Cash & owner pay
How much cash should a group therapy practice keep?
Set a cash floor using the bills you need to pay and the time it takes money to come in. Before taking an owner draw, look ahead to the lowest expected balance and compare it with that floor.
Independent Practice Advisors · 4 min read
Start with cash you can use
Take the bank balance and list amounts already committed: payroll withholdings, upcoming bills and other obligations. Keep unpaid insurance claims separate. They may turn into cash later, but payroll may be due first.
Map the next 13 weeks
Use a row per week for starting cash, likely collections, payroll, rent, debt payments and other bills. Include taxes at the dates and amounts your CPA gives you. Test a slow month or late insurer payment and see which week runs lowest. Count each bill once in the projection.
Choose a floor and test a draw
Say you have $90,000 in the bank, $10,000 already committed and a $70,000 cash floor. That’s $10,000 above your floor today. If the forecast, after those bills and before the draw, dips to $73,000, there’s only $3,000 of room in that period. A slower collection week could use that up. These are illustrative figures.
Revisit the floor when the practice changes
A new lease, payroll cycle or slower payer can change how much cash you need on hand. Review the forecast before major commitments and when you close the books each month.
Nothing here is legal, tax, accounting or compliance advice. Keep your accountant and your attorney. We don’t provide HR advice.