Use a checkup to measure your veterinary practice's health
You're in the health and wellness business, and your patient is your practice. At the 2013 VHMA Annual Meeting, David McCormick, MS, and Leslie Mamalis, MBA, MSIT, CVA, discussed an often neglected measure of practice health: financial wellness.
Start with a health exam
Practice managers often begin their health exam by looking at the overt indicators of wellness. Practice managers may depend upon certain surface measures of well being. These may include:> Reviewing the client base to determine whether it's solid
> Exploring the practice's reputation
> Determining how well the veterinary team is working together and whether staff is united in their pursuit of the practice's goals
> Assessing how current your team is on advances in veterinary medicine
Any one of the above strategies is a useful, if limited, indicator of health. But, when you combine the indicators, a richer picture of health emerges. And to be fully informed, you need to factor in financial health.
Use the right tests
Performing a financial analysis is comparable to the blood test. Although more involved, the financial analysis will yield a much stronger read on the practice's health. Financial health is positive if a practice demonstrates these steps:
> Effectively manages debt, credit and leases
> Has created an emergency fund
> Uses a budget
> Has developed a plan with measurable goals
> Is profitable, with revenues greater than expenses
Create a treatment plan
Considering the long-term profitability, not just short-term profitability, is paramount. When you focus exclusively on the bottom line of financial statements and tax returns, you can lose sight of your long-term plan. Financial statements and production reports provide a wealth of essential information you should review at least monthly. Get into the details. Yes, it's important to look at revenue, but don't neglect average transaction charges and number of transactions.
Be a student of history and study historic revenue and spending patterns as well as monthly cash flow. The more you know, the more sensitive you will be when subtle changes occur. When you spot inconsistencies, dig for more information. The quicker you respond to these changes, the faster you can bring revenues and spending back on track.
The financial picture combined with other measures of performance will offer the strongest overview of where the practice has been and which strategies will ensure long-term success. Visit http://dvm360.com/VHMA for a tool to help you support your practice's financial health.
Christine Shupe is the executive director of the Veterinary Hospital Managers Association. The association is dedicated to serving professionals in veterinary management through education, certification and networking.