How do you know if you will have enough cash flow to service your needs when you buy a practice?

With respect to Cash Flow, it is wise to know what the Cash Flow is from Operations (CFO), how many days does it take for the Accounts Receivable to be collected and what percentage of the accounts are aged 0-30 days, 30-60 days and 60-90 days.

It may also be valuable for you to have your accountant do a Projected Income Statement (Profit and Loss Statement) and a Projected Cash Flow Statement, (Pro Forma), of the practiceyou're considering buying, before you commit to the purchase. Remember, though, that anything that is "projected" is subject to the accuracy of the information going into the analysis. Often it is somewhat biased therefore it is used to "guess" at best-case and worst-case scenarios.

In order to know whether you will have enough cash to run the practice and make a profit, you should "run" the numbers, taking into account that they may be biased to some degree.