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12 painless ways to save money
Learn how to cut your costs and keep more in the coffers with these tips.
First off, let's be clear: Taking steps to increase your practice's revenue will put money in your pocket a lot faster than cutting costs will. For a veterinary hospital, spending lots of energy on cutting costs is a futile effort. Many expenses (such as rent) are fixed, and variable costs (such as medical supplies and payroll) can be reduced only so much.
Tom A. McFerson, CPA, ABV
With that said, you can save money by watching your expenses more closely. Adopt these 12 strategies to save some cash.
1 Minimize sales tax
Knowing when to charge sales tax and when to pay sales tax can be confusing. On occasion, you may have paid sales tax on an item you purchased, then turned around and charged sales tax when you sold it to the client. In other words, you paid sales tax on that item twice—once unnecessarily.
The end user of an item is ultimately responsible for sales tax. If you buy a medication to use in the hospital during a pet's treatment, you're responsible for the sales tax—you're the end user. But if you buy a nonprescription flea product to sell to a client, the client is the end user and should pay the sales tax.
If you charge sales tax on anything (food, oral health products, and so on), make sure you aren't also paying sales tax when you purchase those items. That's 6 percent to 9 percent you can save right there.
2 Reduce staff overtime
You pay 50 percent more or even double for overtime hours, and that's an expense that's nice to avoid—especially if your staff is running up lots of overtime. Review your team members' hours, schedules, and workflow to determine whether you're consistently overstaffed during certain periods of the week, then make adjustments. By juggling schedules a bit, you may be able to reduce one employee's overtime without adding to anyone else's.
3 Analyze your ads
Figure out what you are spending on phone directory advertisements, and then track the financial results of those ads. If you're paying for one half-page, three-color ad that costs $2,500 per month, what kind of new clientele is the ad bringing in? If the cost doesn't justify the new business, downsize the ad. If you're advertising in multiple yellow pages books, track which ads are effective and drop any that aren't.
4 Review doctors' production charges
Are you paying your associate on production? Review the revenue sources you've agreed to include in the compensation formula and make sure your team is crediting them properly.
If you don't include items such as kennel charges, grooming fees, or over-the-counter products in production pay, check that your team is not mistakenly including them in the calculation. If you find that they are, review proper coding procedures with your front office staff.
5 Price-shop supplies
Many practitioners are extremely loyal to their vendors—sometimes to a fault. Sure, you can buy certain items only from a specific vendor. But other products are available from multiple vendors, and the prices vary significantly. Establish accounts with several vendors (four is usually sufficient), and don't be afraid to order from the cheapest one at the moment.
6 Hire independent contractors
If you're hiring relief or temporary help and the circumstances allow it under IRS regulations, treat these people as independent contractors. It will save you in both payroll taxes and workers' compensation insurance (depending on your state's regulations), which can total almost 15 percent of the amount you pay these temporary workers.
7 Consolidate cell phone plans
If you reimburse key staff members for their cell phone usage, consider getting a group plan. Paying for five phone numbers on a group plan is usually much cheaper than paying for each one separately.
8 Buy on eBay
Some practice owners swear by eBay, where they find tools, instruments, and equipment for their practices at a significant discount. By spending some time and energy, you can find great deals, too. Be sure to look for reliable sellers and know exactly what you have in mind to purchase—you don't want to go through the trouble of bidding, paying, and arranging shipping only to discover what you bought isn't what you need.
9 Keep inventory lean
Watch your inventory and try not to over-order. With so many great deals out there, you can go broke trying to save money—and inventory surplus invites spoilage and theft. Use your computer system to manage your inventory count. I also recommend that you perform an occasional physical count—and not just at the end of the year. You'll send a clear message that you're tracking all the supplies in the hospital, which will help deter the disappearance of supplies.
10 Buy high-quality computer equipment
When it comes to computers and related equipment, the old maxim is true: You get what you pay for. Buy quality. Be willing to pay a little more to get equipment that performs better and lasts longer. You'll end up financially ahead in the long run.
11 Reduce missed charges
This one is probably in the category of making more money rather than saving it, but either way, the cash ends up in the same place: your pocket. Make sure that every service you or your team provides for a client is logged in and charged for. Catching even $100 per day in lost charges can mean more than $25,000 a year in extra revenue.
Reuse coffee filters
You know you've thought about it. If your practice has a break room and you provide free coffee, getting multiple uses out of those filters can save you ... OK, this one's a joke. But the next one isn't.
12 Keep your team happy
Pay your team members well, praise them often, challenge them, and educate them. Keeping them in their positions and not walking out your front door looking for another job will save you a fortune in the long run.
Tom A. McFerson, CPA, ABV (accredited business valuator), is a partner with Gatto McFerson in Santa Monica, Calif. Send questions or comments to email@example.com