7 Tips For Better Financial Management of Your Veterinary Practice

Strong financial management is a critical component of any business, particularly for complex organizations with multiple revenue streams, such as veterinary practices. Although balancing the books is an essential task, financial management also considers the decisions you make for the team’s future growth and success. 

Here are eight tips from the Shepherd team that veterinary leaders can apply to their practices to improve financial management and strengthen long-term business health. 

1. Know your numbers

Your hospital’s financial data (e.g., profit and loss statements, monthly balance sheets, financial reports) helps you understand how well (or poorly) the hospital is doing. Ignoring important metrics is not an effective strategy because you can’t plan for the future without knowing where you are now.

Choose a veterinary software system with built-in financial reporting or easy integration with outside accounting tools, and commit to running the reports or balancing the books monthly. If you’re new to practice finances, hire a consultant to help you get started on the right foot.

2. Categorize revenue

Do you know where your income comes from? A veterinary practice includes many different revenue streams under one roof, and each one can have a different level of performance that impacts the overall profitability. For example, diagnostics might be booming, while retail sales are lagging. 

Separating revenue into categories using an organized system, such as the AAHA/VMG Chart of Accounts, can help you better understand and manage your business. The best practice management software systems let you use customizable tags to automatically identify and organize services according to your chart of accounts

3. Capture all charges

Uncaptured service charges pose a challenge to successful financial management. Help your team understand that small omissions add up quickly and can significantly impact your bottom line. Adopting software with automatic charge capture, which builds an invoice as treatments are administered, can ensure your time, skill, and overhead costs are accounted for on client invoices. Automatic charge capture reduces the chance of human error and eliminates missed charges.

4. Set measurable and achievable goals

Vague goals like “do better this year” aren’t helpful for long-term growth and financial stability.  Instead, set clear, measurable targets for revenue and profit margins in the coming month or year, and then use cloud software reporting tools to track your progress. Benchmarking tools from AAHA and other industry-leading organizations can help you set realistic goals based on the performance of other hospitals in your area. 

5. Control inventory costs

The cost of goods sold (COGS) ties up around one-fifth of practice revenue. Keeping too much or not enough inventory on hand can impact this figure, ultimately shrinking your profit margins. Poor inventory management can also drive away frustrated clients or team members when you never seem to have what they need. Use inventory management tools built into your cloud-based software or partner platforms that integrate easily with your current system to manage costs more effectively.

6. Use an integrated payment processor

Outstanding client accounts can be a massive problem in veterinary practice, but pet owners who can’t afford to pay in full at the time of service still need to provide care for their pets. A flexible payment system provides clients with multiple options for payment and financing. Choose a cloud-based veterinary software system that integrates these payment options into one easily managed dashboard to ease the administrative burden on your team. 

7. Involve the team

Your team is less likely to slip discounts onto invoices or “accidentally” forget to include services on bills if they understand the financial difficulties of running a practice, and where client payments are going. Getting everyone on the same page and listening to your team’s concerns about pricing and fairness helps ensure consistent charging practices and a steady income stream. 

Supporting financial clarity with Shepherd

With the right tools, support, and financial management habits, veterinary practices can become sustainable businesses that support pets and people in their communities. Modern, cloud-based veterinary practice management software systems form the basis of sound financial management.

Shepherd is veterinarian-designed and backed by professionals who want to see you succeed. Contact us to book a demo and see how cloud-based software built to simplify your day can help you manage your numbers with ease.