months' worth of all expenses set aside within 30 days. This includes provisions for all outgoings, encompassing payroll expenses and tax contributions. Adopting a cash-based accounting approach involves setting aside taxes separately, securing this money in a designated account each month to prevent unintentional expenditure, and ensuring it's available when due to the tax authorities.
2. Pay down debt - Properly managing and servicing debt is fundamental to a business's success. Inability to do so often means closing the doors. Therefore, when you have surplus cash and face high borrowing costs, using this cash to pay off debt proves highly beneficial. It optimizes your cash flow, reduces interest payments, and consequently lowers the overall cost of borrowing. Tip: Avoid purchasing unplanned assets at year-end solely to offset a tax bill. Also, refrain from borrowing to resolve issues and explore creative solutions. Borrowing should be a strategic move reserved for profitable periods and to fuel sensible growth.
3. Pay a dividend - When the business performs well and has debt, taxes, and operating capital under control, you can pay a dividend and start building wealth without stressing your business. This goal is to have a more profitable business with a good handle on cash flow.
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4. Invest in a new growth project - As a business owner, you are an entrepreneur. You spot opportunities to develop your business or introduce new services or products to serve your clients better. Perhaps you aim to open a second location, integrate shockwave or wellness therapy, or expand your staff to generate more revenue and increase profits. These initiatives might involve hiring new space, acquiring equipment, or ramping up investments in marketing and sales. The underlying goal is to make your money work harder, aiming for increased revenue, profit, and improved long-term cash flow. However, a word of caution: all growth consumes cash. Every new idea or project demands financial resources to take flight. The magnitude of the idea determines the money required. Growth demands substantial cash, often surpassing initial budget estimates—particularly when expanding into and renovating new premises with a larger footprint. Understanding your cash flow and weighing the risks and opportunities involved are crucial in determining the right time for growth and whether the business can afford it. Sometimes, this entails internal funding, leveraging owner resources, seeking external investors, or securing a loan. The objective is to avoid depleting your working capital to a level that hampers profitable business operations. It's about safeguarding the cash reservoir that enabled you to conceive the growth idea in the first place.
5. Sit on it and wait - Business opportunities are often within reach. Exploring investment avenues and seeking growth prospects, ideas, and ways to utilize funds are readily available and accessible. The challenge lies in discerning which opportunities to pursue, avoiding distractions, and preserving resources—time, money, energy, and focus. At times, exercising patience by holding onto cash until the right opportunity surfaces can be wise. This could entail considering real estate investments, exploring new technologies, or bringing in individuals to enhance the growth of your physical therapy business. For instance, many clinics that were fully capitalized before the onset of COVID-19 and subsequent lockdowns found themselves in a more robust position. Having extra reserves in hand allowed for a sense of security and positioned them to emerge stronger. They were better equipped to capitalize on opportunities like acquiring struggling businesses and reconfiguring them based on their successful model.
So there you have—5 ways to leverage your improved cash flow. However, before reaching that stage, acquiring knowledge and understanding of your numbers, billing, and cash flow is essential. This is where we come in. Our comprehensive system is crafted by physical therapists, catering specifically to business owners in the physical therapy field like you.
Robust systems and competent personnel using them are indispensable to enhance business growth and scalability with increased profitability. While we can't supply physical therapists, we can assist in running a more efficient clinic, improving cash flow, and fostering practice growth. Isn't it worthwhile to invest just 30 minutes of your time to explore how Spry can benefit you? Book a demo to delve deeper, or consider reading this case study from Align Therapy.