Economic sessions packed at NAVC
The economy was on the mind of many attendees at the North American Veterinary Conference in Orlando, Fla.
Several sessions on practice management and financial concepts were attended by well over two hundred people. Karen Felsted, CPA, DVM, CVPM, presented several talks including a lecture on benchmarking, and another on managing cash flow.
In “Benchmarking: What Data Should You Compare Your Hospital To?” Felsted discussed the key economic indicators that practices should be looking at, in comparison to other practices.
“If you are not comparing your numbers on a regular basis, you’re not on the way to being a financially successful practice,” Felsted said.
She cited a 2006 AVMA-Pfizer survey that found practices that used financial concepts, such as benchmarking and budgeting, to manage their businesses, earned two-thirds more than practices who did not. On average practices that used the financial concepts out-earned those that didn’t by nearly $50,000 a year.
In previous articles and talks, Felsted has stressed that simply raising fees is not a sustainable way to stay profitable, a point she re-iterated at this session. Other methods must be employed if a practice is to remain profitable in the long run.
“Some fees have gone up an astounding amount,” Felsted said. “You’re going to have to increase earnings and profitability over raising fees.”
Charles Hiland, DVM, was in attendance at this session. Hiland, who owns three practices near Atlanta, Ga., said he is not a typical practice owner in terms of keeping tabs on finances.
“I keep track of everything,” Hiland said.
Each month, Hiland keeps track of how much total cash he has generated compared to the previous month and the previous year. He has also designed management tools for each of his three practices that keep track of person hours in 40-hour segments.
But, he said, he had to retire from practicing medicine to do all that.
“There are people who can manage and practice at the same time, and those who can’t,” Hiland said.
Hiland said the economy has affected his practices somewhat, although profits were flat last year. Even so, he has not completely ruled out expanding beyond three practices, a testament to his financial attention to detail.
“I have to be very prudent in what I do, or wait until the economy gets better,” Hiland said.
Felsted cited some of the most common tools for comparing your practice’s financial data with others.
- The National Commission on Veterinary Economic Issues (NCVEI) website. You will be asked to setup an account and enter your data into the website and then will be shown how your practice compares to others. There is no charge for any of these services and your data is stringently privacy protected. This is the most current data available.
- Financial & Productivity Pulsepoints (AAHA)
- AVMA Business Measures Study (AVMA)
- Benchmarks: A Study of Well-Managed Practices (Advanstar)
Felsted also talked about the importance of tracking and managing cash flow. Most financial reports in a practice are prepared on a tax basis, she said. They include items such as depreciation expenses or bad-debt expenses, which are non-cash expenses. Therefore, these types of reports are not useful for keeping track of the actual money as it comes in and out of your bank account.
If you keep track of your cash, you are less likely to run out of it, Felsted said. And running out of cash is the main reason that businesses fail. She pointed out that a practice should create two reports to manage cash flow. One is a cash flow budget that shows expected inflows and outflows of cash for each month of the year. The second report is a monthly cash flow statement, that show the starting balance in your cash accounts, the actual amounts of cash that came in and out of the accounts during the month, and the final balance at the end of the month.
These reports will help keep you in touch with your cash and can help you prepare for down times. Felsted advised keeping a cash reserve of between 3-6 months of operating expenses.