The focus of a mental health practice should be the well-being of the clients.
But it’s important to focus on the financials also.
A business that isn’t on sound fiscal footing won’t last long enough to make a true impact.
The best place to start building a strong financial foundation is your cash flow. It’s one of the most important aspects of your finances.
What is Cash Flow and Why is it Important to Your Mental Health Practice?
It’s vital to have good bookkeeping practices and to understand the financial status of your practice.
However, sometimes, even business owners with a firm grasp of financial record-keeping fall short in estimating what their cash flow will be.
In the simplest terms, cash flow is money coming in and going out of your business. Ideally, you’ll have more cash coming in than going out. This indicates a healthy cash flow and typically leads to a healthier business.
However, cash flow for mental health practices looks different than cash flow for other businesses.
For example, when you see a client in a billable session, you immediately have revenue in terms of accounts receivable. However, you can’t pay any of your expenses with that revenue until the bill is actually paid and the money goes into your bank account. Only then does your revenue increase cash flow.
You’ll also see unique challenges when it comes to maintaining cash flow.
- Payment from clients and insurers can be delayed
- Some months might be slower than others
Regardless, you still have to keep the lights on, and building a strong cash flow is the best way to do that.
Essentials for Building Cash Flow in Your Mental Health Practice
There are a few best practices every mental health business ought to follow.
Improve Your Accounts Receivable
Accounts receivable is the primary way money comes into your business. In other words, it’s what your clients owe you.
To boost your cash flow, you need to collect your receivables as quickly as possible.
Here are a few ways you can improve your accounts receivable:
- Send invoices or collect payments right away
- For clients that pay out-of-pocket costs or deductibles, sending your invoices right away increases your likelihood of receiving your payments.
- Offering the ability to pay right away also increases the chance of payment.
- Use an automated system to send and collect invoices. This eliminates the manual process and saves you time.
- Offer automatic payments
- If your client typically waits to pay until insurance has cleared, ask permission to charge their credit card once the insurer has settled.
- Make the payment process easy
- Don’t make your clients have to just through hoops to pay. Find their preferred method and be sure to offer it to them.
- Get the payment to your bank account quickly
- Many banks offer remote deposit or lockbox services that allow collections at a secure PO box.
Keep Good Insurance Records
Insurance is confusing for many clients. They’re not sure what’s covered, how much their copay is, and whether they’ve reached their deductible. That’s why it’s critical for you to have the most up-to-date and accurate information.
The more quickly you know exactly how much you’re getting from the insurer and how much the patient owes, the faster you can present an invoice and collect payment.
You don’t want the trouble and expense that come from inaccuracies in your billing systems.
If you’re consistently accurate, then the client is more likely to be satisfied that the invoice is correct and more apt to pay promptly.
You should also try to update client records frequently. This will give extra protection against the possibility of inaccuracies.
Keep Claims, EOBs, and Payments in One Place
Even after a payment hits your bank account, somebody has to post the receipt of payment into your accounts receivables database. In some older systems, the claim, the payment, and the Explanation of Benefits (EOB) are all tracked separately.
There’s no longer any reason to do it that way. Many new technologies allow your bank to receive both the payment and a copy of the claim from the insurer.
The bank can then create electronic EOBs, aka 835s, which can be customized to meet your requirements and posted in your database along with the receivable.
It doesn’t have to be a long process; your cash flow will benefit from this automation.
Work with an Accountant Experienced in Building Cash Flow for Mental Health Practices
As a mental health professional, your focus is on running your practice and improving the lives of your clients. That’s as it should be. Still, if somebody doesn’t attend to your cash flow, you won’t be able to do those things for long.
That’s why an experienced accountant, such as Leichter Accounting Services, can be an invaluable asset to your business.
We’ve worked with many practices similar to yours and understand the key financial success factors for a mental health business. Contact us today to find out how we can help keep your operation financially healthy.