Finding ways to generate revenue and cut costs can make you indispensable
I have owned a bunch of animal hospitals and have done legal and consulting work for many more. I have learned a lot from these experiences, but after all this time I still am puzzled by one thing:
Why do some clinic staffers (lay and professional alike) believe that their practice is some kind of giant money factory with an endless ability to generate paychecks and overtime hours, all without the need for employees to participate in the affirmative effort to increase revenue? (Then again, it is even more mysterious that these same folks are surprised when a weak economy results in a reduction in hours or in their own layoff.)
This legal article is directed toward the veterinary practice staff and provides some information on the law of economics as well as the law of business taxation. The two are related to each other and to the ability of veterinarians to maintain full employment during this recession.
1. HUMANS ARE EXPENSIVE.
Veterinary practices are, in economic terms, no different from any other business. They have certain fixed costs such as electricity, heat and rent, and not much can be done about them.
Veterinary hospitals also have a revenue stream, which is whatever work the public brings in (from which money can be derived). This number is not fixed. It is subject to a steep drop when consumers are tight on disposable dollars.
Some costs drop in direct relation to a drop in revenue. Your practice spends less on Clavamox and paper towels if business drops off. That is just intuitive.
However, the most costly item for the clinic is neither fixed nor does its costliness drop when revenue (client traffic) falls. That cost item is staff. The expenses associated with practicing doctors, technicians, receptionists and others account for the biggest part of the hospital's budget. Furthermore, as long as every employee who is full-time wants to keep his or her hours, that cost will not go down with a drop in practice income.
2. PAYROLL IS ONLY PART OF WHAT HUMANS COST.
Many employees have no idea how much it costs, over and above the amount they receive in their paychecks, to keep them on as workers. Tax and labor laws require unfailing compliance with insurance and matching (employer-paid) tax obligations, which the boss must pay or go out of business.
These additional costs of manpower include the payment of federal payroll tax, state payroll tax, city employment tax (where applicable) and federal unemployment tax. Most jurisdictions require employer-paid disability contributions as well.
In addition to those, employers must kick in to protect their workers against injury by paying a hefty insurance premium for workers' compensation. Then there is the mandatory participation in the state unemployment insurance fund, costs for which are assessed against the entire payroll, even if no one ever actually gets fired or laid off.
Employers also contribute to Medicare on the employees' behalf. Plus, it costs the practice a significant amount to provide staffing and/or overtime during paid and unpaid vacation time, sick time and paid holidays.
When you think about all that, it is easy to see why there is always a computer answering the phone when you call any customer service department these days. The credit-card companies, computer companies and every other business recognize that the cost of people is crushing. On the other hand, machines don't get a paid vacation; and if they are injured on the job, you throw them away instead of covering them for workers' comp.
1. THE TAX LAW ENCOURAGES YOUR CLINIC TO KEEP YOU ON.
Every additional dollar you help generate in client revenue will go to one of two places: either toward practice expenses (such as your paycheck), or to the owner(s) in the form of profit. The practice gets to use that extra revenue toward the cost of keeping you as an employee 100 percent, dollar for dollar, with no cut going to the government. When the same dollar is distributed to the owners as profit, the government takes a big chunk first.
2. THE CLINIC DOESN'T WANT TO LAY YOU OFF.
When you are let go because of hard economic times (i.e., the failure to generate sufficient client revenue), it costs your employer plenty. The clinic will almost immediately have an increase in unemployment insurance rates, which will be assessed against the salary amounts of all the remaining workers. The extra cost lasts for years, and the workers don't pay it; the owners do.
Veterinary hospital employees can do much to help ensure their own economic futures by becoming more efficient and productive. They can generate more client revenue by recognizing the importance of offering and explaining the professional and ancillary services the practice offers.
For example, it is easy for a receptionist not to bother recommending fecal examinations or heartworm preventive when she checks clients in and out. What she should remember, though, is that whatever revenue that extra service might bring in can go directly (dollar for dollar) toward paying her own wages and benefits (at a time when the payroll is getting increasingly difficult for the practice to meet).
And doctors: We veterinarians have a strong tendency to discount prices for clients and refrain from recommending geriatric health profiles or dental procedures when they are clearly indicated. That may make the client feel good about us in the immediate term, but that approach doesn't do much for the practice's ability to give the employed doctors a raise or even to keep them on staff when their contracts expire.
The reality is that when it is hard for a business to meet expenses, it is logical for it to jettison the most costly items in the budget that are not fixed expenses.
An employee who tries hard to help the top line (revenue), by offering and encouraging clients to use services, and the bottom line by using their time, hospital supplies and practice equipment efficiently, is almost certain to be considered indispensable (while others may experience pay cuts or layoffs).
In the veterinary game, we have the opportunity to strengthen our own job security. Many others facing unemployment do not have that option. I suggest we all redouble our efforts to take advantage of the realities of economics laws and employment tax laws to help ourselves remain on the payroll.
Dr. Allen is president of theAssociates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or visit email@example.com