Financial Basics

If you’re new to managing the financial side of a behavioral health practice, you’re not alone. Most providers enter the field to serve others—not to become financial experts. This guide is designed to help you understand a few key financial concepts so you can feel more confident and reduce the stress that often comes with managing finances.

‍

Download PDF

💡 What You’ll Learn

  • The difference between revenue and profit (yes, even nonprofits need margin!)
  • Why cash flow is just as important as income
  • How your P&L can guide day-to-day decisions
  • The role of billable hours in financial health
  • Why planning ahead helps reduce stress and increase impact

1. Revenue vs. Profit (Margin)

  • Revenue is the total money your organization earns from services.
  • Profit—or margin—is what’s left after paying expenses.

Why is this important? Without positive margins, you can’t reinvest in your team, your space, or your future. Margin allows you to grow, adapt, and sustain your mission—especially during lean times.

2. Cash Flow

  • Cash flow is the timing of money coming in and going out.
  • Cash reserves are funds set aside to cover expenses during slow periods or for times with delayed payments. A common goal is to maintain 3-6 months of operating expenses in reserves

‍Why is this important? You can be profitable on paper but still run into trouble if payments are delayed. Healthy cash flow and reserves ensures you can make payroll, cover rent, and keep your focus on clients—not finances.

3. Profit & Loss (P&L) Statement

  • This report summarizes your revenue, expenses, and net income.
  • Reviewing your P&L regularly helps you understand where your money is going and where you can adjust.

‍Why is this important? Your P&L helps you make decisions based on data—not gut feeling. It shows where you're spending too much, what programs are financially sustainable, and where you might need to shift strategy.

4. Billable Hours

  • These are the hours of service delivery that can be billed to Medicaid or other payers.
  • Tracking them helps you understand staff productivity and revenue potential.

Why is this important? Billable hours drive revenue. Understanding them helps you balance productivity, avoid burnout, and ensure your team is sustainably funded.

5. Direct vs. Indirect Expenses

  • Direct expenses are tied to services (like clinician pay and supervision costs).
  • Indirect expenses support the broader organization (like admin salaries, rent, and utilities).

Why is this important? Knowing and regularly reviewing your expenses can help you identify ways to minimize spending, reduce unnecessary costs, and operate more efficiently—without compromising the quality of care.

🧰 Simple Tips to Get Started

  • Review your P&L monthly—start small, even just a 10-minute check-in.
  • Track billable hours weekly so you understand what’s driving revenue.
  • Aim for positive margin and cash reserves—these aren't about “profit,” they’re about stability.
  • Create a simple budget that reflects both your values and your numbers.
  • Reach out to Onyx for more support.

You Might Also Like

The Profit & Loss Statement

This guide breaks down in simple terms what a P&L is, why its important, and how to use it to improve your financial health.

Financial Pillars for Providers

At Onyx Analytics, we’ve identified Three Financial Pillars that serve as the foundation of a financially healthy organization: Cash Reserves, Positive Net Income, and Positive Equity.

Optimize Your Fiscal Health

Improving fiscal health for behavioral health providers requires a strategic approach that integrates financial management, long-term planning, and continuous improvement.