Equine Q&A: My net profit is sinking
You're right to think raising fees isn't always the answer. There are other ways to increase your net too, says Dr. Jim Guenther, MBA, CVPM, a Veterinary Economics Editorial Advisory Board member and consultant with Strategic Veterinary Solutions in Asheville, N.C.
Examine your expenses
First, take a close look at expenses. The three most important are salaries, rent, and drugs/medical supplies. As an ambulatory doctor, your rent and salaries should be under control. That leaves drugs and medical supplies.
A good current benchmark for drugs and supplies as a percentage of gross revenue is 20 percent to 22 percent. If your percentage is higher, revisit your inventory management and re-evaluate your system.
"Order less product, write more scripts, and make sure your markups are where they need to be," Dr. Guenther says. If you can lower this expense and maintain the same gross revenue, your profit improves. (See related links below for an article by Veterinary Economics Editorial Advisory Board member Gary Glassman, CPA, on harnessing your equine practice inventory.)
Mind your missed charges
No one likes to monitor records for missed charges—all the paperwork—but it's a crucial part of improving your bottom line. If you're doing work and not being paid for it, you're letting pure profit slip through your fingers.
For example, Dr. Guenther says, several years ago IDEXX found the average practice missed nearly 20 percent of lab services charges. "I'd bet if it's true for lab services, it's true for almost every area of your practice," he says.
To find out how much you're undercharging or failing to charge, audit some of your medical records daily. Compare client invoices, medical records, and travel sheets (if you use them). You'll see the revenue you're losing every day. Recapture those missing-in-action charges right now and improve the profitability of your practice.