Fall is decision season in physician practices. A senior partner starts talking about retirement. The practice considers adding an associate. Someone raises a second location. The clinical side of these decisions gets careful attention. The financial side often runs on a feeling.
That feeling usually comes from the bank balance. The bank balance is not a financial picture. It is a snapshot of one account on one day, and it was never designed to tell you whether you can afford a hire, a buy-in, or a buildout.
What can tell you is a current monthly close. Not year-end totals from last spring. A close for the month that just ended.
For anyone who has never watched one done monthly: A close means the accounts are reconciled, every transaction is categorized, receivables and payables land in the right month, and someone reviews the numbers before anyone relies on them. It sounds like housekeeping. It is closer to a readiness check. A practice that closes monthly knows its position while the month is still fresh enough to act on.
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I have spent my career in practice management and health care finance, and the pattern is consistent across the practices I work with: The owners who make commitments off a current close make them sooner, and with fewer surprises after. The owners working from stale books tend to do one of two things. They stall, because nothing feels certain. Or they jump, because the balance looked fine. Both are decisions made blind.
Here is what a current close actually tells you before each commitment.
Before you hire. Payroll is the easiest commitment to make and the hardest to unwind. A current close shows you what the practice actually carries month to month: fixed costs, variable costs, and what is left after owner compensation runs its real course. That last part matters. Many practices undercount what the owner takes out, so the margin looks healthier than it is. When the close is current, the hire question stops being “Can we swing it” and becomes “At what point does this role pay for itself,” which is a question you can actually answer.
Before you buy in. A buy-in price is a valuation of the future, and the future is built on the numbers as they stand. Receivables aging, payables timing, normalized owner compensation, one-time items hiding in revenue: All of it changes what a practice is worth. A current close surfaces these before the price is set, not after. I have watched owners negotiate hard on the multiple and never look at the books underneath it. The multiple is the smaller risk.
Before you expand. A second location multiplies everything: the cash timing, the staffing load, the months of ramp before the revenue follows. A current close tells you how much slack the existing practice really has, and how long the slack lasts if the new location runs slow. Expansion does not fail because owners lack ambition. It fails when the runway was guessed.
The questions to ask. Before any of these commitments, whoever keeps your books should be able to answer four questions without a two-week research project:
- What is the most recent month you would call fully closed, and what does “closed” mean in our books?
- What changed across the last three closes, and do we know why?
- Which numbers in this picture are estimates rather than facts?
- If we needed this current every month going forward, what would that take?
If those answers come slowly, that is information too. It usually means the books are maintained at tax time rather than monthly, which is exactly the state that makes fall decisions expensive.
A current close does not make the decision for you. It replaces the guess with a number you can stand on. The commitment is still yours. At least you will know what you are committing.
And the habit matters more than any single close. One clean month tells you where you stand. Twelve in a row tell you the direction, which is the thing every hire, buy-in, and expansion actually turns on.
Richard Perry is a health care finance professional.
