Cash Generating Activities for a Practice
Navigating Cash Generating Activities: Insights and Calculations for a Stronger Bottom Line
When it comes to growing a healthy, profitable business, few things matter more than understanding how your company generates — and retains — cash. Whether you run a healthcare practice, a local retail shop, or a growing small business, knowing your cash generating activities can mean the difference between staying afloat and building true long-term wealth.
In this post, we’ll break down three key calculations that reveal how well your business turns operations and assets into profit — and what those numbers tell you about where to focus next.
Why Cash Generating Activities Matter
Think of your cash generating activities as the heartbeat of your business. They measure how effectively your practice or company transforms its investments, inventory, and day-to-day operations into real dollars you can use — not just revenue on paper.
At ProWise Financial, we focus on three foundational metrics:
Sales to Assets Ratio
Gross Profit Margin
Net Income Margin
Each gives you a different perspective on your financial health — and together, they highlight your hidden opportunities to keep more of what you earn.
1. Sales to Assets Ratio: Is Your Investment Pulling Its Weight?
Your Sales to Assets Ratio answers a simple but powerful question:
“For every dollar I invest in my business, how much revenue am I generating?”
In our demonstration example:
Total Sales: $2.754 million
Total Assets: $735,000
This produces a Sales to Assets Ratio of 3.75.
Sounds decent — but when you compare it to the target industry benchmark of 4.7, you can see that there’s room to do better. If your ratio is low, you might be carrying under-utilized equipment or not squeezing enough value from your current assets.
2. Gross Profit: How Much Revenue Do You Really Keep?
Your Gross Profit Margin shows how much money you retain after covering the direct cost of delivering your products or services. In other words: for every dollar your company makes, how much stays in your pocket to pay overhead, staff, and yourself?
In this example:
Gross Profit Margin: 68.9%
Industry Target: 72%
A few points off might seem small, but even a 3% shortfall can translate into tens of thousands left on the table each year. It could point to pricing issues, unnecessary discounting, or cost inefficiencies with your suppliers.
3. Net Income: Your True Profitability
Finally, the Net Income Margin reveals your ultimate bottom line: what’s left from each dollar of sales once all expenses are paid.
In our demonstration:
Net Income Margin: 11.5%
Industry Benchmark: 15%
If your net margin consistently falls below target, it’s a sign to examine operating expenses, debt servicing, or pricing structures — and to ask: Where can I tighten up or rethink my strategy?
Why Benchmarks Matter
Numbers mean little in isolation. The real magic happens when you compare your ratios against industry benchmarks — and your own historical data.
When you see where you stand, you can pinpoint:
Where you’re outperforming
Where you’re trailing the pack
Where a small adjustment could free up hidden profit
This is how you build a business that works smarter, not just harder.
Beyond the Numbers: Your Roadmap to Real Cash Flow
Identifying your cash generating activities is step one. The next step is learning how efficiently your business converts that cash — through your cash conversion activities (like receivables, payables, and inventory days).
Combined, these insights form your personalized Hidden Cash Map™ — a simple but powerful snapshot that helps you make strategic decisions with confidence.
Want to See Your Own Numbers?
Whether you run a medical practice, a growing local business, or a family-owned shop, these three metrics are the foundation of lasting profitability.
Curious where your practice stands — and how much hidden cash you could unlock?
Let’s find out together.
👉 View the On-Demand Webinar »
Get access to the online training that goes over the six financial ratios to build a more profitable practice.
👉 Book a complimentary Hidden Cash Map™ Session:
I’ll run your numbers, compare them to targets, and show you exactly where to focus first.
