How much money should we take out of the practice?

Practice manager checking accounts

Of all the questions that medical accountants are asked, the issue of drawings is by far the most common. That’s perhaps not surprising, as it can be difficult to get the balance just right.

If your drawings are set too high, you risk running out of cash and being unable to pay the bills, or lurching from one crisis to the next. Cashflow problems can bring down even the most profitable practice which is why accountants often use the saying, ‘cash is king’.

However if your drawings are too low, then cash is lying idle in the practice when it could be put to better use elsewhere – such as paying off your practice loan or your mortgage or invested in something that will provide better returns.

So how do you set the right level? The key is having access to good financial information on which to base a decision – including charts showing your income, outgoings and cash in the bank throughout the previous 12 months or longer. This is where modern accounting software really comes into its own as it makes it easy to access the right figures.

Of course you can ask your accountant to advise you on the right level of drawings for your practice, but those using paper-based accounting systems will typically have to wait until year end when they hand over their books and bank statements.

Online accounting software means that we can access the information online and give you an opinion at any time, or review the situation regularly. It also allows you to set up custom reports and monitor your cashflow on a daily basis if necessary from your mobile phone, to ensure that your bank balance is not running dangerously low.

Hall Liddy is now offering clients hands-on support to move to the new cloud-based Xero system, which is one of the most advanced systems of its type. To find out more, call Andy Pow or Lee Simmonett on 0161 832 7571 or email or

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