Days of Cash on Hand: The Number That Determines How Much Stress You Carry
If I had to name the single biggest problem I see in small businesses — including physical therapy, occupational therapy, chiropractic, and acupuncture practices — it's not pricing. It's not marketing. It's not even profitability, technically.
It's cash flow.
A profitable practice with poor cash flow still feels like it's failing. You're checking the bank balance before running payroll. You're stressed every time a slow week hits. You're making decisions out of fear instead of strategy. And most of the time, the fix isn't "make more money" — it's building a cash cushion so a slow week stops being a crisis.
That cushion has a name: days of cash on hand.
What Is "Days of Cash on Hand," Exactly?
Days of cash on hand answers one question: if no more money came through the door today, how many days could your practice keep operating and paying its bills?
That means covering:
Rent
Payroll (including your own compensation as the owner)
Payroll taxes and benefits
Software, EMR, and billing systems
Supplies
Loan payments
Every other recurring operating cost
It does not assume you stop treating patients or shut your doors. It assumes revenue simply stops coming in — no new claims paid, no new patients booked, nothing collected — and asks how long you could keep the lights on and everyone paid before you'd run out of cash.
How to Calculate It
Here's the formula I recommend:
Days of Cash on Hand = Cash on Hand ÷ (Trailing 3-Month Average Total Expenses ÷ 90)
Why trailing 3 months instead of just last month? Because a single month can be misleading — maybe you had a slow month, or an unusually expensive one with an equipment purchase. Averaging your last three months of actual expenses smooths that out and gives you a realistic daily burn rate. You can always do more — 6, 9 or even 12 months.
Important: include your own owner compensation in that expense number. A lot of practice owners calculate this and quietly leave their own pay out of the equation — either because they think of it as "not a real bill" or because they're used to being the one who goes without when things get tight. But if you're not getting paid, your household is feeling that cash crunch too. A true cash reserve number has to reflect what it actually costs to keep both your practice and your life running. Otherwise you're not measuring resilience — you're measuring how long you can afford to not pay yourself, which isn't the same thing.
Quick example
Say your trailing 3-month average total expenses (including your own pay) are $45,000/month.
Daily burn rate: $45,000 × 3 ÷ 90 = $1,500/day
If you have $60,000 in cash reserves: $60,000 ÷ $1,500 = 40 days of cash on hand
That's a real, usable number — not a vague sense of "we're probably fine."
What's a Good Number to Aim For?
| Days of Cash on Hand | What It Means | What to Do |
|---|---|---|
| Under 30 days | High risk. One slow month or delayed payment could put you in a real bind. | Prioritize building reserves — pause discretionary spending, tighten collections. |
| 30–60 days | Healthy baseline — the recommended minimum cushion. | Maintain this range as your safety net for normal dips. |
| 60–90 days | Strong position with real breathing room. | Good spot — consider whether extra cash should start working harder. |
| 90+ days | Excess reserves beyond what's needed for safety. | Move the excess into a high-yield savings or money market account. |
My general recommendation: keep 30–60 days of operating expenses in reserve as your baseline. That's enough to absorb normal fluctuations — a slow month, a delayed insurance reimbursement, a seasonal dip — without panic. Once you're consistently sitting above 90 days, it's worth having a conversation about what that extra cash could be doing for you instead of sitting in a checking account earning next to nothing.
Use the calculator below to see how many days of cash your business has on hand.
Days of Cash on Hand Calculator
Find out how many days your practice could operate with zero incoming revenue.
Why This Number Matters More Than People Think
Cash flow problems don't just hurt the business — they bleed into everything else. Owners with thin cash reserves tend to:
Delay hiring even when the practice genuinely needs help
Avoid necessary investments in equipment, marketing, or systems
Feel constant low-grade anxiety about the bank balance
Make reactive, fear-based decisions instead of proactive, strategic ones
Struggle to sleep at night, honestly
A healthy cash reserve doesn't just protect your business financially — it gives you the mental space to actually run it like an owner instead of constantly putting out fires. That's the real value of this number. It's not just an accounting exercise. It's the difference between a practice that reacts and a practice that plans.
Know Your Number
If you've never calculated your days of cash on hand, that's the first step — before you think about hiring, expanding, or making any big financial decision. It's one of the simplest numbers to calculate, and one of the most revealing about the actual health of your practice.
I'm putting together a free, simple calculator to make this even easier — plug in your numbers and get your days of cash on hand instantly. Keep an eye out for that soon.
In the meantime, pull your last three months of expenses (owner pay included) and do the math above. You might be more prepared than you think — or you might have just found your next financial priority.
Not sure where your practice stands, or want help building a cash reserve strategy that actually fits your numbers? This is exactly the kind of work I do with PT, OT, chiropractic, and acupuncture practice owners — reach out and let's take a look together.
