Understanding Cashflow in an Aesthetic Clinic

Your clinic can be busy, profitable and still have cashflow problems.

It sounds strange, doesn’t it?

You might be seeing patients every day. Your diary might be full. Your clinic might be generating good revenue.

So why can there still be times when you look at your bank account and wonder:

“Where has all the money gone?”

This is where understanding cashflow becomes really important.

For aesthetic clinic owners, cashflow is not just about how much money the business makes.

It is about when money comes in, when money goes out, and whether you have enough available to cover everything when it is due.

1. What is cashflow?

Cashflow is simply the movement of money into and out of your business.

Money coming into your clinic could include:

• Patient payments

• Deposits

• Treatment packages

• Consultation fees

• Skincare and product sales

• Other clinic income

Money going out could include:

• Rent

• Staff wages

• Practitioner payments

• Stock

• Equipment

• Insurance

• Software

• Marketing

• Utilities

• Professional fees

• Tax and VAT where applicable

The important thing is that profit and cashflow are not the same thing.

You can make a profit on paper and still have very little cash available in your bank account.

That is why looking only at your profit and loss account does not always give you the full picture.

2. Cashflow vs profit

This is one of the most important differences for a clinic owner to understand.

Your profit and loss account tells you about your income and expenses over a particular period.

Cashflow looks at the actual movement of money.

For example, imagine you sell a treatment package for £2,000.

The sale may contribute to your accounting figures, but the timing of when that money is received and when the related costs are paid can affect your cash position.

Similarly, you might receive a large payment from a patient or customer one month, but then have several large bills due the following month.

Your business may still be profitable, but your available cash could be much lower.

This is why profitability and cash availability need to be looked at separately.

3. A busy clinic does not always mean healthy cashflow

Imagine your clinic has had a fantastic month.

You have taken £40,000 in bookings and treatments.

At first glance, that sounds great.

However, during the same month you have:

• Bought £8,000 of stock

• Paid £7,000 in wages

• Paid £5,000 to practitioners

• Paid £4,000 in rent and other overheads

• Purchased £10,000 of equipment

• Put money aside for tax

Suddenly, that £40,000 does not look quite as available as it did when you first saw the figure.

This is why clinic owners need to understand where the cash is going, rather than simply looking at the total income.

Revenue is important.

Although revenue sitting on a report does not automatically mean cash is available to spend.

4. Your bank balance is not your available profit

This is one of the biggest things business owners can overlook.

Seeing £30,000 in your business bank account does not necessarily mean you have £30,000 available to spend.

Some of that money may already have a job.

For example, you may need to keep money aside for:

• VAT

If your clinic is VAT registered, you need to account for VAT correctly and make payments to HMRC by the relevant deadlines.

The money in your bank account may therefore include amounts that need to be paid over to HMRC.

• Tax

Your business may be profitable, but the tax bill often comes later.

If you spend everything that is sitting in the bank account today, you could find yourself short when the tax payment becomes due.

• Upcoming bills

Rent, wages, supplier invoices and other regular costs still need to be paid, even if the clinic has a quieter month.

This is why I always encourage clinic owners to think beyond:

“How much is in my bank account?”

Instead, ask:

“How much of that money is actually available?”

5. Cashflow can change from month to month

Aesthetic clinics can experience changes in income throughout the year.

You might have a very strong month followed by a quieter one.

You might invest in a new treatment or piece of equipment.

You might increase your stock because you expect demand to grow.

You might take on another practitioner.

You might have a large marketing expense.

None of these things are necessarily a problem.

The problem comes when you make these decisions without understanding how they will affect your cashflow.

A clinic can afford an investment in the long term but still struggle with cash in the short term.

That difference is important.

6. Treatment packages and deposits

Treatment packages and deposits can also make cashflow more difficult to understand.

For example, a clinic may receive payment upfront for a package of treatments that will be delivered over several months.

The money has arrived in the bank, but the clinic may still have future costs associated with providing those treatments.

This is why it is important not to look at a large payment and assume that all of it is immediately available for other business spending.

The same applies to deposits.

Deposits can be useful for managing cancellations and protecting appointment time, but they need to be recorded and accounted for correctly.

Your accounting records should make it clear what the payment relates to and what obligations the clinic still has.

7. Stock can tie up your cash

Stock is another area aesthetic clinic owners need to keep an eye on.

It can be tempting to buy more products because you receive a better price when ordering in larger quantities.

Although if you have thousands of pounds sitting on a shelf and those products are not selling quickly, your cash is tied up in stock.

The question is not simply:

“Did I get a good deal?”

It is also:

“How quickly will this stock turn back into cash?”

Regularly reviewing what you have purchased, what is selling and what is sitting unused can help you make better purchasing decisions.

You may find that certain products move quickly while others sit in storage for months.

Understanding this can help you decide what to reorder and when.

8. Practitioner payments need planning too

Aesthetic clinics often work with different practitioners, and the way practitioners are paid can vary from clinic to clinic.

You may have employed practitioners, self-employed practitioners, contractors or different payment arrangements.

Whatever your structure, it is important to understand when those costs leave the business.

A clinic might have a very strong week of bookings but still have significant practitioner payments due shortly afterwards.

If you are looking at revenue without considering the related costs and payment timing, you can get a misleading picture of your available cash.

Your cashflow forecast should therefore include your expected practitioner and staffing costs.

9. Equipment can affect cashflow too

Investing in new equipment can be an exciting step for a clinic.

Maybe you are introducing a new treatment.

Maybe you want to increase your capacity.

Maybe you want to replace older equipment.

Before making the purchase, it is worth looking beyond the price tag.

Ask yourself:

• How much will the equipment cost?

• Are there finance or lease payments?

• Will there be maintenance costs?

• How quickly do I expect it to generate additional revenue?

• Can the clinic comfortably afford the payments?

• What will the purchase do to my cash reserves?

A purchase can make commercial sense and still need careful cashflow planning.

You do not want an exciting investment to create unnecessary pressure on the rest of your business.

10. Do you know what is coming out of your bank account?

One of the easiest ways to improve cashflow visibility is to understand your regular commitments.

Look at your monthly costs and separate them into categories.

• Fixed costs

These are costs that generally stay fairly consistent.

For example:

• Rent

• Salaries

• Software subscriptions

• Insurance

• Certain professional fees

• Variable costs

These can change depending on how much business you are doing.

For example:

• Stock

• Treatment supplies

• Payment processing fees

• Marketing

• Practitioner costs

Once you can see these clearly, it becomes much easier to understand your minimum monthly cash requirement.

11. Build a cashflow forecast

You do not need a complicated spreadsheet to start.

A simple cashflow forecast can be incredibly useful.

Start with the cash you expect to have available.

Then look at the money you expect to receive.

After that, list the payments you expect to make.

For example:

Month Expected Income Expected Outgoings Closing Cash

January £30,000 £24,000 £16,000

February £27,000 £25,000 £18,000

March £35,000 £29,000 £24,000

The numbers will be different for every clinic.

The point is not to predict everything perfectly.

It is to give you visibility.

If you can see that March is going to be a difficult month because you have a large tax payment, equipment purchase or other expense, you have time to prepare.

That is much better than discovering the problem when the payment is due.

12. Look ahead, not just backwards

Your accounts tell you what has already happened.

That information is important, but cashflow planning asks a different question:

What is likely to happen next?

This is particularly useful when your clinic is growing.

If you are planning to:

• Open another treatment room

• Employ someone new

• Move premises

• Buy equipment

• Increase marketing

• Expand your treatment menu

• Increase stock levels

look at the expected impact on your cash before making the decision.

You do not need to know exactly what will happen.

You simply need to have a reasonable view of the numbers and understand the possible pressure points.

13. Cashflow can help you make better business decisions

Good cashflow information can help you answer practical questions.

1. Can I afford to hire another member of staff?

2. Can I invest in new equipment?

3. Can I increase my marketing budget?

4. Can I take more money out of the business?

5. Can I afford to reduce my working hours?

6. Do I need to build a larger cash reserve?

These are business decisions, not just accounting decisions.

Your numbers can help you understand the financial side of those decisions.

14. What about tax and VAT?

Tax and VAT are particularly important when thinking about cashflow because the payment may happen at a different time from when the income was generated.

This is one reason why putting money aside regularly can make such a difference.

For VAT-registered businesses, keeping accurate VAT records and understanding upcoming VAT payments can help you avoid using money that will later need to be paid to HMRC.

The same principle applies to tax.

Instead of waiting until a payment is due and then trying to find the money, you can build tax planning into your regular cashflow review.

The exact tax and VAT position will depend on how your clinic operates, so it is worth getting advice based on your individual circumstances.

15. Common cashflow mistakes

There are a few mistakes I see businesses make repeatedly.

1. Looking only at the bank balance

The bank balance tells you what is there today.

It does not necessarily tell you what needs to be paid tomorrow.

2. Treating all income as available cash

A large payment coming into the bank can look exciting, but some of that money may already be committed to future costs, VAT, tax or treatment delivery.

3. Forgetting about irregular expenses

Some expenses do not arrive every month.

Insurance renewals, professional fees, equipment repairs and other larger costs can create unexpected pressure if they have not been considered.

4. Taking too much money out of the business

As a business owner, you naturally want to benefit from the business you have built.

However, withdrawals need to be considered alongside upcoming costs and tax obligations.

5. Only looking at cashflow when there is a problem

Cashflow should not be something you check only when the bank balance starts looking uncomfortable.

Regular reviews are much more useful.

16. A simple monthly cashflow check

You do not need to spend hours every week analysing your accounts.

A monthly review can be a good place to start.

Ask yourself:

1. How much cash do we have today?

2. What money is expected to come in over the next few weeks?

3. What payments are due?

4. What tax or VAT needs to be put aside?

5. Are we carrying too much stock?

6. Are there any large purchases coming up?

7. Are we taking too much money out of the business?

8. Is our cash position improving or getting tighter?

These simple questions can tell you a lot.

17. Cashflow is about being prepared

You do not need to avoid spending money.

You do not need to keep every penny sitting in the bank.

You certainly do not need to be afraid of investing in your clinic.

The goal is to understand what your cash is doing.

A growing clinic will naturally have money coming in and going out all the time.

The important part is making sure you can see what is happening before it becomes a problem.

Because a strong business is not just about generating revenue.

It is about knowing what you have, what you owe, what is coming next and what you can actually afford.

18. Your clinic numbers should help you feel in control

Cashflow can sometimes feel like one of those accounting terms that only your accountant needs to worry about.

It isn't.

As a clinic owner, understanding your cashflow can help you make more informed decisions about your business.

You should be able to look at your numbers and understand:

1. Where is the money coming from?

2. Where is it going?

3. What needs to be paid next?

4. What can the business realistically afford?

You do not have to become an accountant.

You just need the right information in a format that makes sense to you.

At Aesthetic Accounts, we work with aesthetic clinic owners to help them understand their numbers, plan ahead and make informed financial decisions.

If you would like to understand your clinic's cashflow and what your numbers are really telling you, get in touch for a conversation.

Book a meeting directly here:

https://calendly.com/hello-aestheticaccounts/15min

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