To grow your cash flow, it’s important to keep up with the numbers. Investing in a competent accountant can help you keep your books in order and updated at least monthly or quarterly
As with any business, strong and consistent cash flow is essential to running your business effectively. The same applies to pharmacies. When your pharmacy is struggling with financial liquidity, you see the impact in other areas of your business. Cash problems can be disastrous for businesses, so it is very important to actively manage your accounts and balance sheets to avoid serious problems. If your pharmacy’s cash flow is limited, you need to employ some strategies that can help you rejuvenate your pharmacy business. Here are 5 strategies you can implement to improve your pharmacy’s cash flow.
One of the most important steps to improving your cash flow is managing your inventory. While inventory is a driver of cash flow and profitability, it can also be a huge expense when products aren’t returned. Inventory turnover is a metric that measures how many times you’ve sold and traded your inventory over a period of time. A healthy ratio for an efficient dispensary is 12–13 times a year, which means you sell all of your inventory and replace it about 12–13 times a year.
By understanding the product movements in your store, you can make decisions that will save you big bucks. Look at your customers’ spending habits. Inventory levels and consumer habits are also constantly changing. However, if you pay attention to your catalog and the types of products that you don’t sell regularly, you can manage your product catalog more effectively.
For many pharmacy owners, an inventory management system can be a huge asset and bring a number of benefits. For many pharmacies, McKesson integrates directly with their inventory management system to enable automated ordering, prescription ordering, and inventory management. This type of system can help you avoid freezing too much money on products that don’t sell. It can also help you save money on storing these items.
Many stores do not integrate their inventory management system with their main suppliers. With these stores, you’ll likely spend more time and money on labor costs than you spend on manual ordering and inventory management. In these cases, medication and other inventory should be tracked at the end of each month to limit excessive inventory investments.
You often buy an extra item or two when you go to the grocery store with a list of items to buy. In pharmacies, the same behavior can also increase sales and improve cash flow. While product management is critical to the success of a pharmacy’s cash flow, product expansion can also be an effective method of increasing profits. Provide a variety of pharmacy-related products that your patients can purchase immediately, rather than just buying prescriptions and over-the-counter products. Think about the needs of your customers and the questions they ask when they visit your store.
This way, you can determine if there is a demand for the product. Most of the patients in many pharmacies are elderly people who also need home care products such as walking sticks, blood pressure monitors, compression stockings, etc. to be profitable. It’s not uncommon for our best customers to only sell products with a profit margin of 30% or more.
Just looking at your monthly expenses can have a big impact on the overall profit of your business. Unfortunately, most owners don’t talk to their accountant until after the end of the year, leaving them blindfolded when it comes to managing income and expenses. The most common cost savings we see fall into the following categories: Telephone costs Insurance Unnecessary subscriptions POS systems Bank fees Advertising is not measured by sales. Labor costs are not measured An efficient pharmacy has overhead costs of around 20% to 25% of total sales.
Your overhead includes day-to-day out-of-stock pharmacy expenses such as rent, staff, marketing, accounting, utilities, franchise fees, etc. If you fall outside of this target range, you may be overspending in your store, and you may have an opportunity to reduce the expenses. Staff is one of the highest expenses of any pharmacy. Looking at metrics like scripts per hour worked can help you determine if you’re understaffed. While this rate varies based on the size of the business, the average is around 6-7 scripts completed per hour.
Sometimes the bookkeeping of your pharmacy can be the biggest challenge for independent pharmacies. To grow your cash flow, it’s important to keep up with the numbers. Investing in a competent accountant can help you keep your books in order and updated at least monthly or quarterly. It pays to hire a competent accountant to help you better understand the financial aspects of your business. These include sales growth by department, gross margins, prescription of products versus first-hand products, credit, payroll, and tax minimization.
Accountants are in many ways like pharmacists: they can do much more than file tax returns (or, in the case of a pharmacist, dispense medicines). The true strength of accountants lies in their value-added services, such as providing advice and strategies to help you increase the profitability of your business and minimize taxes. Especially if you are struggling to grow your business’s cash flow, an experienced accountant will work with you to create a budget.
This allows you to set revenue, expense, and profit targets. If you meet throughout the year, together you can compare the budget to actual results and assess the performance. A competent accountant should serve as your company’s chief financial officer. To achieve this, we work with you to set goals and hold you accountable for the actions needed to achieve them. Help track key metrics, understand what the numbers are saying, and create an action plan that will take your business to the next level.