E887 | Why Your Best Month Might Be A Huge Problem For Your Clinic

Big Clinical Months Can Wreck Your Cash Flow If You’re Not Careful

Big months feel great.

You run a reactivation campaign. New patient volume spikes. People prepay for packages. Cash hits the account fast.

Then, a few months later, you’re stressed, confused, and wondering why your numbers suddenly look terrible.

In this episode, Danny breaks down why that happens and how to avoid one of the most common cash flow mistakes clinic owners make.

The Hidden Risk of Big Revenue Spikes

Danny starts with a scenario he has now seen play out multiple times.

Let’s say your clinic normally does around $20,000 per month. Then you run a reactivation campaign or have a strong influx of new patients who prepay for services. That month jumps to $50,000.

Your overhead might still be $12,000. On paper, it looks like you crushed it.

The problem is that a large portion of that cash is for services you have not delivered yet.

Prepaid visits feel like profit, but they are really future obligations.

Why Owners Get Burned

Here’s where things go sideways.

Owners see a big cash balance and take a large distribution. It is technically their money, but the work attached to it has not happened yet.

Over the next few months, patients come in and use the sessions they already paid for. Since they are not paying at the time of visit, monthly collections drop.

Now you are staring at a $10,000 month, wondering what went wrong, even though the clinic is busy.

Nothing went wrong clinically. The issue is cash flow timing.

Danny shares that he made this exact mistake early on. A reactivation campaign worked well, money came in fast, and he paid himself aggressively. A few months later, revenue looked awful, cash reserves were thin, and he had to move personal money back into the business to stabilize things.

The Simple Rule That Fixes This

Before taking large distributions after a big month, you need a cash buffer.

Danny’s baseline rule is simple.

You should have at least three months of overhead in cash before distributing anything extra.

If your overhead is $12,000 per month, you want $36,000 sitting in the business account. Some owners will even hold closer to six months after a large prepaid spike until things normalize.

That buffer protects you during the months when revenue looks artificially low because patients are using services they already paid for.

Prepaid Revenue Is Not Earned Yet

The mindset shift that matters most is this.

Prepaid services are not truly earned until the visits happen.

Yes, the money is in your account. No, it is not free cash.

Those dollars represent work you owe. Treating them as profit too early is how clinics end up scrambling later.

When you understand this, cash flow stops feeling random and starts feeling predictable.

Why This Matters More Than You Think

Most clinicians were never taught cash flow management. School didn’t cover it. Early jobs didn’t require it.

But once you run a cash-based practice, this skill becomes foundational.

Good cash flow management lets you:

• Pay staff confidently

• Make decisions without panic

• Avoid pulling personal money back into the business

• Grow without constant stress

It is not about being conservative. It is about being intentional.

Where Claire Fits Into This Conversation

One reason owners struggle with cash management is that they are overwhelmed and reactive.

When documentation eats up hours every week, there is no mental space to think clearly about finances.

Claire helps by removing the documentation burden so you can stay present with patients during the day and actually plan your business instead of constantly catching up.

You can try Claire with a free 7-day trial here

What To Do Next

If this episode hit close to home, here are a few simple action steps.

1. Look at your last big month and identify how much of it was prepaid

2. Calculate three months of overhead and make that your minimum cash buffer

3. Stop tying distributions directly to single-month revenue spikes

4. Build systems that give you time and clarity instead of constant admin drag

If you want help getting clear on your numbers and building a plan to go full time the right way, PT Biz runs a free Part Time to Full Time 5-Day Challenge that walks you through it step by step.

You can sign up here:
https://physicaltherapybiz.com/challenge 

This episode is a reminder that growth does not just come from more patients. It comes from understanding how money actually moves through your clinic so big wins do not quietly turn into future stress.

Do you enjoy the podcast?  If so, leave us a 5-star review on iTunes and tell a friend to do the same!

Ready to elevate your practice? Book a call at the link below with one of our expert consultants today and start your journey to delivering unparalleled physical therapy.

Podcast Transcript

Danny: [00:00:00] Hey, what's going on Danny here with the PT Entrepreneur Podcast, and today we're talking about [00:00:05] how big clinical months might end up kicking your [00:00:10] butt later in the year. So [00:00:15] what I want to address is cash flow management. And I've seen a scenario [00:00:20] now a handful of times with reactivation campaigns that we have people running that are successful.

They're, they're great, they [00:00:25] generate revenue for their clinic. Um, but there's a really important caveat to this where you [00:00:30] really need to understand the management of the cash that's coming into your business. So I'm gonna give you a really simple scenario and [00:00:35] something that you need to think about if you have these big month fluctuations, and, and in particular this can happen if [00:00:40] you are doing a lot of prepaid, uh, services as well.

So let's say that you have a month [00:00:45] where you have, um, a, a, a lot more. New patient volume than normal, [00:00:50] and a lot more people prepaying for services. So they're prepaying for the packages they have [00:00:55] versus spreading them out. Well, what happens is you have this big cash flow spike. The same thing happens [00:01:00] if you do a reactivation campaign.

So let's say that you reactivate prior customers, [00:01:05] they're coming back in, they're pre-purchasing services with you, they're paying upfront for it [00:01:10] can be a great thing for the business. But it needs to be managed correctly. And [00:01:15] if not, then it can put you in a bad spot a few months later. And I'll kind of explain why.

So [00:01:20] number one, let's just give this scenario of, let's say normally you have a month where you're doing $20,000 a month in revenue, [00:01:25] but you do some sort of reactivation campaign. Or maybe it's just a really big month where you have a lot of new patient volume [00:01:30] that spikes, and then you have a lot of prepaid services.

And let's say that jumps to $50,000 that [00:01:35] month. So. If your overhead, let's say, is $12,000, and [00:01:40] now all of a sudden you have this big delta, you're gonna have a lot of cash, uh, that you're gonna have on [00:01:45] hand from these prepaid services. The mistake that a lot of clinic owners will [00:01:50] make is they will say, awesome big distribution this month [00:01:55] for, uh, you know, for, for the owner, which it's your money, you can do what you want with it.

[00:02:00] But when you look at what's happening, you're, you're. You have services that have been paid [00:02:05] for, but not rendered yet. So the money that you have from those prepaid [00:02:10] services. You need to be very careful about how you manage that because you have to work those off. [00:02:15] And as you start to work those off, since they're prepaid, they will not be paid at the time of [00:02:20] the actual visit.

So this is where people can get themself into a big, um, cashflow [00:02:25] crunch and end up with very little money in their, uh, their account. And then maybe they have to add money [00:02:30] back from their personal accounts and it can get kind of messy as far as your bookkeeping is concerned. So what you wanna make [00:02:35] sure that you have.

Before you do any sort of, you know, distribution, um, with, with these [00:02:40] bigger months or with these activation campaigns, is you have at least three months of cash on hand for your [00:02:45] overhead. So if your overhead is $12,000, then you wanna make sure you have $36,000 [00:02:50] of cash in the business. Before you end up doing any [00:02:55] sort of distribution on top of that, and this is because as you have these later months where people are [00:03:00] coming in to use the services that they have prepaid for, you're gonna have months [00:03:05] where your cash collected is actually gonna be lower than it should be if they were paying at the time of [00:03:10] visit, but they've already prepaid for it.

So if you have this cash buffer, it puts you in a place where as you have [00:03:15] slight decreases in your revenue, you're still in a really good. Comfortable cash position in the [00:03:20] business, and you're managing that prepaid service out so that it, it ends up evening itself out [00:03:25] over a few months or however long it is that you have these services that they've paid for to come, uh, you know, to come [00:03:30] back in.

But the biggest mistake that I see is that we have these big spikes and then people just [00:03:35] distribute a huge dis distribution to themself. And then they end up with months where like [00:03:40] they'll jump up to $50,000 and all of a sudden they'll be at a month when they're at 10. [00:03:45] They're scrambling. They're like, oh my God, what's going on?

I'm gonna go outta business. I don't have any money for. [00:03:50] You know, to pay for X, Y, and Z and it's because they've already paid themselves all that money and they need to eventually [00:03:55] add it back, which again, I, as I said, can make your bookkeeping kind of confusing. So make sure that you have a cash buffer [00:04:00] on hand, especially for these, uh, the, these fluctuations with prepaid services.

And that's at a [00:04:05] minimum. Some people, as these happen, they may ride out six months worth of cash on hand as that [00:04:10] slowly starts to come back to maybe three, four. Um, and you just wanna make sure you're not distributing. [00:04:15] Big chunk of money when you just have a big chunk of prepaid services come in. This may sound [00:04:20] obvious, but when we're running a business, oftentimes we don't know, uh, you know, [00:04:25] cashflow management.

Then we taught you this in school and we taught me this in school, and I, and I know the first time that this happened to [00:04:30] me, this exactly what I did. I literally had a reactivation campaign that [00:04:35] I'd never run before. It went well. We had all these prepaid services. It was towards the end of the year. [00:04:40] And I distributed a ton of that to myself.

And then over the next few months as people came [00:04:45] in to use the services, they'd paid for, my clinic revenue looked awful. And I, I was, [00:04:50] started freaking out, like, what is going on? Why is this uh, happening? It's because it already prepaid for that, but it already [00:04:55] sort of spent, not only spent that money, but I distributed to myself.

So our cash reserves looked [00:05:00] terrible, ended up having to add money back. Um, and it, it creates a bit of a mess. So keep that there. [00:05:05] It's not yours until you've earned it. And, and people have come in to actually use those [00:05:10] services. Uh, and if you do that and you make sure that you have this three month buffer, it puts you in a much, much [00:05:15] better position, uh, because you're able to make decisions based on having the right [00:05:20] appropriate amount of money on hand and not necessarily, you know, having zero cash and then scrambling [00:05:25] to try to figure out what to do from there.

So just remember, prepaid services are great. They can be a huge thing for your [00:05:30] business. These cashflow spikes that we see, you need to make sure you're just managing that and understand it's not your money just yet. [00:05:35] They paid you, but you haven't necessarily earned it yet. You know, they, they have a service that they've [00:05:40] paid for but hasn't been fulfilled yet.

So keeping keep kind of that lens as to that [00:05:45] cash because you, it is yours, but you haven't necessarily worked it off yet, that will help you make better decisions, [00:05:50] manage cash flow better, and if you can manage cash flow better, put you in a far better positioned to [00:05:55] financially be in a good spot, foundationally, to run that business, to grow that business and take you to the next [00:06:00] step.