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Understanding Key Veterinary Practice Financial Statements

What is one of the largest expenses for veterinary practice?

A report by the NCVEI showed that practice growth in 2008 was about 4 percent. The way we respond to adversity is what makes the difference. We can hang our heads and wring our hands, or we can make our clinics more efficient and profitable—either attitude is self-fulfilling.

Why are some vet practices more valuable than others?

As James Cleary details in his book, Atomic Habits, there is a surprisingly narrow gap that separates the good performance from the great performance. And that narrow gap is separated by small habits and daily rituals. Establishing relevant KPIs and striving to achieve them brings attention to those tactics and makes it more likely you’ll achieve your profitability goals.

Startup Working Capital for a Veterinarian Clinic

Beyond the cloud, practice management software (VPMS) improves efficiency and accuracy in accounting and record-keeping within veterinary practices. Practice managers can benefit from digital platforms such as Weave, which help automate the measurement of KPIs and monitoring of business metrics, providing insights for improvement. IRS regulations dictate that many of the pieces of equipment veterinary practices purchase are scheduled to be depreciated over a five-year timeline. Profitability is the critical success factor for every veterinary practice as it is the accurate measure of the practice’s financial health. Implementing and aligning strategies to measure profitability and growth doesn’t have to be complicated.

Inventory management

Our teams know that when we do a good job of controlling costs, we have more dollars available for staff events or bonuses. Labor expenses are the single largest cost area for a practice, representing approximately 40% of total expenditures. For veterinarians, profits are the financial benefit realized when the revenue a practice generates exceeds the expenses, costs, and taxes necessary to operate the practice. If revenues don’t exceed expenses, a practice will likely fail like the brands above.

What is one of the largest expenses for veterinary practice?

And for business owners nearing retirement and considering the sale of their practice, one that generates more profits translates into a business that’s worth more to a potential buyer. Frequently, many of the variable costs come with credit attached. Most of the veterinary wholesalers, from whom we buy the majority of our supplies, offer credit of between 20 and 50 days, depending on when you make your purchase. Salaries are often referred to by accountants as variable costs, but most practice managers know these are actually fixed costs and treat them as such. Poor cost control wastes your clients’ expenditure (or donations or university grants) that could otherwise be used to improve the practice. Financial wellness programs can also alleviate stress for veterinary teams by offering tools for day-to-day financial pressures and future planning.

Discover Opportunities for Incremental Growth and Downstream Revenue

Both of these numbers are used in calculating your basis and whether you have taken excess distributions in the year triggering additional taxable income. If your bookkeeper is up to date and reconciling your account, the cash accounts will show the cash balance in your accounts. This quick breakdown of your statements can help you interpret the financial aspects of your business even when your financial advisor, bookkeeper or office manager isn’t around.

  • Of course, the best strategy can benefit from increasing revenue while also keeping expenses in check.
  • Knowledge of costs will help you reduce waste within your practice, will help your practice flourish and ensure that you are able to provide the best you can for your patients (and yourself!).
  • Understanding financial goals intimately and navigating the complex, unique aspects of veterinary accounting are necessary.
  • Take some time to review your staffing and scheduling practices.
  • However, as with any big investment, purchasing a veterinary practice does come with a degree of risk.

Optimizing Your Practice: Top Strategies for Accounting for Veterinarians

What is one of the largest expenses for veterinary practice?

Depreciation expense is a method of cost allocation, as opposed to the other categories that entail paying bills out of bank accounts. As such, management decisions regarding current tax laws and codes as well as accountant oversight are bookkeeping for veterinarians necessary for the expense entries related to depreciation. Unfortunately, when profits are lacking, good employees leave, software and equipment upgrades are delayed and if the business stagnates, clients move on to other practices.

The Largest Expense: Labor Costs

  • Our veterinary staff are our businesses’ most valuable resource.
  • If operating costs are included in your lease agreement, find out what is included in those costs, and be sure you are not paying for unreasonable expenses such as real estate broker commissions or building repairs.
  • Could continuing education for your staff expand their skill set and increase flexibility?
  • Most practice management software systems can calculate prices.
  • Implementing and aligning strategies to measure profitability and growth doesn’t have to be complicated.
  • Making a significant decision includes choosing the right CPA for your veterinary practice.
  • Cash flow is the amount that your practice actually collects (cash) in excess of what it pays out.
  • If you can also compare your fiscal ledger to your competitors, you can maximize that success.
  • After this point, the practice can ostensibly become profitable, depending on how’ well any revenue above the break-even point exceeds the variable costs of running the practice (Figure 1).
  • It is important to categorise costs, as each practice’s expenditure is finite.
  • He works with practices in the southern Wisconsin and Fox Valley areas to manage cash flow, assess financial performance and growth, and evaluate expenditures.
  • There will also be an account for your personal estimated tax payments.

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