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Solving the Mystery of Cash Flow vs. Profit 

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 “I feel like I’m making money, but I don’t have any” is something Florida CPA Michael Floyd hears from independent pharmacy owners all the time. The first thing he explains to them is that cash flow and profit are not the same. Profit is theoretical, whereas cash is real. You can be turning a profit on paper and still be left with little to no cash on hand. 

cash flow statement

The many grants and PPP funding available to pharmacies throughout the pandemic helped independent pharmacy owners with cash flow, but they also caused many to lose sight of the bigger profit picture. While these programs helped fix temporary cash flow issues, they gave many independent pharmacies an inflated sense of profits. Floyd describes these funds as a bandaid and now that they are running dry, he’s getting calls for advice on a long-term solution to financial health. The first step to achieving this is to solve the mystery of cash flow versus profit once and for all. 

Accounts Payable and Receivable 

Two of the key accounts affecting your cash flow are accounts payable and accounts receivable. Accounts payable are amounts that you owe to creditors and accounts receivable are amounts due to you from revenue sources like PBMs. When you pay off an account payable, it has a negative effect on your cash flow and no effect on your profit. When you get paid for an account receivable, it has a positive impact on your cash flow, but, again, no impact on your profit. These transactions do not affect your profits because they were already recorded as revenue and expenses on the dates they were accrued (assuming you are using the standard accrual system of accounting).  

Floyd recommends collecting your accounts receivable as early as possible to improve your cash flow. This will also help bring your cash flow figures closer to your profits. On the flip side, he suggests waiting as long as possible to pay your accounts payable unless you will receive a discount for paying early. If your vendors offer an early payment discount, then pay sooner. 

Inventory  

Another account that often affects your cash flow but not your profit is your inventory. When you purchase and pay for your inventory, it has a negative impact on your cash flow because you are turning your cash into inventory. On the profit side, these purchases won’t be reflected on your income statement until after the goods are sold. Having a large inventory on hand is a common reason independent pharmacy owners experience cash flow problems. You can work with your PDS coach to better predict the needs of your patients to decrease the amount of inventory you need to shelve. 

Understanding Your Statement of Cash Flow 

Profits are displayed on your income statement while cash flow are reflected on your statement of cash flow. These statements are typically generated alongside one another, but the cash flow statement is severely underutilized when it comes to independent financial analysis. This is an area that PDS coaches work closely with clients on to help foster a better understanding of all the pharmacy financials.  

On your statement, you will see three sections: operating, investing, and financing. These sections are different from what appears on your income statement and balance sheet and they give you different insights into the performance of your pharmacy.  

Operations is the first section that you need to focus on. If you have a positive number in the operations section of your  statement, it means your day-to-day operations are generating cash. That’s extremely important. Investing gives you insight into changes in cash flow related to the purchase of assets like equipment while financing lets you know if your cash is coming from a source used to finance operations. Note that the grants and PPP funds would appear in the financing section of your cash flow statement and not the operations section. If you are not on payroll in your pharmacy, the dividends and draws that have been paid out to you will also appear in the financing section. Categorizing your cash flow this way helps you to differentiate between funds generated by business activities and those coming from outside sources. 

 

Improve Your Finances With PDS 

When you become a PDS member, you have the option to pass on your bookkeeping to our experienced PDSfinancials team. If cash flow and profit remain a mystery for you, our team of professionals can help you analyze all of your financial statements on a monthly basis and create a budget to help you make better decisions for improving your finances. We also provide a complementary financial analysis for all new PDS members. Get in touch with us today to learn more. 

 

COVID Testing

COVID Testing: It’s Not Too Late

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Independent pharmacies are uniquely positioned to help their communities. COVID testing is still in high demand and there is a limited opportunity for our industry to provide the testing services their patients need and boost their profits.  

At this point, COVID has been a significant issue in our lives for almost a year (doesn’t seem real!). Many pharmacies think it’s too late to get started with COVID testing – but it’s not. The sooner you start providing testing services, the sooner you will be able to help those in need, increase your patient base, and drive revenue into your pharmacy that the PBMs can’t touch.  

You Decided to Provide Testing, Now What?

Once you’ve decided to bring testing into your pharmacy, the first consideration to make is do you have a CLIA Waiver. 

COVID Testing

If the answer is YES: 

You are ready to go! You’ll want to make sure you are registered as an independent lab for billing (if applicable). With the waiver, you can collect samples and process tests in your pharmacy. You’re also able to bill cash OR insurance for the tests.  

If the answer is NO: 

You will need to obtain a CLIA Waiver if you plan to process directly in your pharmacy or if you plan to bill insurance. Without a CLIA Waiver, you can only collect the samples and send them to a CLIA compliant lab to process. Whatever process you choose, it is highly recommended to get a CLIA Waiver to make sure you are compliant and things go smoothly. The good news is it’s easy and fast! NCPA has a great video that shows you how to complete the waiver.   

Implementation: Start with the Logistics 


Decide what test(s) you will offer.  

Questions to consider 

What options do you want to provide for your customers? Some employers or travel companies require different types of tests. Do you want to provide the Rapid Antigen Test? The PCR Test? Both? 

What kind of laboratory experience is required to administer the test and what level of training is needed? 

What is the test sensitivity and specificity? The more accurate the tests you are using are, the more confidence you will be able to instill in your in patients. Along with this, you will also want to think about the speed of the test and how quickly your patients need results. 

Discuss how you will document and bill for COVID testing. 

Questions to consider 

Are you going to charge your customers directly or bill insurance? You will need to take requirements into consideration. Many pharmacies have found that their customers WILL pay directly or with FSA/HSA. Patients are also able to submit for reimbursement through their medical insurance, and you can support them by providing the proper documentation. 

Will you use a manual / paper process or set yourself up to operate online? A manual system works well for low volume testing but if demand is high, an online system will help you to automate processes and minimize disruptions to the pharmacy’s overall workflow. The advantages of using an online system are it allows you to implement an appointment-based model with automated scheduling, encourages contactless online payments, and it opens the window for vaccinations moving forward.  

Check with your local health department for any reporting requirements. 

Steps to take 

Every state has their own requirements and they often differ, especially on the reporting side. We recommend that you start with your local county health department. They are normally very accessible and they will provide you will reporting requirements, specific forms for testing documentation, and requirements for waste generation.  

Next, check with the board of pharmacy to ensure you are compliant. With the high demand for COVID information, you can often find information in their FAQs or on their website. 

Once you have the logistics figured out, the next steps are to focus on education and workflow for your pharmacy and then execution. You can download the COVID Testing Implementation Plan that will give you the full list of steps you need to take to start testing in your pharmacy.   

COVID Testing Success 

Carolina COVID testingMany independent pharmacies are successfully implementing testing in their pharmacies. By following a strategic implementation plan, educating your employees, and considering the needs of your community, you can provide testing and be profitable. One PDS Member, Carolina Pharmacy Group, started doing curbside COVID testing (both antigen and PCR testing) and saw immediate demand (and ROI!). 

Since December, the Carolina team has done well over 6,000 tests. The pharmacy is not billing insurance and payments are made online. Currently they are experiencing an ROI of 10x.  

“Honestly this is the best return the pharmacy has seen since generics hit our shelves.” 

– Kavel Bhathela, PharmD and COVID Testing Lead at Carolina Pharmacy

Best practices for COVID testing

  • The pharmacy hired outside nursing staff to help with the tests to minimize disruption to their regular workflow and not cross-pollinate the pharmacy team with the testing team.  
  • They gained their team’s confidence by properly training them about the transmission of COVID, proper hygiene and PPE usage.  
  • The pharmacy provided education on the different tests available to the public and their application.   

Carolina Pharmacy is now offering services to help other independent pharmacies provide testing, help their communities, and increase their bottom line. Visit their website to learn more or place an order.  

Need More Information?

If you still need more help deciding if testing is right for you, schedule a call with PDS or watch our latest webinar: Your Blueprint for Successful COVID Testing.  

Click here to view the full PDS COVID Optimization Program. 

Open Enrollment

Open Enrollment: Help Your Patients and Protect Your Profits

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Every year, Medicare’s Open Enrollment period is October 15 – December 7. The process of enrolling or updating plans can be frustrating for aging patients, resulting in many staying with a plan, even if it isn’t the best option for their healthcare needs. Helping patients navigate this process is an excellent opportunity for independent pharmacies to act as a healthcare resource for their community. Providing high-touch, personalized service improves retention and increases the probability of the patient enrolling in a mutually beneficial plan, one that saves them money and doesn’t hurt your pharmacy’s bottom line.  

Differentiate by Delivering Exceptional Care 

Open Enrollment

The truth in our industry is that business growth can only come from great patient care. Launching a program around Open Enrollment doesn’t have to be intimidating. Start by identifying two important groups of patients in your dispensing data, those who are eligible for the first time to enroll in Medicare and patients who may benefit from an Open Enrollment consultation to select a plan.  

Once you’ve identified who would benefit from your expertise, start getting the word out, in your store and in your community.  

  • Marketing Your Services: Create in-store signs, bag stuffers, and encourage your team to highlight that your pharmacy is offering plan reviews.  
  • Encourage Referrals: Give cards with contact information to younger patients to share with their parents or older family members.  
  • Community Outreach: In-person events may not be in the cards for 2021 Open Enrollment, but you can still connect through Zoom or other video chat portals. Reach out to local prescribers and long-term care facilities to support their patient’s needs.  

What Pharmacy Owners Need to Know About Open Enrollment  


Prioritize Your Efforts in Open Enrollment


Priority #1 – Using your dispensing software or Amplicare Match identify the patients that meet two specific criteria.  

  • Those currently enrolled in a plan that will NOT be the most affordable for them next year. 

           AND  

  •  The most affordable plan next year is also the plan that will provide the highest contribution to pharmacy revenue.  

If the plan doesn’t decrease the out-of-pocket cost for the patient, we don’t recommend making the switch. The focus for any Open Enrollment period should be around improving outcomes and decreasing co-pays and premiums for your patients.  


Priority #2 – Find the patients that simply are not enrolled in the most affordable option.  

Conducting plan comparisons builds the relationship with patients and your pharmacy. If you can help your patients understand their options, save them money, and help them switch to a plan that suits their health care need, they are more likely to continue filling prescriptions with your pharmacy.  

PRO-TIP: Create a PDF that highlights how much you patient stands to save on their prescriptions per month. Always try to quantify the value you provide when possible.  


Priority #3 – Identify Low Income Subsidy (LIS) Network Patients.  

An often-overlooked segment of patients is those currently enrolled in or eligible for the Low Income Subsidy Network (LIS). There are four groups of people who may benefit from a consultation or assistance submitting the application for the LIS coverage.  

The premium and co-pays for are often the same or comparable across these benchmark plans; allowing you to help them choose a plan that offers better reimbursements and lower DIR fees for your region. Additionally, helping patients who qualify, but aren’t currently enrolled can help in driving referral traffic. You and your team can connect with low-income clinics highlighting this service for vulnerable patients.  

Identify Which Plans… 

  • Have restrictions in place 
  • Pharmacists and patients should know which plans cover ALL their drugs, require prior authorization, or step therapy for certain drugs. 
  • Have formulary changes 
  • Ensure you know the cost of a patient’s plan based on upcoming changes. This can help you find medication alternatives for patients that may not want to switch plans but their medication coverage has changed.  

Start Connecting with Patients Early and Often 

Some Medicare plans begin communicating with patients about their options before they turn 65, to shift their business to a chain or mail-order pharmacy. Reaching out to eligible patients before they are steered away from your pharmacy is critical.  

Additionally, many Medicare members are eligible for an annual MTM review with a pharmacist. Reaching out for an MTM prior to open enrollment helps keep the patient and pharmacist informed, as well as identify opportunities to highlight ways to save your patient money during the open enrollment period.  

Want More Information?

PDS teamed up with Amplicare to help pharmacy owners discover Open Enrollment Tactics that they can implement NOW to protect (and increase) their profits in the coming year. Watch this webinar to learn how to compare plans for patients, identify and act on win-win opportunities for patients and the pharmacy, mitigate DIR fees, and hear about the Amplicare features available to help you this fall.

Top 4 Benefits of Attending a Pharmacy Business Conference

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There are multiple benefits to attending a pharmacy business conference. The most significant is spending three laser-focused days working ON your pharmacy, not just IN it. We told you it would be Game On in 2020, but we could have never predicted that you’d be leading your communities through a pandemic. The year has been rife with challenges, and yet we’ve seen first-hand how independent pharmacies have stepped up their game. After everything we’ve faced together, it will be more important than ever to surround yourself with the best and brightest in our industry. 

Do you…  

  • Believe independents deserve to thrive?  
  • Want to contribute to the industry positively?  
  • Think that the only way to navigate uncertainty is with a community?   

Then you can’t afford to miss the 2021 PDS Super-Conference. Join a growing movement of healthcare providers, pharmacy owners, and their teams who are committed to saving their business and changing the way they play the game against PBMs. This event is the ONLY pharmacy conference of its kind; keep reading as we outline the top four benefits of attending PDS 2021.

attending a pharmacy business conference

Discover the Possibilities of Finding Success 

If you’re reading this, you likely already realize that there is a better way to run your pharmacy. The first step though is to decide if you’re ready to get out from behind the bench. Attending PDS 2021 is seeing what is possible. Connecting at the Super-Conference puts you right in front of pharmacy owners that have found success despite industry challenges.

Learn how:

Leave with Actionable Takeaways  

When you get back to your pharmacy on the Monday after the conference, you’ll have real information to make immediate improvements. By design, the Super-Conference answers your questions will practical, actionable solutions. Our focus on delivering real strategies is a huge benefit to attending a pharmacy conference focused on developing you as a business owner. As we move into 2021, we must re-imagine the physical and digital patient experience. Don’t go it alone. Click below to watch some highly impactful presentations from past conferences. 

Improve your Profitability 

You didn’t get into the pharmacy business to barely survive. Helping patients and improving pharmacy profitability doesn’t have to be at odds. The truth is that real growth only comes from excellent patient care. You can’t control third-party reimbursements, so you must find other ways to improve profitability. Your business and patients will benefit from attending a pharmacy conference that will increase your bottom line and improve patient outcomes.

Learn From the All-Stars

attending a pharmacy business conferenceEvery year the top performers in our industry gather to inspire and learn from each other. We feature the best and brightest owners on the main stage in the general session, exhibitors and partners highlight their strategies, and you’ll find their case studies and success stories throughout the event. 

Here are a few tips to make the most of your time at the conference with this community. 

  • Speak to as many attendees as possible. You are among a fantastic group of pharmacy owners and staff – the nicest, most successful folks in our industry. Ask how they have succeeded, and please share your insights with them.
  • Prepare to change your mindset. Please let go of the notion that the traditional dispensing model is the only way to succeed in this industry. There is a world of opportunity if we can learn and adapt.
  • Involve your team. A great team aligned behind a clear strategy is unstoppable.
  • Visit our exhibitor partners. Please explore how they can become your solution partners, chances are high that whatever roadblock you’re facing has been solved by someone else. Ask questions, and make connections. 

Join Your Peers at PDS 2021

Independent pharmacy owners deserve to thrive. Take the first step to claim your success at the PDS Super-Conference. For 3-days, we deliver groundbreaking innovation, exclusive exhibitor solutions, and keynote speakers that will empower and inspire the best in you and your team. Register below with the promo code SUMMER20 to save over 40%, and you’ll receive a complimentary companion ticket. Remember, we want you to feel comfortable with your registration, so all tickets are 100% refundable before October 1st, 2020.

COVID-19 and Your Pharmacy

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COVID-19, also known as the Coronavirus, has impacted the entire globe. This is a time that we must come together to help each other, support each other, and share information that will make this situation just a little more manageable. During this pandemic, PDS is here for our members, our communities, and the overall independent pharmacy industry.

Independent pharmacies have the chance to lead the charge and bring guidance, solutions and resolve for their patients and communities. As people continue to look for answers and ways to protect themselves and their families, PDS continues to compile resources and provide ideas and options so that pharmacies can help combat the spread of COVID-19 and support their communities. We are all in this together.

 

*Updated May 14, 2020*

An important update was released on May 13, 2020 that provides clarification around how SBA will review borrowers’ required good-faith certification concerning the necessity of their loan request.

LEARN MORE

Even as some of the country starts to open, we are all still trying to navigate this situation. The last two webinars in our series have been focused on continuing to grow and improve your pharmacy during COVID-19. We discussed topics on how marketing looks different right now (but is still necessary) and best practices to lead your team and continue to drive success. The replays are available if you missed it.

WATCH

 

*Updated May 5, 2020*

Advertising for your Pharmacy in the COVID Crisis

How are you letting your community know that you’re open for business during the COVID crisis? Leventhal Productions is a specialized advertising agency that has established itself in the independent pharmacy community and healthcare industry over the past 30+ years. Get in touch and let us help you spread the word that your pharmacy is open and ready to serve the community.

 

*Updated April 23, 2020*

*NEW* Paycheck Protection Program (PPP) Update

The first iteration of the Paycheck Protection Program was funded with $350 billion and ran out of money within 13 days. The only reason it took that long was because the banks had to get their portals and systems in place. The next round of funding that will be coming, is expected to run out of funds even faster.

If you didn’t get funded during Round 1, here is what you need to know to be ready for Round 2:

  • If you have an approved loan that is not funded yet, there is nothing you need to do
  • You can apply at a different institution with no penalties. Many members have expressed frustration with the “big banks” so you can move your application to another institution
  • Review information on the available PPP and EIDL programs from the SBA
  • Review HealthGrowth Pharmacy Solutions’ website for necessary documentation, application, and other important information
  • Ensure your application is filled out completely and correctly and submit your application to the bank of your choice
  • Once the next round of funding is approved, get a confirmation of approval from your bank


Proceed with Caution on Antibody Tests

(This is from our friends at NCPA but we wanted to share here in case you missed it). Companies selling SARS-CoV-2 antibody tests are coming at pharmacies from all directions. Before you perform a test on a patient, verify that the test is deemed to be authorized for the CLIA-waived setting by checking the list of test kit manufacturers with an FDA emergency use authorization. There must be a “W” in the column titled “Authorized Settings” for any test to be performed in a CLIA-waived laboratory. This includes test kits that are part of a telehealth bundle. Pharmacies that purchase antibody test kits in anticipation of the product becoming authorized for use in CLIA-waived settings do so at their own risk.

 

*Updated April 16, 2020*

COVID-19 Testing and Resources

With the recent HHS announcement surrounding COVID-19 testing by pharmacists, we are sharing information and where to purchase testing kits. Please understand that PDS is only relaying information as it is developed, and during this pandemic time, pharmacies and pharmacists need to follow state and federal law while ensuring they are testing in accordance within all applicable guidelines. 

Updated CLIA Certificate Waiver Requirements

As of 4/16/2020,  it was announced that pharmacies will need a CLIA Certificate of Waiver in order to participate in testing: if you plan to offer COVID-19 testing in your store, you will need to have a CLIA Certificate of Waiver. For most, this is a very easy process. Fill out the application and mail it in to your state. The form is used for different types of labs, so NCPA has a short video to show you how a pharmacy would likely want to complete the form. You’ll find the video link near the top of the NCPA Coronavirus Information Page.

HHS Statement


CLIA Testing Information


NCPA Guidance on Testing

 

*Updated April 9, 2020*

Rapid Test for the Detection of COVID-19

COVID-19 Rapid test kits are becoming available through different channels. This is not a diagnostic test, but a test to determine if the patient has developed antibodies against the infection.


Physician 360

Physician 360 has announced that rapid tests to aid in the diagnosis of COVID-19/SARS-CoV2 are now available! Learn more about Physician 360 rapid tests.

Your pharmacy can offer the benefits of:

·       Rapid serology test for SARS-CoV-2

·       Detects IgM and IgG antibodies

·       Results in 10-20 minutes

·       Telemedicine consult included

ORDER THE PHYSICIAN 360 RAPID TEST


Drugstore2Door

The COVID-19 Rapid 10-minute test kits are also still available for pre-order through Drugstore2Door. Results are available in 10 minutes and are 98.6% accurate. Drugstore2Door has provided additional test information for you to learn more.

PRE-ORDER THE COVID-19 RAPID TEST

 

The COVID-19 POC test kit is NOT a take home test kit, and the FDA has specific guidelines for pharmacists to follow.

  • A Pharmacist must screen (see CDC guidelines) for an active virus infection before a test may be administered
  • The testing sites can be inside, drive-thru or set up outside
  • Screening and test results must be documented and reported


Paycheck Protection Program (PPP)

The Paycheck Protection Program Application is now available. This program authorizes forgivable loans to small businesses to pay their employees during the COVID-19 crisis. Funds can also be used to pay interest on mortgages, rent, and utilities. We encourage you to speak to your financial advisor and take advantage of this opportunity.

PPP Overview

PPP Borrower Information Sheet 

PPP Borrower Application 

PPP Interim Final Rule *NEW*

 

*Updated March 30, 2020*

CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed Friday by the House. The act makes small businesses with 500 or fewer employees eligible for emergency grants and a forgivable loan program. There are also changes to rules for expenses and deductions meant to make it easier for small businesses to keep employees on the payroll and open for business. The legislation helps small business pharmacies’ employees as well, which is important as they are serving on the front lines of care during this pandemic. NCPA created a summary of the relevant provisions to help independent pharmacies.

READ THE NCPA SUMMARY

 

*Updated March 23, 2020*

Donate to First Responders

PCCA has developed four simple steps for the donation of hand sanitizer to first responders. This is an amazing way for local pharmacies to give back to their communities!

LEARN MORE

Webinar: Pharmacy Financial Health in Time of Crisis

With this pandemic, high demand, inventory turns, and changes in operational procedures are all impacting your pharmacy.  This webinar features tips and advice from PDS financial experts about maintaining your pharmacy’s financial health.

WATCH

COVID-19 Solutions to Help Your Pharmacy

We are focused on ways to help you keep your pharmacy and your patients healthy during the COVID-19 pandemic. Our most recent webinar featured solutions to help you better serve your patients and communities. Discover products to help combat the spread the virus, and direction on where to find high-demand disinfectants, test kits, and more.

 

 

*Updated March 20, 2020*

Updating Your Store Policy During COVID-19

It is important that during the time of the COVID-19 pandemic, independent pharmacies have guidance about new, short-term store policies. We have created a store policy document that many of our members are already implementing in their stores. We hope this will help give you some organizational structure and procedures in a time when things are constantly changing. Please feel free to use some or all of it and adjust according to your specific business needs.

DOWNLOAD COVID-19 STORE POLICY

 

*Updated March 18, 2020*

Special Edition Webinar – COVID Disinfecting Agents and Where to Buy

Sourcing hand sanitizer, masks, and cleaning supplies is getting harder by the hour.  PDS has vetted and found some suppliers that will have many high demand products available. Watch the following webinar to learn more.

  • Disinfectants
  • Hand Sanitizers
  • Masks
  • Tuzistra Cough Syrup
  • 1st Defense Nasal Screen

 

 

 

COVID-19 Resources

We have compiled information related to COVID-19. Please see below for resources related to operations, procedures, sanitation, best practices, and policies.


General Information


Medication or Supplement Information


Pharmacy Information


Leadership

 

Pharmacists will play a key role in access to healthcare during this outbreak. PDS suggests that you familiarize yourself with your state’s statutes that become enacted during declarations of health emergencies. These statutes often times allow you to refill prescriptions without doctor authorization or temporarily broaden your scope of practice. The best resource is your SBOP website along with your state pharmacy association.

For PDS members, log into PDSadvantage to find the applicable resources in the Knowledge Library that can help you navigate this difficult time such as access to product opportunities and financial resources.  Please contact your Performance Specialists and Coaches – they are here to answer your questions and address your concerns.

Three Tools that Lead to Smarter Decision Making in Independent Pharmacy

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When a methodology works for everyone, it gets its own name. Take Pearson’s Law, for example, which has helped everyone from basketball coaches to restaurateurs see better results. The rule says that “everything measured improves; everything measured and reported improves exponentially.”

In short: looking at your data leads to smarter choices. This is certainly true for pharmacy owners, who can find some of their most useful data in just three routine financial statements and gain the clarity and confidence to move their pharmacy forward.

Pharmacy Finances: If It’s Not Broke, Why Fix It?

Pharmacy owners don’t think about diving into their finances because that’s not what they studied to do (outside of a one-semester business class, maybe). Pharmacists are in the business of helping people, not balancing books – which is why they tend to be content as long as they’re in the black.

But the pharmacy world is fluid and increasingly suffocating, and without strategic financial planning, big moves (like opening a second location or taking on an esteemed hire) may not be feasible. Not being savvy with the financial basics and being unaware of the ins-and-outs of pharmacy performance data to make smart decisions — can cost your pharmacy businesses plenty.

In this blog, we’ll take a look at three financial statements, how to decode them, and what information you can get to develop the future of your pharmacy.

Get Your Footing with a Balance Sheet

Your Balance Sheet is a simplified overview of your current financial situation. It should be used to make budgetary decisions – similar to how you check your bank account balance before saying “yes” to that new car purchase.

The balance sheet lists everything in your pharmacy as either an asset or a liability for providing a comprehensive financial snapshot. Here are some quick tips for getting more out of your Balance Sheet:

  • Determine your accounting method. Ask your accountant whether he or she uses the Cash Method (working with money already in the bank or register) or the Accrual Method (popular with most pharmacies, it works with all money, including revenue still pending from insurance companies). As tax laws change, have discussions with your accountant about which method is best for your business.
  • Diagnose your pharmacy’s health. One of the most important figures here is the Retained Earnings, which is the go-to gauge for the health of your business. To find it, take your assets and liabilities (see the totals on the left- and right-hand side in the above example?) and add invested capital. The larger the difference, the healthier your pharmacy is.
  • Distinguish what you can (and would) invest. Know what you have in the bank to reinvest (e.g., “Current Assets”), and what is untouchable (e.g., “Payroll Account”). Determine what you feel comfortable with moving when considering what to spend. For example, what can you liquify from your Fixed Assets, like office equipment? To find out what you really have to work with, subtract the depreciation figure from your total fixed assets.
  • Work the ratio. The golden ratio for pharmacy owners is a different figure from that of Ancient Greece: for a healthy and robust pharmacy that is seeing positive growth, you want to have a 2:1 assets-to-liabilities ratio. This ratio is known as the quick ratio and can be an early indicator of financial trouble.

For more balance sheet hacks (and how often you should generate one), download our eBook or get in touch with us.

Income Statement = Outgoing Investments

An Income Statement is a two-page document that goes into further detail than the Balance Sheet. It will provide more insight around trends in your spending (where is the money pit?) and the performance of different revenue sources (like prescriptions vs. over-the-counter items). It’s also an excellent resource for comparing how your business has fared month-over-month or year-over-year.

     

It shows financial data current to the month, and data from the same time the year prior. Your revenue (income) should exceed costs (your spending). You’ll want to figure out the following using your Income Statement:

  • Find your hotspots. Even if your profits are stable, the sources may not be uniform; a few items could have wide profit margins while others really don’t, and this is certainly something to consider when deciding how to grow your business. The key lies in percentages. To find your gross margin, divide the gross profit by total revenues. To see your profit margins, divide net profit by total revenue.
  • Understand the outliers. Numbers don’t lie, but they don’t always tell the whole story. There are unlisted factors that pharmacy owners should consider when examining their Income Statement, such as depreciation. Using a car analogy, your new car lost some value as soon as you drove it off the lot — the same can apply to office equipment but it doesn’t affect cash. A good accountant will advise a pharmacy owner on how to work these factors into the equation.

For more information on this, read about additional influences you should consider when planning your pharmacy’s long-term success.

Go With The Cash Flow

A partner of the Income Statement is the Cash Flow Statement and is a bit of a fortune-teller. Instead of the retrospective that an Income Statement provides, the Cash Flow Statement gives pharmacy owners an idea of what to expect next.

The more pharmacy owners understand how to read this document; the more accurate their assessments will become over time. Here’s where to find some clues hidden in your Cash Flow Statement:

  • Ask for the time. While every business has a Cash Flow Statement, this document is especially valuable to pharmacists whose revenue is tied up with third-party payers. It’s difficult to accurately project future cash flow if you’re unsure of reimbursement time frames. To determine the gap, look at the difference in monthly revenue vs. cash sales (copays, OTC goods, etc.). Then add up the percentage of cash in Accounts Receivable that came from prior months’ sales. This will give you an idea of how much of your monthly cash flow relies on earlier transactions and how much available equity you shouldn’t expect to receive from your sales from month-to-month.
  • Play it safe. Always err on the side of underestimating the cash you expect to come in, and overestimate the cash you plan to spend, whether it’s due to surprise DIR fees or flood damage. Plus, ending up with more than you planned for is always a great way to operate!

Working With Your Accountant

Financial statements are interdependent, and you need both the parts and the whole to understand how you’re doing. Now that you’ve got the basics down for a better understanding of how your pharmacy is performing, it’s time to make informed, strategic decisions. This is a little harder to come by. And admittedly, even with a better understanding of these three financial statements, pharmacy owners have too much on their plate to stay on top of intelligent accounting choices. That’s why it’s crucial for pharmacy owners to partner with accountants who deeply understand the industry. Anyone can produce a Balance Sheet, but unless those numbers are examined in the context of the pharmacy industry, it’s easy for even the best accountant to miss key data (for example, taking DIR fees, 340b contracts and clawbacks into consideration). For a checklist of questions to ask your accountant in addition to tips for accounting software users, download our eBook. Are you interested in working with us to make more of your pharmacy? Good, because so are we! Schedule a short call with our accounting team.

For PDS members, log into PDSadvantage to find the applicable pharmacy team resources in the Knowledge Library that can help you start making your finances work for you such as the Finances Peer Group, Budgeting Worksheet, Profit vs. Cash Flow, and many more.

Your TEAM is a critical piece of the puzzle

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What comes to mind when you think of pharmacy success? Most will mention efficient operations, the ability to grow, and of course, profitability. When it comes to measuring success though, one critical aspect of the business that is often overlooked is the TEAM. It’s not that they aren’t important, it’s that business owners often fail to recognize the direct and immediate impact their employees can have on the bottom line.

In any business, including independent pharmacy, individual employee performance impacts the performance of the team as a whole. In order to run a truly successful business, you must have an engaged and dedicated team. So how do you get there? What will the impact be when you do?

PDS member, Travis Wolff of Med-World Pharmacy, realized how important this piece of the puzzle was. He DOUBLED his revenue in only 9 months by focusing on (you guessed it) – his TEAM and their engagement.

 

Watch this webinar from the Oval Group, LLC, a PDS partner, to hear this inspiring story.

 

Are you ready to experience the impact of an engaged team? Here are a few things you can do to get started.

  1. Review your current team – are their roles aligned with their abilities? Aligning existing talent with responsibilities that fit their strengths can make a big difference in their performance.
  2. Look at your hiring process so you can hire and select the right staff. According to the Society of Human Resources, 80% of employee turnover is due to bad hiring decisions.
  3. Understand your employees and help them understand themselves. There are many assessments available that allow you to take a deeper look at the individuals on your team and figure out how to configure your team for success.
  4. Enhance team communications to increase efficiency and productivity. This will help improve morale by reducing stress and conflict.

The right team in the right roles with the right goals will be as invested in the success of your pharmacy as you are. Getting there is not always easy, but the outcome is worth it.

For PDS members, log into PDSadvantage to find the applicable pharmacy team resources in the Knowledge Library that can help you start engaging your team on a higher level such as Designing Your Company Culture, Recruiting, Hiring, Training and Retaining the Right People, Incentivizing Your Team, and many more.

PDS partners are vital to the success of our members. The Oval Group LLC is a talent management solutions provider that specializes in tools that enable business owners and corporate executives to make informed strategic decisions about their unique business and the people who hold the keys to its success.

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