I get it. Accounting is not your thing. You’re a veterinary professional, not a mathematician. When you decided you wanted to work in the veterinary profession, you certainly didn’t picture yourself measuring data or entering numbers into spreadsheets. But, as a business owner or practice manager, not keeping track of your data can lead to huge pitfalls, and you could be unknowingly setting your business up to fail.
Here are three steps you need to take to make 2019 your most profitable year yet.
#1: Develop strong and accurate accounting practices
- Set up the AAHA/VMG Chart of Accounts in your accounting software. Be sure to spend the time to train your managers and the team members responsible for ordering inventory to know where to code revenue and expenses so the information is accurate in both the accounting and practice management softwares.
- Revise the income and revenue categories in your practice management software to match exactly with the AAHA/VMG Chart of Accounts.
- Use an accrual basis of accounting. Revenues are reported on the income statement when they are earned, which often occurs before the cash is received from customers (resulting in accounts receivable). Expenses are reported on the income statement in the period they occur, which is often different from when the payment is made (resulting in accounts payable). The use of the accrual method is typically preferred because of the “matching principal,” and the financial statements provide a better picture of a company’s profits during a specific accounting period. The revenues earned and expenses incurred are recorded in the period (whether or not they are received or paid) and match and report true profitability on the business’ activity.
#2: Develop internal controls
Implement internal controls to safeguard assets and ensure your practice’s transactions are captured in a complete, timely, and accurate manner.
Have a trustworthy person review the Audit Trail Report daily. Reviewing the practice’s daily transactions against the medical record should be done on a daily basis to:
- Keep up with adequate fee capture, fee changes, and/or deletions by team members
- Ensure the correct provider code was entered for the services rendered
- Safeguard against embezzlement and other financial errors
#3: Measure your data
Many practice owners and managers avoid measuring their practice data because they think it’s too time-consuming, complicated, or difficult. But, measuring your key performance indicators (KPIs), is how you’ll recognize areas where you’re strong and areas where you need to improve.
KPIs are like your practice’s pulse rate and blood pressure. They are tangible signals that help you make important decisions regarding fees, workflow efficiency, and the services you offer your clients. Evaluate your KPIs monthly and quarterly, and share them with your department leaders and managers so they understand how to improve their management of the team and operations of the business.
So, which KPIs should you measure? And, what do you measure them against? Check out the ninth edition of Financial and Productivity Pulsepoints from AAHA Press. This helpful book surveys various KPIs and profit centers in practices throughout the country, and the statistics can help you identify ideal targets for revenue, expenses, and profit margins.
Some common KPIs include:
- Total practice revenue
- Revenue centers as a percent of total revenue
- Expenses as a percent of total revenue
- Total practice transactions
- Practice average transaction charge
- Total clients
- New clients
- Client and patient visitation rate
- Client retention rate
- Total accounts receivable
- Revenue per patient
- Revenue per client
- Staff/doctor ratios
- Revenue per hour of operation
- Net income before and after owner compensation
These metrics will come from your practice management and accounting softwares. It’s helpful to track your information in a spreadsheet so you can combine multiple KPIs in one place.
Remember, what you don’t know can hurt you. Start measuring your data to help your practice grow and become more profitable.
Looking for more help on measuring your data and improving your bottom line? Join the waiting list for the Relationship Centered Practice Academy.