# Medical Practice Cash Flow: How to Forecast and Manage It Source: https://www.cashflowforecasttemplates.co.uk/guides/medical-practice-cash-flow-guide Updated: September 25, 2026 > Medical practice cash flow depends on the revenue cycle. Forecast collections from claims by payer and typical payment delay, keep denials low with clean claims and fast resubmission, collect patient balances at the time of service, track days in accounts receivable monthly, and fund payroll through the claims lag, especially when adding a provider. A medical practice delivers care today and is paid for most of it weeks or months later. Payroll runs every two weeks regardless. The practices with healthy cash aren’t necessarily the busiest; they’re the ones with a tight revenue cycle, a realistic forecast of when claims will pay, and a close eye on the numbers that show cash slipping. This playbook sets out the routine. For how practice cash flow works and a worked claims-lag example, see the [medical practice cash flow forecast page](/cash-flow-forecast-template/medical-practice). ## The revenue cycle, simply 1. **Before the visit:** eligibility and benefits verified, prior authorisations obtained. 2. **At the visit:** copays and known balances collected. 3. **After the visit:** coding and claim submission, ideally within a day or two. 4. **Payer processing:** payment, partial payment or denial. 5. **Follow-up:** denials corrected and resubmitted, patient balances billed. Every delay in any step pushes cash later, and errors at the start of the cycle usually cost the most to fix at the end. The forecast should reflect how each step really works in your practice. ## The weekly routine 1. **Collections** by payer against forecast. 2. **Claims submitted** and any backlog. 3. **Denials** received, by reason, and resubmissions due. 4. **Patient balances** collected at time of service. 5. **Payroll and major payments** due in the next four weeks. 6. **Cash balance and lowest point** in the next 13 weeks. ## Forecasting collections by payer Different payers pay at different speeds. Build a simple collection curve for each main group: | Payer group | Paid within 30 days | 31–60 days | 61–90 days | Not collected | |---|---|---|---|---| | Commercial insurers | 55% | 30% | 8% | 7% | | Government programs | 60% | 30% | 5% | 5% | | Patient balances | 40% | 25% | 15% | 20% | Apply each curve to the charges you expect to bill, and your forecast shows realistic cash, not charges. Update the curves every quarter from your own reports, since payer behaviour changes more often than most practices expect. ## Days in accounts receivable Track days in accounts receivable (AR) monthly: **Days in AR = total receivables ÷ average daily charges** A rising figure means cash is arriving later. Also watch the share of receivables older than 90 days; old claims are much less likely to be paid, and often need a dedicated push to recover. ## Denials Denials delay cash and some are never recovered. Track denial rate and reasons monthly. The most common causes, such as eligibility, missing authorisation, coding errors and missing information, are largely preventable at the front desk and in coding. Resubmit corrected claims quickly. ## Patient collections Patient responsibility has grown with higher deductibles. Collect copays and known balances at the time of service, offer card on file with consent, send clear statements with online payment links, and agree payment plans for larger balances. A balance collected at the desk costs far less to collect than one billed later. ## Payroll timing Clinical and admin payroll is the largest cost and runs on fixed dates. In the weekly forecast, place each payroll on its date and check the balance the day before. If payroll and a slow claims week coincide, you’ll see it in advance. ## Adding a provider A new provider adds salary and costs from their first day, while their claims take weeks to pay and their schedule takes months to fill. Forecast: - salary, benefits and onboarding costs from the start date - a ramp-up in visits over three to six months - claims paid on your normal collection curves The gap between costs and collections in the first few months is the cash the practice needs to fund the hire. ## Front desk and check-out Many revenue cycle problems start at the front desk: incorrect insurance details, missing authorisations, uncollected copays. Train front-desk staff on eligibility checks and time-of-service collection, give them a simple script for discussing balances, and review their numbers monthly. Improvements here often have the fastest effect on cash. ## Annual and lumpy costs Malpractice insurance, licensing and registration, equipment leases and EHR contracts often have annual or quarterly payments. Put them in the months they’re due. ## Billing services If an external billing service handles claims, its fee is usually a percentage of collections. Forecast it as a percentage, and review their performance: days in AR, denial rate and collection rate should be reported to you monthly. ## A worked example A practice bills about $82,500 a month in insurance claims. Its forecast assumes insurers pay 5 percent in the month billed, 55 percent the next month and 30 percent the month after. A payer changes its prior-authorisation rules, and in two months denials rise from 6 to 14 percent of claims. Collections fall by about $6,600 a month, and days in AR rise from 42 to 51. The weekly denial report catches it in the second month. The front desk adds an authorisation check to scheduling, the billing team resubmits the backlog, and within six weeks denials are back to 7 percent. The forecast, updated with the backlog payments, shows the practice staying above its buffer throughout. ## Payer mix and contracts Your mix of payers shapes cash flow as much as your volume. A practice with a high share of slow-paying or low-reimbursing payers needs a larger buffer. Review payer contracts periodically, track reimbursement and payment speed by payer, and forecast any change in mix, such as a new contract or a payer leaving the area, before it happens. ## Warning signs - Days in AR rising month after month - Denial rate increasing - Claims backlog growing - Receivables over 90 days rising - Patient balances growing without collection at the desk - Payroll funded by the credit line - Collection curves never updated since the forecast was built - Coding or billing staff turnover followed by a drop in collections ## When cash gets tight 1. Clear the claims backlog and resubmit denials. 2. Chase high-value receivables by payer. 3. Strengthen time-of-service collections. 4. Review billing service performance. 5. Talk to your bank about a line of credit before payroll is at risk. ## Tools The premium [Medical Practice template](/templates/medical-practice-cash-flow-forecast-template) includes a Claims Lag tab that turns claims billed into cash received, a Billing Fees tab, scenarios for payer delays, and a dashboard. See also [how to forecast receivables](/guides/how-to-forecast-accounts-receivable-collections). ### Why do medical practices have cash flow problems? Because most revenue arrives weeks or months after care is delivered, through insurers and government programs, while payroll and rent are paid on fixed dates. ### What is days in accounts receivable? The average number of days between billing a claim and being paid. Many practices aim to keep it below about 40 to 50 days, depending on payer mix. ### How can a practice reduce claim denials? Verify eligibility before appointments, code accurately, submit claims promptly with complete documentation, and track denial reasons to fix root causes. ### How should patient balances be collected? Collect copays and known balances at check-in or check-out, keep a card on file with consent, and send clear statements with online payment. ### How much cash does a new provider need? Enough to cover their salary and costs for the two to three months before their claims begin to pay, plus a buffer.