7 Tips to Manage Your Cash Flow


Wallet and some money on a wooden tableCash flow is the term used for the ins and outs of money in your practice. It’s important to manage it so that you don’t end up at the end of the month with no money to pay the rent, or put petrol in the car. Income in a therapy or counselling practice can be changeable, dipping at some times of the year, rising at others. There are a few easy steps you can take to help you manage your cash flow more effectively:

  1. Have a Budget (and use it): Obvious as it sounds, this is a really important step in managing not just your cash flow, but your practice finances generally. When you work out what you need to earn in order to pay for what you need to pay out, you might be surprised. The discipline of having a monthly target for fees earned will focus your mind towards activities that generate income. Don’t forget too, to allow for seasonal fluctuations and holiday periods, as these are likely to create significant ups and downs in your cash flow.
  2. Have a cash flow projection: A Cash flow projection plots the expected money in and money out for a future period, usually 3, 6 or 12 months. It allows you to see where you are most likely to run into difficulties, for example, where an increase in expenses meets a reduction in income. You can see an example of a cash flow projection for a small practice HERE.
  3. Get paid on the day, or in advance where possible: Most therapists aim to get paid on the day. However, some therapists bill at the end of each month and some work (for example, most employee assistance programmes) is paid either at the end of the contracted work, or on invoice. Make it clear in your initial meeting with a client what your payment terms are. Consider accepting credit card payments. If you agree a block of sessions for a fixed fee, consider asking for payment up front, or partially up front. Another idea is to fix the fee on a monthly basis (rather than a session basis) and make it payable by direct debit or standing order.
  4. Invoice promptly: Where you are working on an invoiced basis, get your invoices out promptly at the month end, or the end of the contract. The bill can’t be paid if you don’t send it out.
  5. Keep debtors to a minimum: Follow up invoices regularly until they are paid. Send out monthly statements. If clients fail to pay under the agreed terms, make sure to talk about it at the earliest opportunity. Don’t allow unpaid fees to accumulate, it’s not good from either a therapeutic or a business perspective. Make a policy for yourself about the maximum number of outstanding session fees, or the maximum invoiced amount for a provider you are willing to allow before bringing the work to a temporary halt.
  6. Be firm about cancellations: Be clear with clients from the outset what your cancellation and no show policy is. You may wish to give it to clients in writing. After all, in the first session, they are probably paying more attention to the issue that brings them to therapy, than they are to your terms of business. Stick toeuros it.
  7. Know your outgoings, and spread them where possible: Be aware of the fluctuations that can arise in expenses at particular times of the year, for example, when yearly payments such as subscriptions or insurance are paid. Consider the benefit of opting to spread the payments over a period, even if there is a small charge for doing so. Include in your budget an amount to cover unforeseen circumstances, you’ll never think of everything in advance! Think long and hard before making significant payments that are not in your budget.

Cash flow can be erratic in a therapy or counselling practice, but using these simple but effective tips, you can minimise the impact on yourself.

If you struggle to manage the financial side of running your practice, I may be able to help you. Contact me here for your free 20 minute consultation or to make an appointment.