Critical to Success - Cash Flow Management
/So you know how they say “cash is king”, well it’s for a REALLY good reason. Being on top of your cash flow is so important to the growth and success of your practice. That means keeping track of your accounts payable (who you owe money to) and accounts receivable (who owes you money). This can be a little daunting and may make you want to bury your head in the sand or completely turn a blind eye to your bookkeeping. However, by managing your finances correctly, you are ensuring that your practice is set to grow and succeed. Being up to date on your practice’s cash flow will affect how you budget and ensure that you are able to plan for periods when costs outweigh income. Also, on an important side note, it’s very important for tax season to have correct and up-to-date bookkeeping records.
Now to make this process manageable, I highly recommend using an online accounting program, as opposed to a spreadsheet. Online accounting programs are pretty affordable and can save you time and money. For a comparative summary on different bookkeeping software's, check out my article "Finding the Right Bookkeeping Software" HERE.
Accounts Payable
Once you set up your bookkeeping within your online accounting program (look for one that is Cloud based with bank level encryption software), you need to make sure to enter data on a daily basis in order to stay on top of your bookkeeping. You will want to enter incoming bills, credit card expenses and employee expenses. Don’t forget to keep paper copies of your documents.
Your next step to make sure you stay on top of your bookkeeping is to pay your bills weekly and always on time. Don’t wait until you meet your supplier’s set term date. Instead, make your payment with a few days to spare of the deadline. This establishes a good relationship with your supplier, which can come in handy during a period where your cash flow income is less than your costs.
Accounts Receivable
Next we have your accounts receivable (aka the fun account!). The biggest recommendation I have for setting up your accounts receivables is to try to automate the process as much as possible. Most online accounting programs offer billing systems, or you can use an online software tailored specifically to accounts receivable.
The second recommendation I have is to educate your staff on the importance of minimizing accounts receivable with your customers. Have your staff review each customer’s account and payment history during their visit and train them to request full payment immediately following service. If the customer cannot pay for the appointment in full or would like to pay at a later date, have your staff explain all the payment options your practice offers. Most importantly, make sure they are aware of when the balance is due. If possible, have that customer’s bill sent out that SAME day. If not, make sure that you have a system in place to have the bill sent as soon as possible. The sooner you send the bill, the sooner you get paid.
Your last step would be to assign a staff member to handle customer collections. The staff member you select should be personable, professional and up to this difficult task.
Finally, my most valuable piece of advice! If you decide to hand over your bookkeeping, management of your accounts receivable and payable, to another member of staff, make sure to still keep close tabs on it. You should always be aware of what’s going on with your money. By checking up on your accounts payable and receivables periodically, you can ensure that no form of fraud is occurring within your practice.
Cash is the lifeblood of a practice. Want to know how you can ensure that you are taking every measure possible to grow your practice? Then you have to keep accurate and current records of your accounts payable and receivables. Only then will you grow!
Now this whole process is time consuming and your time is incredibly valuable. Consider hiring a bookkeeper who can dedicate themselves to ensuring your books are kept correctly. There are many advantages to hiring a bookkeeper outside of your practice. Advantages like reducing the risk of fraud, freeing up your valuable time and ensuring that your books are kept correctly by someone more experienced.
If you’re ready to start putting some of your money back in your pocket, living a more stress-free life knowing your practice is on the path to financial success and having more time to dedicate to your customers and their pets instead of to your bookkeeping, send me an email at rbailey@veterinarybookkeepingsolutions.com. I’d be more than happy to help you get started on this path!