Understanding Cash Flow in a Dental Practice: Why Profit ≠ Money in the Bank

Many dental practice owners are running profitable dental practices — yet their bank account feels uncomfortably low. The reason? Profit and cash flow are not the same thing.

Profit vs. Cash Flow — The Key Difference

Profit is what’s left after subtracting all expenses from your income, on paper, for a given period.
Cash flow is the movement of actual money in and out of your bank account.

A practice can be profitable on paper but still experience cash shortages if the timing of money coming in doesn’t align with money going ou

Tangible Examples

1. Delayed Payments

NHS payments can be delayed or perhaps an over delivery of performance is reconciled months later. Meanwhile the practice has fronted the cost for the service delivery.

2. Large, Irregular Expenses

Annual indemnity fees, equipment purchases, or unexpected repairs can create sudden dips in cash even if the practice is profitable overall.

If you suddenly need a new xray or autoclave, it will cost you £2500-£5000. These are not insignificant sums of money.

3. Stock and Lab Costs

If you’ve paid for stock or lab work upfront for treatments not yet delivered or collected payment for, your cash flow takes a hit.

4. Loan Repayments

Loan repayments (capital and interest) affect your bank balance but don’t reduce profit in the same way.

How to Stay on Top of Cash Flow

1. Monitor It Weekly

Don’t wait for month-end reports — review your cash position every week so you can spot potential issues early.

2. Forecast Ahead

Look at the next 3–6 months of expected income and expenses. This is especially important for quieter seasonal periods.

3. Build a Buffer

Aim to keep at least 1–2 months’ worth of operating expenses in reserve for peace of mind.

4. Tighten Credit Control

Chase overdue payments promptly and have clear payment terms for all patients.

5. Negotiate Better Payment Terms

See if you can negotiate NET30, NET45 or NET60 with lab providers and suppliers. You don’ ask you don’t get.

The Takeaway

Profit shows whether your practice is viable. Cash flow shows whether it can survive. Managing both together is the key to staying financially healthy — and sleeping well at night.

Action Step:
This week, review your cash inflows and outflows for the past month and see if there’s a mismatch. If there is, make a plan to close the gap before it causes problems.