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3 bad spending habits of veterinary practice owners and managers
Take charge of these spending problems so you'll have something to celebrate on your 2014 financials.
New Year's is a time for reflecting and planning for resolutions–even in business. So, set a resolution to drop the following three bad spending habits and replace them with new ones to help you stress less about the bottom line in 2014.
Bad habit #1: Bring on every special offer from suppliers
It's difficult to walk away from a deal on drugs and medical supplies, but don't accept one that puts an extra item in inventory that you don't need. Sure, veterinarians like to try new products. But when the decision is made to take on something new, what is it replacing? Here's a target to aim for: $10,000 to $16,000 on-hand drugs and medical supplies per full-time equivalent doctor. That number includes heartworm, flea and tick products but excludes diets.
Also, beware of purchasing increased quantities if it will lower your inventory turnover rate below six. An easy back-of-the-envelope calculation for inventory turnover rate is the number of times you refill your inventory of a product in a year. As a general rule, only take advantage of special offers if the purchase keeps your inventory turnover in the six to 12 range.
Bad habit #2: Not investing in your staff
If your staff turnover is on the high side, taking a look at these areas may help zero in on why:
Structured evaluation process. Employees should receive evaluations at least once a year. Good times are an employee's anniversary hiring date or sometime in the first quarter.
Train your staff. Time is money and training takes time. If you constantly find yourself short-staffed, if you experience high staff turnover or if your staff isn't quite up to par, perhaps it's time to examine your pay scales to be sure they're competitive. Plug in job titles and ZIP codes at Salary.com, payscale.com and simplyhired.com for local salary ranges.
Staff compensation budget. Not having a budget for staff compensation may leave you scratching your head when it comes to staffing and paying appropriately. Target staff costs (wages, payroll tax and retirement contributions) between 22 and 25 percent of gross revenue, which includes cost-of-living and merit increases for current team members. (Check out the charts below for staff pay averages and a budget breakdown.) Depending on the economics of your community, you'll need to plan a cost-of-living increase of 2 to 4 percent and a 1 to 5 percent merit increase for a total increase of between 3 and 9 percent.
When Dr. Elizabeth Callahan, owner of Veterinary Medical Center in Easton, Md., looked at her clinic's staff costs last year, they were out of control. She sat down with her clinic's leaders and found a better way to staff.
"If a doctor wasn't coming in until 10 a.m., we didn't need his support team there at 8 a.m.," Dr. Callahan says. "We scheduled smarter. Now, a team member might have to take a two-hour lunch or stay later than usual, but we kept them in the loop from the beginning so they've all been nice about it."
Small changes like this helped Dr. Callahan's practice reduce their staff costs by 3 percent so staff members are seeing bonuses and raises this year.
Bad habit #3: Letting client information lie
In this digital age, updating not only an individual's contact information, but how they wish to be contacted is essential. Granted, doing so will require diligence and a consistent message, but try to keep the process as simple as possible and be sure to explain why you are asking for an update. Try saying, "We value our relationship with you and your pet and keeping accurate contact information is just one of our many standards of care. Can you please answer a few questions?"
There are multiple opportunities to update information when clients visit your practice—when you greet them, when they wait in the reception area, when you work with them in the exam room or when they wait for prescriptions.
Just because you've been doing something one way for years doesn't mean it's best practice. If you can break these bad habits, you'll be in great shape for the new year.
Craving more data? Check out Benchmarks 2013 at http://dvm360.com/buybenchmarks.
Denise Tumblin, CPA, is president and owner of the veterinary practice consulting firm Wutchiett Tumblin and Associates. Christina Materni is a financial analyst at the firm.