Choosing to ignore monthly financial reports could cost you as much as $42,000 per year. Are you willing to give that money away?
Practitioners who review their finances monthly earn about $42,570 more per year than those who don't. This stark finding from the 2005 AVMA-Pfizer Business Practices Study, conducted by Brakke Consulting Inc., illustrates the importance of keeping a close eye on your practice finances. Here's a look at three key figures you need to know:
The study shows only 22 percent of respondents look at their profit-and-loss statements on a monthly basis. "I'm surprised this number is so low," says Dr. Karen Felsted, CPA, MS, CVPM, a consultant with Brakke Consulting Inc. in Dallas. "Most people understand the profit-and-loss statement; it states revenue in, expenses out, and what's left over. I think maybe people don't look at their profit-and-loss statements because they don't know what to do with the information."
You want to compare your profit-and-loss statement to your previous years' statements and to published benchmarks, says Dr. Felsted, a Veterinary Economics Editorial Advisory Board member. Are you spending more or less in key areas?
More than three quarters—77 percent—of respondents review their accounts receivable aging reports each month. And Dr. Felsted says it's a good thing that so many doctors check this statistic. Yet just looking at the numbers isn't enough. You need to do something with the information to make a difference, she says.
"And there's still the fact that nearly a quarter of veterinarians aren't focused on their monthly accounts receivable report," she says. "That's something everyone should review regularly to increase practice and personal income. You're just asking to give away money if you don't follow up on this information."
Figure out who owes you money—and how much—Dr. Felsted says. Then determine which clients you could work with to reconcile their accounts. Send the ones that don't seem promising to collections.
Two-thirds of responding owners to the AVMA-Pfizer study review the production of the doctors in their practices on a monthly basis. (See Figure 1.) "It's a cliché, but you can't manage what you don't measure," says Dr. Felsted. "Let's say you're an owner and you don't know how much an associate produces. You have no idea whether you're paying your employees fairly given their contributions."
Figure 1 : In the know on production
"This ignorance also makes it hard for owners to determine whether they're addressing gender-pay issues," says Dr. Felsted. "So often we say that differences in production drive differences in pay between men and women. But if we're not measuring production, how can we know?"
Dr. Felsted says all doctors, associates and owners, need to know their production to ensure their financial security. Yet the AVMA-Pfizer study shows many doctors—44 percent of male associates and 56 percent of female associates—don't know their production. How can you ensure you're paid fairly or work to increase your pay if you don't know your production?
Even if you're not paid on production, your production affects your pay, Dr. Felsted says. "It's an economic reality," she says. So ask the owner if you can see the production reports each month. And if the hospital isn't tracking production, talk with the owner about the benefits of doing so.