Monitoring Your Practice’s Financial Health

Every practice leader should familiarize themselves with the following financial and PIMS reports, learn what they represent, and start evaluating each for change over time. Never mind that you don’t have an accounting degree. In this case, your best ally is your curiosity. Merely ask yourself, ‘Why is the change before me happening?’ After that, the internet will provide you the answers that you seek!

Veterinary Profit and Loss

A profit and loss statement, also known as an income statement, is a financial document that summarizes a company’s revenues, expenses, and profits (or losses) over a specific period of time, typically a month, quarter, or year. It provides insights into a company’s financial performance by showing how much money it earned (revenue), how much it spent (expenses), and the resulting net income or net loss.

Here’s a breakdown of the key components typically found in a profit and loss statement:

1. Revenue: This section lists the total amount of money earned by the company through its primary business activities. It includes sales of goods or services, interest income, royalties, and any other sources of income.
2. Cost of Goods Sold (COGS): COGS represents the direct costs associated with producing or purchasing the goods or services sold by the company. This includes materials, labor, and manufacturing overhead directly attributable to production.
3. Gross Profit: Gross profit is calculated by subtracting the cost of goods sold from the total revenue. It reflects the profit generated from core business operations before deducting operating expenses.
4. Operating Expenses: Operating expenses are the costs incurred to run the day-to-day operations of the business. This category includes expenses such as salaries, rent, utilities, marketing, administrative costs, and depreciation.
5. Operating Income: Operating income, also known as operating profit, is derived by subtracting operating expenses from gross profit. It represents the profit generated from normal business operations before considering interest and taxes.
6. Other Income and Expenses: This section includes any additional sources of income or expenses not directly related to the core business operations, such as interest income, interest expenses, gains or losses from the sale of assets, and other non-operating items.
7. Net Income (or Net Loss): Net income is the final line of the profit and loss statement and represents the company’s bottom line profit after accounting for all revenues, expenses, gains, and losses. A positive net income indicates profitability, while a negative net income indicates a loss.

Profit and loss statements are essential financial tools used by businesses for decision-making, financial analysis, and reporting to stakeholders such as investors, creditors, and regulatory agencies, but remember that Profit and Loss statements don’t represent true cash flow, an important consideration when managing a business. For more on how to adjust your Profit and Loss to represent true cash flow, reach out to Bash Halow.

Veterinary Practice Summary Report

Usually called as much in the practice software, the Summary Report includes information on the most basic financial and practice health metrics including number of invoices, new clients, average invoice, number of patients seen, etc.

Veterinary Category Sales

Category sales (sometimes called Class Sales) is a report showing revenue broken into subsets of the total revenue, like hospitalization, radiography, laboratory and so forth. Since there is reliable benchmarking for these groups of sales, it’s important that you set up your categories like those represented in the benchmarks. To learn how to organize your categories up properly, review this article on veterinary inventory and software set up and click on the category and classes hyperlink at the top of the page.

Veterinary Metrics by Doctor

It’s helpful to see how your sales break down by doctor. Run the Summary and Category Sales reports by doctor, When appropriate, divides class sales by total sales per doctor to produce percent-sales-per-doctor so that you can compare doctors regardless of many days they work or money they generate. For example, Doctor A sells 10 dollars of dog treats and generates 1000 dollars in revenue. Doctor A’s percentage of dog treat sales to her gross revenue is 1%. Doctor B on the other hand sells 100 dollars worth of dog treats and generates 500 dollars in revenue. Doctor B’s percentage of dog treats sales is 20%. Looking at the significant spread between the two, we have to ask ourselves, ‘Why are sales so different between the two doctors?’ But don’t jump to the conclusion that Doctor B is a superior provider simply because her sales are higher. Upon closer look, we find that Doctor B hasn’t sold a single treat prior to her fabulous performance this past month and had high sales this period only because the owner of Puppy Land came in and bought 4 cases from her. Doctor A, on the other hand, sold almost no treats this month because after Doctor B sold the 4 cases, there were no more cases left to sell! Lesson learned! Never leap to any kind of conclusion by merely looking at the number. Ask good questions; they are your best ally!

Discounts, Voids, and Fee Exceptions

Make an exhaustive search of the way that you discount, void, and change prices. You may have to do quite a bit of digging! In the end, add up all the money that was discounted or given away and ask the parties involved if this ‘investment’ paid off.

Referral Report

The referral report lists all the ways people found out about your practice, but it will only report accurately if it is set up in the software correctly, so check with your software provider to check things for accuracy. Learning  how people found out about your hospital is important. It can tell you if you are spending your advertising dollars effectively and whether you need to change your marketing strategy. A bit of advice though, if clients say they found you through Google, do a bit more digging since your practice was not the only one that came up in the search. Why did the client ultimately pick yours?

Google Dashboard

Google Dashboard provides a wealth of information on one of your most important new client acquisition tools, your website.

The most important information from Google Analytics is:

1. Website Traffic: Understanding the total number of visitors to your website, as well as their behavior, including new vs. returning visitors, and which pages they visit most frequently.
2. Audience Demographics: Knowing the demographics of your website visitors, such as age, gender, location, and interests, can help you tailor your content and marketing efforts to better suit your target audience.
3. Acquisition Channels: Identifying where your website traffic is coming from, whether it’s from organic search, paid advertising, social media, referrals from other websites, or direct traffic, can help you allocate resources effectively.
4. Conversion Tracking: Tracking conversions, such as sign-ups, purchases, or other desired actions on your website, and understanding the path that leads to those conversions can help you optimize your website and marketing campaigns for better results.
5. Bounce Rate and Exit Pages: Monitoring the bounce rate (the percentage of visitors who leave your website after viewing only one page) and identifying the pages with the highest exit rates can help you identify areas for improvement in your website’s user experience.
6. Site Speed: Monitoring the loading times of your web pages and identifying any slow-loading pages can help you improve user experience and reduce bounce rates.
7. Mobile Performance: Understanding how your website performs on mobile devices, including metrics such as mobile traffic, bounce rate, and conversion rate, is crucial as mobile usage continues to grow.

By focusing on these key metrics and insights in Google Analytics, you can gain valuable insights into your website’s performance and make data-driven decisions to improve your online presence and achieve your business goals.

Conclusion

There is so much more to learn about your practice’s financial health and solutions to the issues you may uncover. Please refer to the articles below for more information!

Additional Reading

$1000 Referral Fee!