Nine tips to boost a practice's bottom line
National Report - Veterinary students need to factor educational increases into long-term financial plans. Rising tuition costs usually mean decreased spending limits and increased debt load, experts say.
NATIONAL REPORT — Veterinary students need to factor educational increases into long-term financial plans. Rising tuition costs usually mean decreased spending limits and increased debt load, experts say.
For graduates seeking to eventually own a practice, building clientele ranks the obvious first key to a successful launch. But that's only the beginning to ensuring a healthy bottom line. Once a steady flow of cash comes in, managing its movement with skill and attention to detail proves necessary to making any strong business last.
The principles of professional cash-flow management are not difficult to learn, but they are easy to neglect. Accept their importance in a practice, and owner's will find it easier to stick to the rules. Here are nine powerful techniques that will help improve your cash flow and net income right from the start:
Never allow money to lie idle
As soon as you launch a practice, open a money market account at the bank and have it linked to the practice's business checking account for telephone or online transfers.
Deposit all daily receipts into a money market account, where they will immediately start drawing interest. Never deposit receipts directly into a checking account. Keep a minimum balance in the checking account and transfer cash by phone or online as needed to cover checks written. The banks have made this technique so easy to use there is no longer any reasonable excuse for not using it.
Never leave checks or cash lying around in a desk drawer until you can get to the bank. Using every cent to make money is the mark of professional and profitable cash management.
Don't hurry to pay bills
There's good reason why checks will be slow to come in from people who owe you money. It's because hanging on to cash as long as possible keeps that money available to draw interest.
That's why it's important to set up a system to pay bills only when they come due. It's easy to do and is another rung on the ladder of professional cash management. But it's important not to jeopardize your credit standing by paying bills late. Pay your bills when they are due — not before, not after. It's especially important to avoid late payment on credit card bills because of the oppressive penalties that most card issuers have put into place in recent years.
Maintain a cushion
If you expect to do any of your own billing, it's important not to allow receivables to go untended. The practice earned that money; you have a right to it, and you need it.
While paperwork and contacting late-paying clients might not be a favorite pastime, setting up an accounts receivable file and following through on late payments will be as important to financial success as the quality and skill of the veterinary services offered. If clients learn the practice is cavalier about money owed, you can be certain they will stretch your patience and your cash flow to the limit.
This is an important strategy when building a new practice or when appointments are off and retail sales are down. During slow times, any work is better than no work.
Consider offering special services or products at sale prices that do not satisfy usual parameters of profitability during slow periods. That approach makes sense by providing work and smoothing out the inevitable ups and downs of cash intake.
Whenever possible, keep enough cash in interest-bearing accounts to cover normal operating expenses for three months to six months. There is nothing like the peace of mind and self-confidence that comes when you don't have to sweat out next week's payroll during a business slowdown. Also, keep in mind that your cushion money is making money for you in those interest-bearing accounts.
Get to know the banker, computer
Handling money is a banker's job, and most are good at it. Even if your new practice is small, it's a good idea to have a personal relationship at the bank where you do business. Discuss your financial picture honestly with the manager of your local branch. You'll get some good ideas and a favorable ear should you ever need a little financial help.
Trust every aspect of your finances, including personal investments, to the computer. The financial reports and analyses that off-the-shelf programs can produce at the touch of a button can be vitally important tools for improving cash flow and bottom-line profits. The commercial programs specifically designed for management of veterinary practices are even better.
These programs are infinitely easier to use than they were a couple of years ago. More important, they teach in dramatic fashion the benefits of a sensible cash-management system.
Harness the magic of impulse sales
Ever notice those inexpensive items lined up at the cash registers of supermarkets and drugstores? They're known as impulse buys — products inexpensive enough to be bought on a whim.
Don't be misled by the low selling price of these items. An impulse sale of $2 to $5 will produce a higher percentage of net profit than normal retail transactions. That's because almost all the gross profit on impulse sales moves directly to the bottom line. The basic service to the client has paid for your operating and labor costs, so any additional sale increases costs only by the price of the product.
The more cash generated daily, the more you will benefit from good cash management. The more impulse sales generated, the more cash there will be to manage.
Spread the gospel
Manage cash means having a steady flow of the stuff coming in. Many new practitioners keep so busy dealing with day-to-day problems they never get around to putting together a business-building marketing program.
That's a serious mistake. Marketing is an essential ingredient in the recipe for growth, even survival, for any professional practice. Yet, many veterinarians shy away from all but the most obvious ways to promote their expertise. For some, the marketing consists of a Web site or an expensive advertisement in the Yellow Pages.
It's possible that veterinarians once were able to buy equipment, place an advertisement and sit back while the phone rang off the hook and money poured in.
But it's not likely.
Building a growing and profitable practice requires an ongoing marketing program. There is no other way. Competitive prices alone won't do it. A high degree of professional skill alone won't do it. As one entrepreneur puts it: "You have to tell the world your story. If you don't do it, no one else will."
Taken individually, good cash management techniques might seem inconsequential. However, when you blend them in a consistent manner, they will form a significant and permanent contributor to your bottom line and your economic future.