5 Smart Ways to Improve Your Veterinary Practice Finances and Cash Flow
In veterinary practice finances, cash flow is king. Even with a packed schedule, excellent patient outcomes, and a great reputation, inconsistent cash flow can put your practice’s financial health and bottom line at risk.
Much advice available on revenue optimization and cash flow management in veterinary practice is generic and doesn’t account for the unique needs and structures of veterinary businesses. Here are five practical, yet overlooked, ways small animal veterinary clinics can improve their cash flow without burning out their teams or compromising patient care.
1. Use cash flow forecasting
Many practice owners, especially those in small clinics, overlook forecasting because it seems like a task reserved for accountants or MBAs. However, this critical strategy is more straightforward than you might think. Forecasting involves estimating how much money will come in and go out over a specific future period, typically a month or quarter.
A cash flow forecast helps you:
- Avoid surprises
- Time major purchases
- Plan promotions
Forecasting veterinary practice finances uses your financial statements (e.g., profit and loss statement, balance sheet) to see what’s on the books currently, examine recent trends, and then factor in upcoming expenses. Most practice management software systems include a reporting or forecasting tool. Alternatively, you can outsource this aspect of financial management to your bookkeeper or CPA and discuss their predictions during monthly check-ins.
2. Reassess pricing strategies
Reviewing and adjusting your pricing strategy can have significant effects on veterinary practice finances and overall revenue optimization. Value-based pricing is a strategy that places a premium on skilled services, while making prices for vaccines, wellness exams, and other essential services more affordable. Benchmarking your fees against those of similar practices in your area or specialty is a great place to start, but it shouldn’t be the sole decision-making strategy in your long-term pricing plan.
3. Automate workflows
Missed charges, overlooked follow-up calls, and unbooked wellness services are silent drains on vet practice profits. Making a slew of calls each day to check on patients and remind clients to schedule visits, refill medications, or pay overdue balances ties up the front desk and technician team for hours. Eliminating these time-wasters lets team members focus on caring for patients and clients in the hospital, which directly drives revenue and cash flow.
Switching to a cloud-based practice management software system allows teams to take full advantage of automation and digital communication features that send reminders and follow-ups so you don’t have to. Configure your system to send emails and texts in advance of upcoming services and appointments to reduce CSR busywork.
4. Improve inventory management
Poorly managed inventory ties up the clinic’s cash and leaves it sitting on a shelf. For most clinics, the cost of goods sold occupies a significant chunk of the balance sheet and impacts overall veterinary practice finances. Many practices overstock to avoid running out of medications or supplies, or they underestimate needs and frequently scramble to place last-minute orders. Either way, the hospital loses money.
To tighten up inventory management:
- Phase out items that don’t sell
- Set reorder levels based on historical usage
- Consolidate vendors and order days
- Use PIMS inventory tools or third-party programs like Inventory Ally
5. Make informed decisions
To improve cash flow and veterinary practice finances, business owners must learn what works for them and what doesn’t. Tracking metrics can help you determine which services and providers are the most profitable and where you’ve stagnated or are actively losing profit, so you can make decisions that support growth over time.
To improve overall practice profitability, explore the reporting features in your PIMS or consider consulting a professional in accounting and bookkeeping for assistance in understanding them. Select metrics to track based on your clinic’s long-term objectives, which might also require consultation with an expert.
Financial stability without sacrifice
Improving veterinary practice finances doesn’t mean you have to set unreasonable prices or cut corners on patient care and staffing. Reliable cash flow depends on simple systems that reduce waste and an understanding of what makes your practice tick.
For practice owners, financial business management may be outside your wheelhouse. A good accountant, tax professional, and bookkeeper are critical to financial growth when you don’t have the time or training to manage these yourself. Invest in your practice’s future, and start managing cash flow smarter instead of working harder.
