The Financial Blind Spots Sabotaging Growth for Healthcare Entrepreneurs

Last Updated: 

June 30, 2025

Discussing finances with healthcare is always a touchy subject.

On one hand, the cost of insurance and medical visits is untenable for many households. On the other hand, practitioners work eye-popping hours and spend the first decade of their career--or more--just trying to pay back med school debt.

As such, it would be remiss to overlook the delicate balance between providing a top-notch patient experience while ensuring financial solubility of the practice. Keep reading as we explore some of the most common financial blind spots that can stall growth for healthcare entrepreneurs.

Key Takeaways: Common Financial Pitfalls Medical Practices

  1. Cash vs accrual accounting clarity: Choose cash basis accounting for small practices to track real-time cash status, or accrual accounting for larger practices with significant accounts payable and receivable.
  2. Seamless accounting transitions: Plan carefully when switching from cash to accrual accounting as your practice grows, as failure to transition properly can create financial inaccuracies and serious tax implications.
  3. Strategic growth planning: Develop clear 1-year, 5-year, and 10-year plans with defined goals for patient load and business structure to prevent inadequate scaling that undermines success.
  4. Proactive financial management: Implement preventative financial planning rather than reactive approaches, as single billing errors or missed payments can create difficult-to-recover business situations.
  5. Investment in quality systems: Purchase the best billing software that recognises medical codes and alerts you to potential errors, reducing costly mistakes and improving cash flow management.
  6. Staff training priorities: Provide ongoing training for team members to ensure HIPAA compliance and financial best practices, protecting both patient data and practice revenue.
  7. Expert financial outsourcing: Consider outsourcing financial management to specialists who can forecast costs and revenues whilst maintaining real-time payment models and compliance.
  8. Cost-benefit analysis discipline: Conduct thorough cost-benefit analyses before purchasing expensive medical equipment, evaluating time savings, error reduction, and obsolescence risks against six-figure investments.
  9. Revenue lag management: Create 30-, 60-, and 90-day revenue buckets to account for insurance payment delays, providing clearer cash flow visibility for payroll and operational decisions.
  10. Complex revenue stream planning: Develop robust financial management systems that handle the variability of medical practice revenue streams, from direct payments to complex insurance reimbursements.
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Mix-Ups in Accounting Methods

There are two overarching methods of bookkeeping for doctors:

  • Cash basis accounting - involves recording income as it is received and expenses as they are paid. This is an IRS-approved accounting method for small medical practices. It can be preferable because it does a good job of providing a real-time snapshot of the business’s cash status.
  • Accrual accounting - recognises income as services are performed and expenses as they are incurred. Although more complex than cash basis accounting, it is better for large businesses that have significant accounts payable and receivable. It is a better option for viewing the long-term financial health of expansive healthcare organisations.

As medical practices grow, it may be necessary to switch from cash basis accounting to accrual accounting. Failure to seamlessly transition can result in myriad issues. Not only will it provide an inaccurate picture of where the business stands financially, but it can also have serious tax implications, especially for those handling Tax Preparation, where compliance and accuracy are critical.

Failure to Account for Growth

Financial chart with businessman

It is a bit ironic.

One of the most significant threats to growth is growth itself.

Any time a practice gets too big too fast, the chances for ongoing success are severely undermined. This is known as inadequate scaling. 

As such, it is crucial to plan for growth and incorporate it seamlessly into the business model. What are the goals of the practice? What is the ideal patient load? What is the business structure? 

By having a clear answer to all of these questions and using them to drive 1-year, 5-year, and 10-year plans, the business can stay ahead of office expansions, equipment investments, and staff additions as they become necessary.

Reactive Planning

Healthcare providers are not shy about preaching proactive health to their patients. Proper diet/exercise, reduced stress, and routine check-ups are far preferable to letting a condition develop and trying to treat the symptoms. 

The same logic should apply to a practice’s financial planning. 

A single billing error, missed payment, or poor patient experience can leave the business in a difficult hole, if not impossible, to emerge from. 

As the age-old entrepreneurial logic goes: “It costs a lot less to keep a customer (patient) than to win over a new one.”

With this in mind, it is crucial to plan for and stay ahead of these types of issues. Invest in the best software that recognises billing codes and can alert you to potential errors. Offer ongoing training for team members to ensure the utmost HIPAA and financial best practices. Outsource financial management so that experts can forecast costs/revenues and integrate real-time models to keep all payments on time.

Lack of Cost Analysis

Healthcare professional with credit card

Who doesn’t love medical salespeople? They are just relentless in their claims that they have the perfect machine/technology/drug that will solve all of your business problems.

Many of these products are wonderful. They theoretically will make life easier for your practice. Or it may simply be tempting to just say “yes” to get the salespeople off your back.

Unfortunately, this is just a shot in the dark without the proper cost/benefit analysis. Many medical devices run in the six figures or more. How much time will the new device save? Will it reduce errors? How much better is it than existing systems? Is it at risk of becoming obsolete too quickly?

Answering each of these questions and assigning accurate monetary figures to them can help you make the most informed decisions on which purchases to make for your business and which to forego.

Overlooking Revenue Lags

There are few types of businesses that can match medical practices in terms of variability and complexity of revenue streams. There are the traditional cash, check, and credit card payments. However, any time insurance is involved, an additional layer of complexity is added. It can take weeks, if not months, for services to be approved and payments disbursed. Without the appropriate financial management strategies for hospitals and healthcare organisations, businesses can put the cart before the horse and start earmarking money before it actually comes in.

Therefore, the best financial management systems for healthcare businesses will create 30-, 60-, and 90-day buckets for revenue, helping providers get a clearer picture of the cash on hand at any given moment in time. This can do wonders for payroll management, scheduling staff, and keeping big-ticket purchases on time for efficient financial operations within the practice. 

Avoid Common Financial Pitfalls and Watch Your Medical Practice Grow

Without the proper financial infrastructure, it will be impossible for healthcare practices to offer the best service possible. From accounting mix-ups to inadequate planning for revenue lags, avoid the blind spots listed above to promote the growth of your healthcare business. For more of the latest trends in business and entrepreneurship, explore the content at Robin Waite for additional thought-provoking reads!

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