Lynxmoor Capital, a small-business funding service in Alexandria, LA, walks through medical practice cash flow analysis for Rapides Parish clinics: how claims lag behind payroll, how to read a practice's cash flow statement, and where a line of credit or working capital fits. Health care was the parish's largest payroll sector in 2023 ($743.4 million, CBP).
Why medical practice cash flow differs from profit
A practice records revenue when it delivers care, but cash arrives when claims are paid. In between sit coding, submission, payer review, and sometimes denials and appeals. Payroll, rent and supply orders keep their own calendar. The gap between the two calendars is what a cash flow analysis measures.
Clinic payroll at parish scale, Rapides Parish, LA
Health care and social assistance was the parish's largest sector in 2023 by both establishments (590) and annual payroll ($743.4 million), with 13,856 employees (County Business Patterns 2023). Offices of physicians alone numbered 167 employers, with $125.9 million in payroll; 58.7% had fewer than five employees.
The full industry view is on medical practice funding.
Reading a medical practice cash flow statement
A cash flow statement has three parts. Operating cash flow is collections minus the cash paid for payroll, rent and supplies. Investing cash flow covers equipment bought or sold. Financing cash flow covers loans drawn and repaid. A practice whose operating line is positive over the year but negative in certain months has a timing problem, not a profitability problem.
Three numbers worth tracking monthly
- Days from visit to payment, on average
- Payroll as a share of collections
- The low point of the bank balance in the month, not the closing balance
A month in a small clinic (invented numbers)
| Week | Collections | Payroll and costs | Running balance |
|---|---|---|---|
| Start | $20,000 | ||
| Week 1 | $8,000 | $14,000 (payroll) | $14,000 |
| Week 2 | $9,000 | $6,000 (rent, supplies) | $17,000 |
| Week 3 | $7,000 | $14,000 (payroll) | $10,000 |
| Week 4 | $12,000 | $4,000 | $18,000 |
The month ends close to where it started, but the balance dips by half in week three. A new provider or a slow payer can push that dip below zero.
The week-three dip and a revolving draw
A line of credit drawn for the week-three dip and repaid in week four matches the pattern. For one known gap, such as the first months of a new provider, working capital may be simpler.
Medical practice equipment financing and cash flow
Paying cash for an ultrasound or an X-ray unit moves a large sum out of operating cash at once. Financing it spreads the cost over the equipment's working life, which keeps the operating line steadier. The trade-off is the total cost of financing, so compare it with paying outright.
Denials stretch the gap (invented numbers)
Invented numbers: a clinic submits $120,000 of claims in a month, and 8% of them, $9,600, are denied on first submission. Corrected and appealed claims pay about 45 days later than clean ones.
Cutting first-pass denials to 4% brings $4,800 a month forward by those 45 days, money that no longer has to be bridged. Clean coding can be a low-cost fix for medical practice cash flow, and it shrinks any request that still has to be made.
Where loan payments sit on a medical practice cash flow statement
Under the usual US presentation, interest paid sits in operating cash flow and principal repaid sits in financing cash flow. Equipment bought outright shows under investing; equipment financed from day one appears through the payments instead. Read the statement with that in mind, or a month with a large principal payment can look like an operating problem it is not.
Related reading
Parish figures are on the Alexandria, LA overview from Lynxmoor. More Lynxmoor articles.
Building a simple cash flow forecast for a clinic
- List every payroll date for the next three months.
- List rent, supply orders and equipment payments by date.
- Estimate collections by week from your days-to-payment average.
- Run the balance forward week by week and mark any week it falls below your comfort level.
The weeks you mark are the ones funding has to cover. A forecast like this, even rough, is a useful page to bring to a partner.
Medical practice cash flow when adding a provider
A new provider's wages start immediately; their claims start paying weeks later. Forecast that ramp separately. It often explains a dip that would otherwise look like a problem with the practice.
By Lynxmoor Capital · Updated