How do I tell a bad month from a pharmacy that is running out of cash?
A bad month has a cause you can name, and it reverses by itself. A pharmacy running out of cash is a direction: every month gets closed by something you cannot do twice - more of the overdraft, a wholesaler bill stretched another fortnight, a PAYE payment late for the first time, drawings you did not take. The question is not the size of this month's gap but what closed it, and whether that will still be there next month.
General information, not advice: where a decision binds you, a licensed insolvency practitioner or a solicitor confirms it.
What is the real difference between a bad month and running out of cash?
Reversibility. Three questions test it. What closed the gap? Will that be there in four weeks? Is the gap growing?
A bad month answers cleanly: the quarter's rent, the insurance renewal and a locum week you had to buy all fell in one fortnight. Running out of cash answers badly - you cannot name what closed it, or you name four things that are really one thing, which is that the shortfall is being funded by your suppliers, your overdraft and you.
Section 123 of the Insolvency Act 1986 sets out the two tests a court works with: unable to pay debts as they fall due, in section 123(1)(e), and assets worth less than liabilities, in section 123(2). The first can be true while the accounts still show a profit.
What are the signs a pharmacy is running out of cash?
They show on the shop floor long before the accounts. Having advised on more than 120 pharmacies, 50 of them independents, this is the order I have usually seen them arrive in, rather than a sequence anyone has written down.
Owed items building. You order what today's payment will release, not what patients need.
The wholesaler account tightening. A credit limit cut, a move to pro-forma, a second-line supplier picking up lines the main account used to send.
An overdraft that never touches zero. It has stopped being a buffer and become part of the float.
A rota that no longer covers itself. It leans on one person, usually you; the Saturday gets done by the owner to save a shift, and locum invoices start going out late.
Services quietly stopping. A clinic not reopened after a staff change, a delivery round shortened. Nobody decides to stop; it stops, and the income goes with it, which is why falling profitability reaches the accounts last.
You also know your bank balance from memory every morning.
Why does the NHS payment timetable hide it?
Because the money arriving is an estimate and the correction arrives later. You declare a month's prescriptions to the NHS Business Services Authority after dispensing them; an advance payment follows, calculated on an estimate rather than on what you actually dispensed; the final figure is settled later, once the prescriptions have been priced. The NHSBSA publishes the submission deadline and the payment dates, and they belong on the wall rather than in your head, because missing a submission moves a payment.
A real fall - in volume, in mix, in reimbursement - therefore reaches you late, as a settlement smaller than the advance you have already spent. Several smooth advances can sit on top of a worsening business.
So the number to watch is the gap between the advance and the settlement that follows it, month by month. One month of it widening is noise. Three is a fact.
What does a wholesaler moving you to pro-forma mean?
That a supplier has formed a view about credit risk, often before a bank has. Pro-forma means paying before the order ships, which reverses your working capital: you fund the stock before you dispense it, and before the payment that reimburses it.
Ordering becomes a daily decision about what you can afford rather than what the shelf needs, so owed items build - and owed items are where patients notice first. Sometimes it is not the account manager's decision at all: a credit insurer may have withdrawn cover. An arrangement proposed before a payment fails is a different conversation from the same one proposed after.
When does a late payment become something a court can look at?
When a creditor stops asking and uses the statutory route. In England and Wales, a creditor owed more than £750 then due can serve a written demand, and section 123(1)(a) of the Insolvency Act 1986 treats a company that has neglected for three weeks afterwards to pay, secure or compound for that sum as unable to pay its debts.
A petition changes the pace, and the damage is not the hearing date. Where a winding-up order is later made, the winding up is deemed to commence when the petition was presented, under section 129(2), and section 127 makes any disposition of the company's property after that point void unless the court orders otherwise. The court can be asked for a validation order permitting payments in the meantime, so wages, locums and stock keep being paid.
In practice the harder constraint is the bank: an account is commonly frozen once a petition is advertised, which stops payroll and the wholesaler. So a validation order is a question for a solicitor before the account stops, not after.
What should you stop doing once you have seen the signs?
Three things, none of them a judgement about your own position.
Stop paying whoever shouts loudest. An office-holder appointed later can apply to the court about a payment that put one creditor in a better position than the others. In England and Wales that is section 239 of the Insolvency Act 1986, and section 240 sets how far back it reaches: six months before the onset of insolvency, or two years where the creditor was connected with the company. Scotland has its own route to the same place, unfair preferences under section 243. Whether any particular payment was a preference is for the court to decide on that application - not for you, and not for this page. From here, who gets paid is a question for a licensed insolvency practitioner or a solicitor before the payment rather than after.
Stop signing for money nobody has read the documents for. New lending, new security, invoice finance, an advance against card takings, a personal guarantee. A guarantee outlives the company, and a solicitor reads it before you sign. The same goes for what you write rather than sign: a position you give a lender or a landlord gets read back to you.
Stop treating the professional obligations as a finance question. Your duties as a superintendent pharmacist under section 71 of the Medicines Act 1968, and as the responsible pharmacist under section 72A, do not move because the company is short of cash, and no creditor, lender or fellow director can vary them.
Does any of this change what the pharmacy is worth?
Yes. What a short-of-cash pharmacy stops doing is what carries the value: a service that runs off a rota, a team that covers itself without the owner, a stock file that is not half dead lines. Each is cheap to keep and slow to rebuild, which is why what is my pharmacy worth? and pharmacy valuation: how the number is built are better read a year before a sale than during one.
Who decides any of this, and who do you speak to first?
Five of them, and they are not interchangeable.
A licensed insolvency practitioner. Only an authorised practitioner may act as administrator, liquidator or trustee, under sections 388 to 390A of the Insolvency Act 1986. Which process fits, and whether the business can be sold as a going concern, is their judgement.
A solicitor, on the lease, the guarantees, the validation order and anything you are asked to sign.
An accountant, on anything with a tax consequence. That is their work, not this page's.
NHS England, acting through the integrated care board, on the contract and on any overpayment position.
The General Pharmaceutical Council, on the premises register and on the superintendent.
RSB Consulting sits on the pharmacy side of that group, alongside them and not in place of any of them: see the adviser network and pharmacy insolvency and distressed sales.
When does this stop being a cash-flow question?
When the honest answer to "what closes next month's gap" is nothing, or when somebody else has started a clock: a petition presented, an account on stop, a landlord's notice. The order of the fortnight that follows is set out in a distressed pharmacy: what to do in the first fortnight. If you recognised more than two of the signs above, make that call while you still have a choice about who you make it to.
What to do next
If you recognised more than one of these, act while the options are still yours. This is the stage where the choices are widest and cheapest — refinancing, restructuring, a managed sale — and all of them narrow once a creditor moves or an appointment is made. Waiting is the only decision here that cannot be undone.
Your accountant should see the figures, and a licensed insolvency practitioner becomes necessary if the position has gone further than you think. RSB does neither of those.
What RSB does is tell you honestly which of the three it is: a bad month, a fixable structural problem, or a business that needs a buyer while it still has something to sell. That is a judgement about pharmacies specifically, not about businesses in general.
Tell us what the last three months look like, in confidence. Nothing is passed on, and an early conversation commits you to nothing. If the answer is that you are fine, you will hear that too.
General information as at 1 October 2026, and not legal, tax, financial or insolvency advice. RSB Consulting is not an insolvency practitioner, a solicitor, an accountant or a lender, and does not hold itself out as any of them. The Insolvency Act 1986 applies across Great Britain, but the procedure and some of the sections cited differ in Scotland. The NHS payment route described is England; Wales runs its own National Health Service (Pharmaceutical Services) (Wales) Regulations 2020 through its Local Health Boards, and Northern Ireland differs again. Not sure which of the two this is? Tell us where you are.
Related: A distressed pharmacy: what to do in the first fortnight · Pharmacy valuation: how the number is built · Pharmacy insolvency and distressed sales
Rajkamal Singh Bhatti MPharm is a practising pharmacist (GPhC registration 2230365) and a former Superintendent Pharmacist of a national group of 120 branches, which he took through insolvency and sale. He founded RSB Consulting.
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