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Mastering Cash Flow Forecasting for Critical Access Hospitals: Strategies and Tools for Success

January 2, 2023    •    6 min read
Hospital Cash Flow Forecasting

As a Critical Access Hospital (CAH) CFO, you know that cash flow forecasting predicts how much money you’ll have at any given time. It’s important because it helps you make better decisions about how much money to spend on things like inventory and payroll, or whether to take out a loan. In this article, we’ll give you an overview of cash flow forecasting and explain why it’s so crucial for any CAH CFO to understand how their hospital’s cash flows work.

Preventing Cash Shortfalls

Cash flow forecasting is a critical tool for any CAH CFO. It helps you to plan for the future and avoid cash shortfalls. How? By giving you insight into how much money will be coming in and how much will be going out over the next few months. The importance of thoughtful forecasting cannot be overstated. You must know what your hospital needs to do to stay afloat financially. The earlier that information is available, the better equipped you’ll be to make decisions based on it (e.g., whether or not hiring another healthcare provider would help your bottom line).

Identifying Opportunities for Growth

Cash flow forecasting is a great tool to help identify opportunities for growth in your CAH. The more frequently you can forecast, the better you’ll understand your hospital’s cash flow trends and make informed decisions about how much money needs to be allocated toward each area of your hospital.

For example, let’s say that in one month, your hospital’s volume was higher than expected and has resulted in excess supplies. Leaders must manage the re-order points and use the supplies before they expire or become outdated. If this happens once every few months, then it may not be worth spending time on an additional forecast until those conditions arise again; however, if this happens every quarter or even monthly (or even more frequently), then it might be worth investing some time into developing a more robust forecasting model so that these opportunities don’t slip through the cracks!

Improving Decision-Making

In a CAH, having a clear view of what’s happening in your hospital is important. Cash flow forecasting helps you by providing information on how much cash you’ll have at any given time, so you can make better decisions about how to use it. Cash flow forecasting is also used as part of scenario planning–a tool for imagining different outcomes and planning for them before they happen. If one scenario comes true, then the results of your plan will be ready; if another does, then the second version will be ready instead. This kind of preparation helps ensure that no matter what happens in the future, your hospital can still function smoothly and succeed financially.

Common Challenges of Cash Flow Forecasting

While cash flow forecasting is a critical tool for CAH CFOs, it can be challenging. Several common challenges can make forecasting difficult or even impossible.

Common Challenges of Cash Flow Forecasting:

Data accuracy: The data you use in your forecasts should be as accurate as possible. If you’re using estimates instead of actual numbers, your forecasts will be off-base and cause problems down the road when they don’t match reality.

Forecasting accuracy: Your forecast should be made using historical data from similar periods to get an accurate picture of what might happen in future months/quarters/years based on past performance trends (or lack thereof). This will help ensure that any changes made during the course of planning are manageable and realistic–and thus more likely fail due to lack of preparation!

The Benefits of Monthly Cash Flow Forecasting

If you still need to start doing monthly cash flow forecasting, it’s time to start. Your CAH will gain many benefits from this practice:

  • Improved accuracy and greater control over cash flow management
  • The ability to understand the trends in your hospital’s cash flow over time

The first benefit is obvious–you’ll be able to make better decisions about how much money is coming in, and when it will arrive. This will help you avoid surprises that could hurt your hospital’s bottom line. For example, if there’s an unexpected delay in payment from one of your payors, having accurate information on hand can help ensure that no one gets left out in the cold (or even worse).

How to Create a Weekly Cash Flow Forecasting Process

Gather the Data

The first step in creating a weekly cash flow forecasting process is to gather all of the information you’ll need. This means gathering historical data, which can be done using your accounting software or by pulling reports from your bank. You’ll also want to make sure that you have current figures for things like patient volume and inventory levels, so that you can use them when projecting future costs and revenues.

Create Projections Based on This Information

Once you have all of this information at hand, it’s time to create projections based on what has happened in the past and what may happen in the future based on those trends (or lack thereof). For example: if patient volume is down over time but it’s always been seasonal, then there’s no reason why it wouldn’t continue being seasonal–so we would project lower patient volume numbers than usual during our slow season.

Analyze Results After Each Week

After creating your weekly cash flow projections, you’ll want to analyze the results at the end of each week. This will help you determine if your projections were accurate and identify any areas where adjustments may need to be made.

You should compare your actual cash flow data to your projected data during your analysis. Look for any significant variances and try to determine the cause. For example, if you projected higher revenue from a particular service line, but the actual payment is lower than expected, you may need to investigate further to understand why.

Once you have identified any variances, you can use that information to adjust your projections for the following week. This will help you make more accurate projections going forward and give you greater control over your hospital’s cash flow.

It’s important to note that cash flow forecasting is an ongoing process. It’s not something that you do once and forget about. By regularly analyzing your results and adjusting your projections, you’ll be able to stay on top of your hospital’s cash flow and make informed decisions about allocating resources.


In conclusion, cash flow forecasting is crucial for any Critical Access Hospital CFO. It allows you to plan for the future, prevent cash shortfalls, identify growth opportunities, and make better resource allocation decisions. While it can be challenging to create accurate projections, the benefits are well worth the effort.

By implementing a weekly cash flow forecasting process, regularly analyzing your results, and using the right tools, you can gain greater control over your hospital’s cash flow and ensure its continued success. So, take the time to develop a robust forecasting strategy and watch as your hospital thrives in the years to come.

Gregory Brickner

Results Fanatic®


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