Like most small businesses, veterinarians have to be competitive and offer a suite of services directly and indirectly related to pet health and safety. And like medical offices, vets offer a variety of methods of payment, including cash, check, credit card, and even insurance.
Unlike a retail store chain, a gas station, or a hair stylist shop, veterinarians are viewed much like the old country doctor who will patiently provide health care, and then will gladly invoice the customer and/or accept partial payments.
The average American does very little in preparing for the future. In fact, according to the Federal Reserve, US Census Bureau:
- The average American family savings account balance is $3,800.
- 25% of American families have no savings at all.
- Only 38% of American adults have an emergency fund to fall back on.
- 40% of working Americans are not saving for retirement.
- The average amount saved for retirement is a meager $35,000.
- 24% of Americans postponed their retirement age because they can’t afford to stop working.
The question is what does the average
Veterinarian do in preparing for the future?
1. What are your veterinary practice’s cash flow requirements?
Take a few minutes under the harsh, cold light of reality to ask yourself how many of the following danger signals exist in your practice and then evaluate carefully their implications:
- An excess of unsold inventory
- Customers not paying their bills on time
- Tax obligations generally late — and getting later
- Writing business checks for personal expenses
- Bank loan overdue
- Paying suppliers late — and getting later
- Poor controls, presenting the opportunity for theft
- Showing profits, but having no cash
- Paying bills too early
- Seasonal slump — or boom — creating cash shortage
- Buying lots of fixed assets (like trucks, equipment, the latest and greatest…)
- Bank statement only reconciled once per year
- Missing most supplier discounts
- Excessive interest expense due to high loans
- Expenses rising dramatically from past years
- Financial reports only prepared once per year
- Not looking at or understanding our financial reports
- Bad debts increasing
- High moving items always out of stock — always a “crisis”
- Payroll checks written late
- No lawyer or accountant or financial advisor
Perhaps the greatest dangers of all: not having adequate records and/or financial skills to be able to answer all of these questions — or not having any questions to ask! Do you know where your employees and customers are at this very minute? Without adequate controls, they could be draining you out of house and home. Nero fiddled while Rome burned.
The danger signals listed above can creep up on you even in the good times. It’s like the chain letter phenomenon: it grows exponentially. The only successful strategy I know is a combination of planning, control, and attention. Successful business owners practice discipline every day so they’re always prepared. As veterinarians, we are business owners – practice owners – we must act accordingly.
2. How do you calculate them?
It all starts with an overview of the budget on the veterinary expenses and cost of operation for your practice. Let’s see if you can answer these cash flow questions
1. What are the fixed expenses for your practice, using a percent _____.
2. What is your goal for this year for fixed expenses, using a percent____.
3. What are the variable expenses of your practice, using a percent ___.
4. What is your goal, or budget, for variable expenses for this year, using a percent ____.
5. What is the percent of the gross veterinary remuneration, including owner veterinarian, but excluding boarding, grooming and OTC sales, using a percent ____.
6. What, after subtracting the fixed, variable and veterinary remuneration, is the profit of your practice, using a percent of the gross _____.
7. When investing in new technology and education, these are not fixed or variable expenses, but come from the profit side of the ledger. True or false? (answer true)
8. How much of your gross profit dollars are used for new technology and education to develop and upgrade to new or improved services, using a percent _____.
9. How do your numbers compare to national norms?
10. And then one sneaky little question…how much of your gross expenses are hidden personal expenses, using a percent ______.
For a typical American practice, consider the
following percentages that lead to good cash flow:
* Facilities. About 7 percent is the normal of expense for good cash flow. Exceptions exist.
* General expenses. About 13 percent is the normal of expense for good cash flow. Exceptions exist.
* Total fixed expenses should be around 20 percent. This is the normal of expense for good cash flow.
* Drugs and Supplies. For a typical practice 15 percent is the normal of expense for good cash flow
* Support Labor becomes interesting in assorted practices. Routine medicine and “9 to 5” practices can (and will) be in the upper teens-18 to 20 percent of the normal of expense for good cash flow. While advanced technology-based practices can expect support labor expense to run closer to 25 percent of the normal of expense for good cash flow.
* Profits: Will vary for good cash flow but you should have a Reinvestment amount of (5%) – and an amount of Cash (15%)
Simple Steps to Improve Your Veterinary Practice’s Cash Flow
Blending the practice of veterinary medicine with sound economics is very important to the overall well-being of a practice. Some of the steps to improve your veterinary practice’s cash flow can include:
(1): Debt Review
The first step is to compile a schedule of all of debts. In that schedule, include the original loan amount, the current obligation, the interest rate, monthly payment and term of the loan. This concise and well-outlined list will allow you to get the true picture of monthly cash leaving the practice to cover debt.
(2): Interest Rates
Next, review this debt schedule to identify any debts at interest rates higher than today’s available rates. Normal interest rates are currently between 5 and 7.5 percent. The debt schedule allows you to easily see the range of rates you are paying and the monthly obligation of each note.
If the debts were originated at a higher rate, consult with a lending professional who can quickly find an additional $5,000, $10,000 or more to add to your bottom line over the course of a year. If you have a $500,000 obligation that has a current interest rate of 8.5 percent and you can refinance this into a 5.5 percent rate, you would save $15,000 per year or $1,250 per month.
A second key piece of your debt review will include looking at the term of loans on all existing debts. In general, you can finance practice assets over a term of 10 years; real estate is financed over up to 25 years; and individual equipment pieces are generally shorter at five years but as a package can be on a term up to 10 years.
A wide range of terms is available for the debt. Lenders have different approaches but in tight cash-flow times, maximizing the term of your debt can help provide you with a more manageable monthly obligation.
This is best demonstrated through an example.
If you have several different leases that total $150,000 at an interest rate of 5 percent with each of them on a five-year term, you have an annual payment of $33,968.22. If you are able to roll these loans into a loan with other associated practice debt and place it on a 10-year term, the resulting payment of $19,091.70 will reduce the annual obligation by $14,877 per year.
(3): Revolving Debts
The final step is to review trade accounts, credit cards and other revolving debts associated with the practice and closely monitor these obligations. In many instances, as cash flow gets tighter, we start to rely on trade and revolving debt to carry the practice, convincing ourselves that we will get this paid in full the next month.
If you are in a position where you have accumulated a high level of revolving credit that isn’t being paid off in your busy season, take immediate steps to stop this cycle.
Stop purchasing supplies on credit and complete an exhaustive review of expenses. This detailed review will allow you to make appropriate adjustments. If these adjustments are not easily identified, it might be wise for you to seek a financial checkup on your practice.
Once you have tightened the spending or increased revenue to where you don’t need revolving debt, then you can term the existing balance out through a five- to 10-year term loan. This will allow you to have a reasonable payment and a plan to reduce principal.
You get in trouble if you have not fixed your cash-flow problem and continue to borrow on your existing lines of credit.
These guidelines are just a starting point to use as you assess your clinic’s obligations and payments. Interest rates and the type of credit you are carrying can help reduce the monthly cash demands of your debt.
In an economy where every dollar matters, this can be one tool that business owners can utilize to maximize their cash flow.
(4): Third-Party Assistance
A third-party is a viable option when it comes to collecting receivables from your clients. If hiring a debt collection agency isn’t your ideal approach, an outsourced accounting partner can assist you. By reaching out to your customers you could expedite the collection process in a way that does not hurt your valued customer relationships.
(5): Easy Payment Options for Clients
Third-party assistance isn’t just there to help your business – it’s also a great option for your customers.
“Clients are requesting payment options and many practices prefer to accept a third-party financing program, in addition to other forms of tender, because it enables them to focus on delivering care and provides resources to help clients more easily fit the cost of pet treatment into their budget.”
Setting up internal payment plans for your customers is another way that you can increase the likelihood of collecting money on time while building client loyalty. Charging customers a manageable monthly maintenance fee that covers your basic services and allows customers to bring in their pet throughout the year provides you with predictable revenue and eases your customer’s financial burden of having to pay all at once.
(6): Online Payment Options
Making it as easy as possible for your customers to pay creates a win-win scenario. How easy is it for customers to pay their bills on your website? There are software systems available that can safely store credit card information, giving you the peace of mind of already having their payment information while simultaneously making customers’ bill paying process as easy as a few clicks. There are also apps available that allow vets to swipe customers’ credit cards using a smart-phone, making it simple for vets to accept up-front payments even on the road.
You don’t have to choose between ensuring your practice’s financial health or making your customers happy and your patients healthy. Dedicating some time to setting up efficient systems can lessen the financial burden on both you and your customers.
Having a positive cash flow is a critical piece of the financial puzzle, but is still only part of what you need to consider when it comes to creating effective financial processes. The right outsourced accounting partner can help your office team more effectively manage your practice’s accounting needs, allowing you to focus on what you do best.
Veterinary Practice Financing Solutions designed to help you succeed
In addition to a full range of animal hospital financing options, we offer the critical knowledge you need to establish and develop your business, which helps you develop vital management skills.
(7): Micro Loans: The Veterinarians’ Unsecured Micro Loans Solution
We understand the strain that can be placed upon the cash flow of Veterinarians. The time it takes for most cases to come to fruition can be very prohibitive and the need for a good solution is more a necessity than a requirement.
We provide micro loans so that you can source the necessary finance that will enable you to have a huge impact on the success of your business when you need it. Unlike traditional banks our loans are based on the health of your company and cash flow, NOT on credit scores.
You’ll get a complete financing solution, when you want a loan of $5,000 or $250,000+ with a term of 3 months to 18 months. The easy application process consists of a simple one page application and 4 months of bank statements plus your profit & loss statement. Loans come with fixed interest and fixed payments; that are approved in 72 hours, funded in 7-10 days and have an easy 1 page application.
No hassles and no long waits for a response. This helps you can focus on running and growing your business.
We understand business – businesses need capital to work, and bank loans are tough to get, even for healthy small businesses. The difference we can make besides our exceptional customer service and our professional and experienced opinion is the reality that you can receive your funding easily and quickly. Apply for Veterinarians’ Micro Finance today…
When choosing a finance partner you should always make sure that you are dealing with a company that has an established pedigree and one that can actually do what they say. Too often we are told that companies can move heaven and earth however when it comes down to it the results can be very poor.
This is exactly the opposite of what we do here. We simply promise to listen to your requirement and respond in the most appropriate manner. So you tell us what you need and we will let you know whether we can assist. Our veterinarians’ loans are flexible. They give you the chance to decide how and when you want to spend your loan and the time frame in which to pay it back.
HOW CAN MICRO FINANCE HELP YOU?
Our micro loans for Veterinarians can help you to keep your cash flow running smoothly, enable you to pay for a large expensive item, or simply give you a little extra to help you pay the bills. The difference our Veterinarians’ loans can make is enormous. We understand the complex regulatory environment you operate in and we can tailor our business funding to suit your needs.
WE OFFER THE FOLLOWING BENEFITS:
- Budget planning – Our unsecured loans for barristers have proven returns on investment, allowing you to spend on equipment or training while minimizing your capital outlay
- Alternative credit – We are not bound by restrictive lending issues and we have multiple sources of finance to draw upon
- Flexibility – We can cover almost all aspects of your business expenditure and the finance can be arranged to suit your requirement
Our unsecured micro loan is an agreed loan not secured against business or personal assets. It has been created to allow businesses to:
- Enjoy greater financial freedom to invest as they choose
- Gain significant cash flow advantages
- Gain access to an additional line of credit
- Invest with less risk, as loans are not secured against personal or business assets.
An unsecured micro loan offers a host of attractive benefits. These include:
- No impact on existing banking arrangements –existing financial arrangements will not be affected at all
- No deposit – there are usually no deposits or pre-payments required
- No invoices – usually there is no need to present invoices
- Tailored loans – agreements can be customized to individual requirements
- Fixed charges – repayment and interest charges are fixed for the duration of the agreement
- Repayment periods – repayments and interest charges are scheduled over an agreed period of time, usually between 3 months and 18 months
- Payment of funds – funds are paid direct into your practice
- No limits – the loan can be used for virtually any business purpose from Office Furniture to Relocation Costs or Private Medical Schemes; Refurbishment; IT Hardware/Software; Telecoms; Office Equipment; Furniture; Building Works; Tax Liability; Vehicles; Expansion; Relocation; Practice Acquisition; Partnership Buy In/Out; Practice Mergers; Recruitment; Fee Purchase; Partnership Equity Purchase; Professional indemnity insurance and more.
Our Micro Loan Promise
From our extensive experience, we believe that our clients’ business interests and requirements are best served by us acting as a partner, rather than simply a supplier of funds. Our policy is to listen to our clients’ long and short term business plans before recommending an appropriate financial solution. This pledge to engage carefully with clients’ business needs and aspirations is just the first step in what we call the PBI Micro Loan Promise.
Our Micro Loan Promise comprises a number of undertakings we give to every one of our clients. It can be described as follows:
- Listening and learning – we undertake to listen to our clients’ business objectives and learn how they wish to grow their business.
- A personal approach – no two clients’ plans or ideas are the same; we treat every practice’s needs individually.
- Total confidentiality – clients can be assured of our complete discretion.
- Minimal bureaucracy – paperwork and administration are kept to a minimum.
- No prepayment – to ensure continued smooth client cash flow, we never ask for prepayments or deposits.
- Fast response – we do our utmost to avoid delays or bottlenecks in order to effect solutions swiftly and effectively.
Ask about micro loans today and receive your funding within days. If that is not what you want consider our full range of financing options for attorneys, including the critical knowledge you need to establish and develop your firm. We work with Veterinarians all across the country, so we know what it takes to manage your business in the most efficient, cost-effective way.
(2): Get up to $200,000 for Partnership Buy-In in Capital Loan
As a vet, you’re well aware that buying into a partnership is something you may do just once in your lifetime. That’s why you need to work with someone who can make it as easy as possible from start to finish.
We offer flexible repayment options and knowledgeable associates to help you with your decision. Resources available to you include:
- Buy-in financing for up to 10% ownership of the business
- Customized loan amounts that provide necessary capital financing for your firm
- Flexible payment structures to fit your law firm’s capital distribution schedule
- Interest only payment options for up to 13 months available
- Fixed rate terms to meet your specific needs with competitive rates
- The ultimate in flexibility and control, with principal reduction and early payoff options
- Borrow $25,000 to $200,000 at terms up to 10 years
(3): Purchase or refinance the building that’s right for you through a Commercial Real Estate Loans
When leasing space isn’t the best option, it may be time to consider buying or relocating to your own building.
We offer a complete suite of real estate loan products including first mortgages, refinancing and more. We’ll customize a financing solution that meets the specific needs of your firm. Our financing program include:
- Loans up to $5 million
- Conventional loans with simple applications and short approval times
- 6 months of no payments or up to 12-month interest-only options—make lower payments while you adjust to ownership
- Payment schedules up to 25 years to keep payments affordable
The ultimate in flexibility and control with principal reduction and early payoff options
(4): Improvements- Expansion and Relocation Loans: It’s a big decision—relax, we’re here to help you every step of the way
The professional and financial rewards of expanding or remodeling your practice can be well worth the effort—especially when you have our professional practice financing experts on your team.
We can help you locate reliable, reasonably priced sources for everything from equipment to software. We offer resources that may enable you to determine cost-effective methods for remodeling and expanding, and can discuss financing alternatives to help you achieve your dream of a more profitable practice—now and in the future.
- 100% financing for everything from architectural and design fees to renovations, construction, equipment and other project expenses—including tenant improvements
- Interest-only payments for 12 months or deferred payments for 6 months to lower payments after remodeling or expanding
- No payments during the draw period
- Longer repayment terms than anyone else in the industry—up to 10 years—to keep payments low and affordable
- Fixed rates to suit your practice needs
- Up to 12-month rate lock, through project build-out phase, to protect against potential rate changes
- The ultimate in flexibility and control with principal reduction and early payoff options
- A dedicated project manager resource to help get things done on time and within budget
(5): Equipment Loans: We make the Equipment Purchase Process quick and easy
When your equipment breaks down or becomes obsolete, you may need to replace it quickly. We understand. That’s why in most equipment purchase situations no tax returns or financial statements are required. Even if you’re not in a hurry, you’ll appreciate the financial advice and assistance we can offer.
We’ll explain the tax benefits you can receive from depreciation and first-year write-offs—as well as the Section 179 tax implications—of qualifying equipment and software purchases. We’ll even help you decide between leasing and buying. We offer a wide variety of financial options and flexible terms that will make upgrading your equipment easier than you ever imagined.
- Quick credit decisions on loans up to $75,000 for equipment or consulting
- Preserve working capital with 3- or 6-month deferred payment options
- Quick and easy phone application process
- Comprehensive financing for everything from installation to training and equipment costs
- No application or closing costs—to save you money right from the start
- Simple interest payoffs and principal reductions that put you back in control
- Flexible payment structures with terms up to 7 years to meet your needs
- Up to $10,000 travel reimbursement for consulting
(6): Simplify your financial life with a Practice Debt Consolidation Loans
Now you can leverage your professional equity to upgrade or expand, fund future growth, consolidate bills into one low monthly payment or improve your cash flow by lowering your overhead. We’ll work with you to customize a plan that suits your income, debt level and plans for the future.
- Sensible solutions at competitive rates
- Financing up to 65% of your business revenue to help you consolidate debt and lower your monthly payments
- Repayment terms up to 10 years—to keep payments low and affordable
- The ultimate in flexibility and control with principal reduction and early payoff options
Note: All programs subject to credit approval and loan amounts are subject to creditworthiness. Some restrictions may apply. The term, amount, interest rate and repayment schedule for your loan, and any product features, including interest rate locks, may vary depending on your creditworthiness and on the type, amount and collateral for your loan.
As the central topic of innumerable books, workshops, and speeches, it’s almost become “white noise” to many business owners. To most financial advisers, however, convincing their clients of the absolute necessity of maintaining a sound financial system and cash controls — and the need to consistently review, evaluate, and plan — is about as easy as selling first aid.
Everyone knows it’s there but we can always “do it later.” Besides, “it won’t happen to me.” Or, “So what? I don’t have any control over all that stuff.” Ah, but you do, and what does this mean for individual businesses?
The loud and clear message is “manage better.” You have to do a better job when there’s less room for error.
As practice owners, we have faced economic cycles forever — and probably always will. In addition, technology and social change have drastically impacted many industries, not to mention competition. The devastating impact of the Great Recession is just the most recent example.
In a positive expanding economy, the primary focus is on sales as an easy indicator of success or failure. Many practice owners and managers devote relatively little time to efficiency and control, and often, virtually no effort is made to manage the balance sheet.
Then, the economy changes (as it always does!), or competition enters the scene – or both. Profits are squeezed and volume declines. Prices are lowered in an effort to bolster sagging volumes. Lower prices mean lower margins. Lose a little on each sale and make it up on volume. High leverage makes debt harder to service and increases interest expense. Suddenly, the areas of control and management become key focal points.
In a recessionary or changing economy, survival becomes the key issue and cash flow is king. Emphasis switches from profits to cash flow and the highly leveraged, inefficient firms become statistics.
The primary message focuses on the importance of establishing, maintaining, and using financial controls.
We need to answer the questions, “Where does the cash go?” In business, owners often get trapped because they don’t heed the messages their business sends and they don’t pay attention to basic principles. Does this sound vaguely familiar?
It should – we tell our clients the exact same thing with respect to the health of their animals! It’s amazing how similar the principles of the Universe affect everything similarly.
Remember this: good times don’t last; but neither do bad times. Nothing lasts forever. When things change, you need to be just like a good Boy Scout — prepared. So we know planning is the vital element, especially when we’re talking about cash flow. Danger signals are just that — signals. The longer you wait the fewer options you will have. Now is the time to gain control and keep it. By using the cash flow checklist, you’ll take positive steps toward being a survivor — not a statistic.
Protect your cash flow lifeline and your business will survive and prosper. Remember this: you pay taxes on net profits, but you eat on cash flow.
This way of life has permeated into the business sector as well, with many of today’s veterinary practices struggling to remain financially stable. But to help veterinarians like yourself regain control of cash flow and better prepare for the future, we gave you the simple steps you can implement today!
YOUR TURN: What has been your go-to approach for managing your cash flow? We’d love to hear some tips that you learned along the way to becoming a successful veterinarian. Share your story!
Call to see what we can do for you call us and one of our experienced managers will be delighted to assist. Please advise how we can help you succeed in your business. Our suite of lending solutions and panel of financial providers means we can tailor our loans to suit your individual needs, allowing you to overcome or prevent any cash flow difficulties. We offer a swift, confidential and personalized service, and our experience allows us to understand the issues affecting veterinarians.
The Business Doctor
Profit Builders Inc.