Introduction:
Managing a healthy veterinary practice requires utilizing various tools and strategies to achieve optimal outcomes. One such tool is the financial statements of your hospital, which can be likened to bloodwork for your business. In this blog post, we will explore how you can leverage your financial statements in a similar way to bloodwork, allowing you to assess, diagnose, develop a treatment plan, and complete a re-check for the health of your veterinary practice.
Healthy Ranges are Defined:
Similar to how different values in bloodwork indicate the functioning of specific organs or systems in the body, each account in your financial statements tests the overall health of various business systems. The key areas of focus include cost of goods sold, support staff salaries, veterinary salaries, and rent. By setting up your financials to allow for easy comparison between periods, you can identify trends and symptoms in your business that require diagnosis and treatment. Someone in the organization must be responsible for the health of the practice by monitoring the healthy ranges of these areas of business. Without having accurate and timely financial bloodwork, you can fall too high or even too low. Ignoring the bloodwork seems inconsequential in the short term but just like the health of our animal friends, a proactive approach ensures a long healthy life.
Excellent Diagnostic Tool:
Quality financial statements serve as a diagnostic tool for managing your hospital’s financial and business health. Just as bloodwork provides insights into potential causes of symptoms in an unhealthy patient, financial statements can pinpoint specific areas of concern in your business. If you utilize the right tools in your preparation of the financial bloodwork of your hospital and review this information with a clear and unbiased mindset you can identify the areas of opportunity in your hospital. This allows you to develop your treatment plan and test the impact of your treatment plan, the same as the way you treat a patient.
Completing Diagnosis and Developing a Treatment:
To effectively evaluate the financial and business health of your hospital, use diagnostic tools in conjunction with your regular observations and experience in the business. Refer to industry standard guidelines when proceeding with the analysis of the results. Ensure the Key Performance Indicators (KPI’s) of your practice fall within the healthy range and if not work to develop your treatment plan. These additional steps help narrow down the causes of symptoms, just as they do in treating a patient. If you require assistance with this process, there are advisors available who can help you gain the necessary knowledge. Once you have identified the root causes, you can develop, implement, and execute a treatment plan. Not all diagnoses are good news but when paired with a straight forward and measurable treatment plan, a healthy outcome is possible.
Complete the Re-Check:
Skipping re-check appointments can lead to the manifestation of bigger problems down the line, both in the case of patient health and your hospital’s financial health. To prevent this, set a frequent follow-up to assess the progress of your treatment plan and review the financial diagnostics of your hospital. If the test indicates that something must be done immediately, a weekly check in is needed whereas a moderate issue can be assessed monthly. Regularly re-evaluating your financial statements ensures that your business remains on track and enables you to make any necessary adjustments. Ensure that whoever is in charge of the treatment plan, stays accountable and provide regular updates.
Requires Calibration for Accuracy:
Just as regular calibration of chemistry analyzers ensures accurate bloodwork results, calibration of your financial statements is crucial. Using proper tools such as the AAHA chart of accounts and correct cost/forensic accounting is essential for obtaining accurate and calibrated financial results. Working with experienced accountants who can correctly code your revenue and expenses will provide you with reliable information to identify areas in need of a treatment plan. As mentioned above, when picking the right tool, you must calibrate that tool often to make sure it’s providing accurate results. That might mean that a bookkeeper is delivering books to do the taxes, but can an expert accountant deliver action items, needed to get results. The misconception here is that the cost is more but in reality the improvement in the health of your business creates more short-term cash flow and long term value.
Timely Information is Essential:
Timeliness is critical when it comes to bloodwork, as waiting for results after surgery would hinder decision-making. Similarly, effective financial statements should be closed out and delivered for review within 30 days of the end of the month, if not sooner. Timely financial information allows you to make informed decisions that impact your business based on current data rather than relying on outdated information from several months ago. If you’re making decisions on an internal bleed that started months ago, you’re already too late.
Conclusion:
Investing in high-quality, accurate, well-calibrated, and timely financial statements is the foundation for building a strong veterinary hospital that can make timely and sound business decisions. By treating your financial statements like bloodwork, you can assess, diagnose, develop a treatment plan, and complete re-checks to ensure the health and success of your practice. If you’re interested in finding a partner to provide accurate and timely financial reporting for your veterinary hospital, consider reaching out to Eric Josovitz, the founder of AdaptCFO, at https://www.adaptcfo.com/vet to learn more about veterinary financial statements.
