Five Tips for Building a Cash Reserve in Your Mental Health Practice

Maintaining a cash reserve is essential for the sustainability of your mental health practice, especially during unexpected income fluctuations such as the recent United Healthcare data breach which shutdown the processing of insurance reimbursements for many practitioners. Here are some practical strategies to build up a cash reserve and protect your practice during uncertain times.

1. Set Clear Savings Goals

Start by determining how much you need in your cash reserve. A good rule of thumb is to save enough to cover at least three months’ worth of operating expenses. Break this goal down into smaller, manageable monthly targets. For example, if your monthly operating expenses are $10,000, aim to save $3,000 each month until you reach your reserve goal. Remember, this is a long-term goal to build up enough reserves, don’t stress if you’re not able to get there overnight.

2. Automate Your Savings

Consider setting up automatic transfers to your savings account. Designate a specific percentage of your monthly income to be automatically transferred to your cash reserve. This ensures consistent savings without needing to think about it every month. There are many online banks that allow you to open as many additional bank accounts as you’d like. Consider opening a separate savings account (a high interest savings account is even better) to use as your cash reserve account. Another option is to open that savings account at a completely different bank than your regular checking account – that way it will be out of sight and you’ll be less likely to be tempted to dip into it on a regular basis.

3. Prioritize High-Impact Expenses

Identify and prioritize expenses that have the most significant impact on your practice. For example, rent, utilities, and payroll should take precedence over non-essential costs. Review your budget regularly to ensure that your spending aligns with your priorities. Work on building up cash reserves to cover just the essential expenses, before expanding beyond that.

4. Offer Prepaid Packages and/or Diversify Income Streams

For cash-basis practices, encourage clients to purchase prepaid packages of sessions at a discounted rate. This not only provides immediate cash flow but also ensures client commitment and future income. For example, offer a package of 10 sessions at a 10% discount, payable upfront. Another useful tip is consider diversifying your income streams. Instead of just offering therapy sessions, consider branching out to offer workshops, online courses and perhaps subletting office space. Put the income from these additional income streams straight to your cash reserve fund.

5. Review and Adjust Your Fees

Periodically review your fee structure to ensure it reflects the value of your services and market rates. If necessary, adjust your fees to better align with your costs and financial goals. Communicate any changes transparently with your clients, emphasizing the value they receive. This is important not only for cash basis practices, but also those that accept insurance. Review your insurance records to make sure you’re billing at the maximum reimbursement amounts.


Building a cash flow reserve is essential for protecting your mental health practice during income fluctuations. By setting clear savings goals, automating your savings, prioritizing high-impact expenses, offering prepaid packages, and reviewing your fees, you can create a financial cushion that ensures stability and resilience.

For more tips and detailed guidance on managing your practice’s finances, including tax planning services, feel free to book an appointment with us here to discuss one of our tax subscription packages!

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