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Q&A: Best practice financial indicators
Q&A on financial benchmarks every veterinary practice should watch.
Here are the five pieces of information you should watch, says Dr. Jim Guenther, MBA, CVPM, a Veterinary Economics Editorial Advisory Board member and consultant with Strategic Veterinary Solutions in Asheville, N.C.
1. Gross revenue. Track this by month and year and compare the data to prior years to identify trends. If you find problems, consider changing your marketing, adding services, reducing missed charges, or adjusting fees.
2. Net profit. This is a reflection of your return on investment. If profit is down, look at your gross revenue and expenses to figure out what should be dialed back for your practice to show an excellent profit.
3. Cost of goods sold. Managing inventory is a surefire way to improve net profit. Assign a qualified staff member to manage ordering and pricing, monitor inventory usage, and improve the cash flow from inventory items.
4. Average client transaction (ACT). By monitoring ACT, you'll learn how much money each doctor brings in, as well as the overall practice revenue per client. Compare the numbers to benchmarks from AVMA, AAHA, or Benchmarks 2009: A Study of Well-Managed Practices, and if you're below them, ask why. Correction begins when you identify a cause and make necessary changes to boost revenue.
5. Staff costs. Monitor staff costs, and you'll see if everyone is making money for your practice. Compare doctors' production to their compensation package and adjust when needed. Conduct performance reviews for support staff to ensure they're meeting job expectations.