You’ve just reviewed your year-end accounts. Your dental practice made a healthy profit. Your accountant congratulates you on a successful year. Yet here you are, two months later, staring at your bank balance and wondering how you’ll make payroll next week.
If this sounds familiar, you’re not alone. Dental practice cash flow problems are the silent killer of dentists across the UK. Your profit and loss statement might look brilliant, but profitability and cash flow are two very different things—and it’s cash flow that keeps your doors open.
Why Profitable Practices Run Out Of Cash
The harsh truth is that profit is an accounting concept. Cash flow is reality.
Your accounts might show £150,000 profit, but that number includes money patients haven’t paid yet, doesn’t account for the timing of when bills are due, and ignores the fact that you need actual money in the bank to pay your team, your suppliers, and HMRC.
Many dentists discover too late that you can be profitable and insolvent at exactly the same time. The difference often comes down to three critical factors: when money comes in, when money goes out, and whether anyone’s actually watching the gap between the two.
The NHS Payment Timing Challenge
NHS practices face unique cash flow complexities that purely private practices don’t experience, despite receiving monthly payments.
To smooth cash flow, dental practices receive equal monthly payments based on contract values. While this monthly payment structure helps with predictability, it creates a different set of challenges for dental practice finances.
The fundamental issue is that you’re being paid a fixed monthly amount based on your annual contracted UDA target, but your actual delivery and costs fluctuate throughout the year. You might deliver 120% of your target UDAs in busy months and only 80% in quieter periods, yet your monthly NHS income remains constant.
This disparity between work completed and payment received means you’re essentially pre-funding periods of high activity from previous months’ income, then facing potential clawbacks at year-end if overall delivery falls short. Integrated Care Boards (ICBs)—the organisations responsible for commissioning NHS dental services in your area—have access to systems for monitoring activity and expenditure, and under-delivery can result in financial penalties that significantly impact your cash position.
The challenge intensifies when major expenses cluster together. Your monthly NHS payment might be £25,000, but if you have corporation tax due (£18,000), equipment repairs (£8,000), and annual insurance premiums (£5,000) all hitting in the same month, you’re suddenly £6,000 short—despite being “profitable” on paper.
Mixed Practice Payment Chaos
Mixed practices (NHS and private) face added complexity. You’re managing:
- Fixed monthly NHS contract payments regardless of actual UDA delivery
- Variable private patient collections that depend on treatment mix
- Delayed insurance reimbursements with unpredictable timing
- Patient payment plans spreading income over months
- Direct debit collections that can fail without warning
This means dental practice cash flow patterns change week to week. One month you might have strong cash flow from several private crown cases completing, the next month you’re relying entirely on your fixed NHS payment whilst major bills are due. Without proper forecasting systems, you’re constantly reacting to surprises rather than planning ahead.
The monthly NHS payment structure helps prevent the extreme peaks and troughs of purely private practice, but it doesn’t eliminate cash flow challenges—it just changes their nature. You need different management strategies to handle the mismatch between fixed income and variable costs.
The Hidden Costs Nobody Warned You About
Cash flow problems often stem from expenses that don’t appear in your monthly operating budget but hit your bank account with alarming regularity.
Corporation tax and VAT payments create massive cash outflows that many practices fail to plan for. You might owe £30,000 in corporation tax based on last year’s profits, but that money needs to come from this year’s cash flow. If you haven’t set it aside monthly, you’re suddenly facing a bill that can cripple your working capital.
Equipment purchases and repairs rarely happen when it’s convenient. Your autoclave doesn’t wait until you’ve had a good month before breaking down. When you need to replace a £12,000 piece of equipment immediately, that money has to come from somewhere—and if it comes from your operating cash, you’ve just created next month’s problem.
Associate and staff costs are your largest expense, typically running at 50% of revenue. But these costs are relatively fixed whilst your income can fluctuate. A week of cancellations due to bad weather doesn’t reduce your wage bill, but it definitely reduces your income. Without a cash buffer, you’re immediately in trouble.
Why Your Bookkeeper Isn’t Solving This
Here’s an uncomfortable truth: most practice bookkeepers are historians, not forecasters.
They’re excellent at recording what happened last month. They’ll tell you what you spent on lab fees, what your debtors balance is, and whether you made a profit. This information is essential for compliance and tax purposes, but it’s backwards-looking.
What you actually need to manage dental practice cash flow is forward-looking information. You need to know that in six weeks, you have three major bills due in the same week. You need to see that your debtors are creeping up and that £18,000 of outstanding private patient invoices is turning into bad debt.
Traditional bookkeeping rarely provides this visibility. You discover problems when they’ve already happened, not early enough to prevent them.
Many dental practice owners struggle on alone, trying to make sense of their numbers whilst juggling patient care and team management. But there’s a better way. Our Virtual Finance Office services provide the forward-looking financial management that traditional year-end accounting simply can’t deliver—giving you real-time visibility over your practice finances without the cost of employing a full-time finance director.
Ready to stop the monthly payroll panic? Book a free dental practice financial health check and discover how proper cash flow forecasting could transform your practice management.
Four Ways to Get Control of your Dental Practice Cash Flow and Finances
The 13-Week Cash Flow Forecast That Changes Everything
The single most valuable tool for preventing cash flow crises is a rolling 13-week cash flow forecast.
This isn’t a complicated spreadsheet requiring a finance degree to understand. It’s a simple, clear view of when money is coming in and when money is going out, broken down by payment source—NHS monthly payments, private patient collections, insurance reimbursements—matched against your major expenses.
A proper forecast shows you:
- When NHS payments will hit your account and how they compare to actual delivery
- Which weeks have major bill clusters (rent, wages, tax, lab fees all due together)
- How much cash you need in reserve to cover the gaps
- Early warning of potential shortfalls whilst you still have time to act
The beauty of a 13-week forecast is that it’s actionable. Thirteen weeks is far enough ahead to make real changes—delay that equipment purchase, arrange payment terms with suppliers, chase outstanding invoices more aggressively—but not so far out that the projections become meaningless.
Practices using 13-week forecasts report 95%+ accuracy in predicting their cash position. Those relying on gut feel or looking at their bank balance typically discover problems when it’s too late to fix them without expensive emergency measures.
Debtor Management: The Money Already Yours
One of the fastest ways to improve cash flow is by collecting money you’ve already earned.
Many practices have £20,000-£50,000 sitting in aged debtors—money owed by patients and insurance companies for work completed months ago. This is your money. You’ve done the work, paid for the lab fees, invested the time. Yet it’s sitting in someone else’s bank account instead of yours.
The solution is building systematic processes: automated payment reminders, direct debit collection for payment plans, clear payment expectations before treatment, and dedicated time each week to follow up on overdue accounts.
Private practices should aim for debtor days under 30. If yours are consistently above 45 days, you’re essentially providing free financing to your patients whilst struggling to pay your own bills. That makes no sense.
Insurance reimbursements require particular attention. Claims sitting unpaid for 60+ days need active management—phone calls, written appeals, and understanding why claims are being rejected. Dental practices that simply submit claims and hope for the best often have significant cash trapped in the insurance system.
Building Your Cash Reserve (Even When Money’s Tight)
Financial experts recommend dental practices maintain a cash reserve covering 2-3 months of operating expenses. For most practices, that’s £40,000-£100,000.
If you’re struggling with cash flow, that figure probably seems impossible. The key is starting small and being systematic.
Begin by setting aside a fixed percentage of revenue—even just 2-3%—into a separate reserve account that you don’t touch for operating expenses. As your cash flow stabilises using the other strategies in this guide, increase that percentage gradually.
Think of your cash reserve as insurance. You hope you never need it, but when your autoclave dies on a Friday afternoon or HMRC sends an unexpected bill, having that buffer means you handle it without crisis.
The practices that weather economic downturns, equipment failures, and unexpected expenses aren’t necessarily the most profitable ones. They’re the ones with cash reserves and proper cash flow management.
Technology That Actually Helps
Modern cloud-based accounting software can transform cash flow management from a monthly panic into a daily routine you control.
The best systems integrate with your practice management software, automatically tracking income and expenses in real-time. You can see your cash position updated daily, run reports showing aged debtors instantly, and forecast future cash flow based on scheduled treatments.
Working with your accountant becomes collaborative rather than reactive. When your accountant can see the same real-time data you’re seeing, they can provide proactive advice—”Your debtors are climbing, let’s address this before it becomes a problem”—rather than discovering issues six months later during your year-end review.
The key is choosing software designed for your needs and implementing it properly with expert support. Generic accounting software without dental-specific setup rarely delivers the insights you need. Our team has extensive experience with cloud accounting implementation for dental practices, ensuring your systems work together seamlessly to give you the management accounts and reporting you need.
When To Get Professional Help
If you’re experiencing any of these warning signs, it’s time to speak with a specialist who understands dental practice finances:
- You’re regularly surprised by tax bills or major expenses
- Your bank balance doesn’t reflect your reported profitability
- You’re using overdrafts or credit cards to cover routine operating expenses
- You can’t explain where your money goes each month
- Staff or suppliers are waiting for payment
- You’re making financial decisions based on your bank balance rather than actual data
Specialist accountants for dentists can provide support with all these issues. You can also contact the British Dental Association for industry-specific context and support for dental practice cash flow challenges.
The good news is that cash flow problems are almost always fixable with the right systems and support. Unlike structural profitability issues, cash flow challenges typically respond quickly to proper management—often within 60-90 days.
Taking Control Of Your Dental Practice Finances
Cash flow management isn’t about being good with numbers. It’s about having the right systems, accurate information, and expert support when you need it.
At AssureTax, we specialise in helping dental practices move from reactive crisis management to proactive financial control. Our Virtual Finance Office services provide the forward-looking financial management that traditional year-end accounting simply can’t deliver.
We’d be happy to review your dental practice cash flow situation in a no-obligation consultation. Many practice owners are surprised to discover that fixing cash flow issues is more straightforward than they imagined.
Your practice deserves better than monthly panic about payroll. With proper systems and support, you can focus on providing excellent patient care whilst knowing your finances are under control.
Book a free dental practice cash flow assessment to discuss how we can help stabilise and strengthen your practice finances.
About The Author
Jayen Patel FCCA is the founder and Managing Director of AssureTax Accountants, based in Croydon, South London where he specialises in providing tailored accounting and tax solutions for small businesses, including dental practices. With a passion for helping business owners achieve financial clarity and growth, Jayen combines technical expertise with a client-focused approach to deliver Virtual Finance Office services that go beyond traditional year-end accounting.
Frequently Asked Questions
Why do I have profit but no cash in my dental practice?
Profit is an accounting measure that includes money owed to you (debtors) and doesn’t account for payment timing. Cash flow is actual money in your bank. Your practice can show £100,000 profit whilst having negative cash flow if patients haven’t paid, you have large tax bills due, or major expenses hit before income arrives. NHS practices face particular challenges with the mismatch between fixed monthly payments and variable costs that creates cash gaps even when profitable.
How much cash reserve should a dental practice have?
Dental practices should maintain a cash reserve covering 2-3 months of operating expenses—typically £40,000-£100,000 depending on practice size. This buffer helps you manage the timing gap between income and expenses, handle unexpected costs like equipment repairs, and avoid expensive emergency borrowing when cash flow tightens.
How do I manage my dental practice cash flow with NHS monthly payments?
Create a 13-week rolling cash flow forecast showing exactly when your fixed NHS monthly payments arrive and when major expenses are due. Set aside money weekly for irregular quarterly costs (tax, equipment, repairs) rather than scrambling when bills arrive. Many practices maintain a separate account for managing the mismatch between steady NHS income and variable operational costs.
What is a 13 week cash flow forecast for dentists?
A 13-week dental practice cash flow forecast is a forward-looking document showing predicted income and expenses week-by-week for the next three months. It includes NHS monthly payments, expected private patient collections, insurance reimbursements, staff wages, supplier payments, and tax obligations. This visibility lets you spot potential shortfalls weeks in advance and take action before problems occur.
Why is my dental practice always short of money?
Common causes include: poor debtor management (patients/insurers not paying promptly), not planning for quarterly tax bills and major expenses, inefficient collections processes, no cash flow forecasting, treating your bank balance as profit, and the timing gap between providing treatment and receiving payment. Traditional bookkeeping shows what happened historically, but doesn’t predict or prevent cash shortages.
How do I improve dental practice cash flow quickly?
Start with debtor management—collect money already owed to you through systematic follow-up, direct debits for payment plans, and clear payment expectations before treatment. Implement a 13-week cash flow forecast to spot problems early. Set aside money weekly for upcoming taxes and major expenses. Review supplier payment terms and negotiate where possible. Many practices improve cash flow by 30-40% within 60 days simply by implementing proper collections processes.
Do I need a specialist accountant for my dental practice finances?
While any qualified accountant can file your tax returns, managing dental practice cash flow requires understanding NHS payment cycles, UDA delivery patterns, mixed practice challenges, and sector-specific cash flow issues. Specialist dental accountants provide proactive cash flow forecasting, real-time financial visibility, and strategic advice that traditional year-end accounting doesn’t deliver—preventing crises rather than recording them after they’ve happened.
