I’ve written before on the subject of cash flow management, but it’s so important that it’s worth writing about again. The work in a therapy practice can come and go, sometimes with little warning, so it helps to have some strategies in place to help to manage your own finances. Here are a few tips to help you:

1. Budgeting – know your targets: It’s funny how such a seemingly little thing as having a target can help to keep you on track. Having a budget will be enough to raise your awareness of opportunities that are always out there, but which you weren’t aware of because you weren’t looking. Have a budget for both the amount you need to earn each week or month in order to keep afloat, and also for the amount you expect to pay out for regular expenses.
2. Fixed drawings / salary: Treat yourself as if you were an employee of your practice, and withdraw the same amount every week or month to live on. This will help you to be disciplined about what you spend. And unlike being an employee, if you don’t have the money, you don’t get paid!
3. Put the tax aside: Avoid the pitfall of a surprise tax bill by putting aside something each week or month towards your tax bill. This spreads the pain of the tax over the period in which you earn the money. If you don’t trust yourself, put a standing order in place to pay the amount directly to the Revenue.
4. Matching life style and income: Live within your earnings. Don’t live like someone who earns the income you’d like to earn! The availability of credit cards, and the temptation to fund short term expenses through long term borrowings, are two ways that people can easily live outside their means, running the risk of future debts that can’t be repaid. If you’re not earning enough to meet your outgoings, you need to cut your costs or find a way to earn more.
5. Seasonality / covering holidays: The work is unpredictable at times, but for most of us, runs in a typical pattern that slows down during the summer and in school holidays, and lifts again soon after. Help yourself to manage the fluctuations by saving in more affluent periods, so that you’ll have some reserves when times are slow, or if you have to take time out. Remember, that most therapists do not get paid for their holidays or training time, so taking time off is a financial double-whammy, that costs money at a time when nothing is earned.
6. Income protection: If you have heavy borrowings or dependent relatives, consider taking out insurance to cover long term illness, that covers not just your medical costs, but also provides some replacement income.

Managing cash-flow in any self-employed professional practice can be a challenge, but with a little forethought, you can buffer yourself against the worst highs and lows. If you struggle to manage cash flow in your practice, or you have any queries about any aspect of running your practice, please contact me here for your free 20 minute consultation.

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