Understanding Practice Expenses with the 100-Penny Exercise

‍To be effective, KPIs cannot be viewed in isolation — they must be compared with some sort of benchmark. By comparing your practice’s KPIs with other practices that are similar to yours, you can see how you stack up to the competition. The American Animal Hospital Association, American Veterinary Medical Association and National Commission on Veterinary Economic Issues publish industry averages you can use for KPI comparisons.

• Offering employee discounts can contribute to attracting and retaining employees, boosting morale, and increasing staff loyalty.
• These supplies include medications, vaccines, surgical instruments, and other necessary medical equipment.
• Provides investors a snapshot of short-term operational efficiency, and is a more accurate reflection of a company’s operating profitability (net income + taxes + interest expense + depreciation and amortization).
• Percentages above 18% are generally considered superior, 16% to 18% are excellent, 13% to 15% are good, 8% to 12% are fair, and less than 8% are poor.
• Efficient management of these costs is crucial for maintaining profitability.
• When emotions arise, having a legal professional or neutral third party on your side can help you keep a level head and review the terms of the sale objectively.

Stop costs from gobbling up your revenue

Comparing your staff hours per veterinarian hour to the veterinary industry benchmark is a strong reference. Per AAHA’s “Financial & Productivity Pulsepoints,” the average full-time equivalent (FTE) staff per FTE veterinarian is Online Accounting around 4.0. To calculate yours, divide the total staff hours by the number of doctor hours for the same period. At the same time, you may find overlap among different marketing tools or technology vendors. Could your virtual scheduling, patient portal, and electronic billing all be provided by the same software? Are you paying different agencies to do your social media, website management, and print advertising?

• The remainder of labor costs go to various government-mandated taxes and employee benefits.
• The detailed analysis highlights a roadmap emphasizing the importance of mastering the fundamentals.
• “Often, practice owners are surprised by how much of their income goes to various labor costs and all of the government requirements that eat into a paycheck,” Dwyer said.
• A few years ago, many equine practices showed low profitability, often in the 9% range or lower.
• This can cost around $500 to $1,500 annually, depending on the volume of waste.
• Operational costs for a veterinary clinic typically account for 60% to 80% of total revenue.

Facility costs

Selling a veterinary practice is a big decision, and you shouldn’t rush into a sale if you don’t feel 100% confident. Some consolidators are pushy in their practices, but don’t feel like you need to make any rash decisions. Take time to think about what offer is best for you — more than likely, the offer will still be there when you make your decision.

The Right Formula to Calculate Monthly Operational Costs for a Veterinary Clinic

On the other hand, if you came in below budget, you have a great problem! Use the extra money to invest back into the practice, buy new equipment, give your staff a bonus, or donate to a cause close to your heart. Having “bonus money” left over at the end of the month is truly one of the best parts of using a budget. It’s very likely that your expenses will exceed your allotted budget from time to time.

• Consolidators will do everything they can to get you to agree to an offer, which may include inflating their services and offerings.
• For example, neglecting HVAC systems can lead to higher energy bills or system failures, which could incur costs of $5,000 or more for emergency repairs.
• Businesses who cannot measure the effectiveness of their various marketing tactics waste millions of dollars every year.
• Second and most important, the client hears all of the body systems that are being evaluated and examined and this adds value to the concept that exams are one of the most important services we offer.
• Understanding and managing practice economics is challenging even under the best of conditions.
• Creating specific budget categories for your practice can seem overwhelming, but start with the obvious, such as rent, utilities, loans, salaries, etc.

This list should help you get an idea of what your breakdown should look like, but every vet clinic is different, so your specific percentages will be different. Regulatory changes and industry challenges inevitably impact the veterinary profession. From streamlining https://www.facebook.com/BooksTimeInc workflows and automating tasks to enhancing data security and regulation compliance, technology plays a pivotal role in the financial management of a veterinary practice. It’s advisable for a veterinary clinic to set aside 5% to 10% of their monthly budget for unexpected expenses. Software and technology expenses for a veterinary clinic can range from $300 to $1,200 per month.

Karen E. Felsted, DVM, MS, CPA, CVA, CVPM, is founder and president of the veterinary consultancy PantheraT in Dallas, Texas. She has been published in numerous veterinary journals hasserved on the boards of VetPartners and the CATalyst Council. Understanding how to calculate your veterinary bookkeeping practice’s value will help you get the biggest bang for your buck.