NTD 2022 ISSUE 3 DE-3 - Page 20

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finance

CASH FLOW for Startups

Calculate your cash needs and develop a plan to cover them
by Jeramy Smith , CPA
You are thinking about owning your own dental practice . You know there is risk involved . Owning your own practice has more risk than being an associate , but it can be more financially rewarding and allow you to create your own working environment and team .
Purchasing an established practice may lower the ownership risk since it can quickly yield a positive cash flow . Still , the practice may not be exactly what you want in terms of location , ideal patients , team members , etc ., and you ’ ve most likely paid more for the patient base the previous dentist built up .
Starting up a practice can give you a lower upfront overall cost and more input on the practice specifics since you are starting from nothing , but it will take some time to get to a positive cash flow as you build up your patient base . Initially , you will have expenses , but no patients , so one of the biggest things you need to plan for is the cash flow shortfall until you reach your breakeven / positive cash flow point .
Understanding the cash needs for the first 12-24 months and having a plan to fund those needs is critical to your practice ' s success and mental well-being since the financial stress of seeing monthly losses can take a toll on you . Here are four steps to help you put together a projected cash flow and determine how you will cover any shortfall .

Step 1

Estimate collections by month . Keep in mind that insurance payments may take a couple of months to come in . Be conservative and don ’ t overshoot the income . You are better to choose lower numbers on this step .

Step 2

Estimate monthly expenses . You will probably have a loan to pay for most of the upfront cost of equipment , building out your
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