A “health check” of your practice finances is a good starting point from which the future growth and success of your business can be planned, managed and implemented. With the economy and nature of veterinary practice ever changing, it is vital that the financials are monitored and move with the times.
Issues faced by veterinary practices are wide-ranging but in the current economic climate issues may include cash flow and balance sheet concerns, ownership of assets, investment in technology and the recent increase in energy prices.
Veterinary practice financials
Directors and practice managers must understand the financials of their business, which includes cash flow and balance sheets. One of the key guides to follow for understanding financials fully are the short, medium, and long term goals of the practice. This will highlight any areas of concern as well as any areas for potential growth.
Another aspect to consider is the voice of the customer. The pricing strategies, marketing campaigns and the overall service offered by the practice need to meet the needs and requirements of existing and potential clients. Retention of customers is more important than ever with the influx of private equity backed corporates into the market, making it increasingly difficult for private practices to compete with their prices and product offering.
According to a recent Office of National Statistics report, veterinary costs and pet-related spending such as for food and medication are all considered as non-discretionary. This is good news for veterinary practices in the face of a cost-of-living crisis, but there can be no complacency, and as ever the importance of retaining and winning new customers is key.
Debtor and creditor management
The management of the creditors and debtors of the practice will still be required to ensure its financial stability and success. Developing a strong line of open communication with stakeholders including lenders, debtors, HMRC and employees will be needed to quickly resolve any issues. There are options available to those struggling with this, for example invoice factoring, where the practice will enjoy a release of cash from their debtors through the purchase of their outstanding invoices.
The investment into premises and machinery are likely to be some of the largest purchases/ongoing overheads. In recent years, technological advancements and investment in new technology have assisted practitioners in developing their offering. However, this comes at a significant cost.
For a practice that needs an injection of cash, sale and lease back of the premises and or assets is an option. It ensures the practice does not lose its service offering or identity while bolstering the levels of cash within the practice.
A review of the assets currently held by the practice is a method of identifying any machinery or equipment that is rarely used and could be sold or leased back. Embracing technology can widen product offering and improve value to the client thus improving client retention.
A major issue everyone is currently facing is the rising costs of energy and an investment in greener energy practices can help to reduce costs. Smart actions such as starting with a review of previous utility bills from the last 24 months can highlight areas where costs could be reduced. Some examples of this include investing in solar power, using LED sensor lighting and by implementing heating and water cuts where possible.
Royal College of Veterinary Surgeons’ (RCVS) standards
These standards are in place to ensure that veterinary professionals and practices perform to the highest standards. Despite there being no strict guidance from the RCVS surrounding practice finances, there is a duty for veterinary professionals not to allow financial or commercial situations to affect their impartiality or to drive any decisions as to those in their care. It is key that all financial implications of their work are communicated to their clients and employees and recorded through consent forms and record books.
How to deal with any financial issues faced
If your veterinary practice does start to experience financial distress, open lines of communication will be key in helping to resolve any issues. Professionals such as legal advisors should be engaged quickly to advise on the next best steps.