Home Finance Accountant How to Prepare a Cash Flow Analysis
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How to Prepare a Cash Flow Analysis

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It’s been said that cash is king, and that couldn’t be more true than when it comes to running a medical practice.

An accurate cash flow analysis will help you determine how much inflow, or cash, is needed to balance your outflow, or the expenses of running your practice.

A cash flow analysis looks at three distinct areas of your business.

The first step in completing this analysis is to estimate the cost of your operating activities. This number will include the income you receive from patients and insurance companies, as well as daily operational expenses like staff salaries, rent, and insurance.

The net figure you arrive at after looking at inflow and outflow gives a strong indication of the overall operational cost of running your practice.

Next, consider large, one-time purchases like medical equipment and property. These are considered investments. The purchase of larger, expensive items is calculated into your outflow, while the eventual sale of such items counts as inflow.

Finally, consider financial transactions like loans and loan payments. Loan monies you receive are part of your business’s inflow, while loan payments made are considered outflow.

Your goal in creating a positive cash flow is to balance your inflow and outflow, taking care that you’re never spending more than you’re making.

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