Understanding Your Finances Impacts a Lot More Than Your Check Book Balance
As an independent pharmacy owner, you spend an incredible amount of time running and growing your business, but do you truly understand the finances behind it all? There is money coming in and money going out – but it’s much more than that. If you take a deeper look and develop a more comprehensive understanding, there is a wealth of information behind the numbers that can be used to make important decisions about your pharmacy.
Understanding your financial statement is a great place to start. Three reports make up your financial statement (and tell quite a story); the Balance Sheet, Income Statement, and the Statement of Cash Flows. It’s more than just inputting numbers though. By learning what each of these reports mean, and how they work together, you will develop an understanding of your finances that will give you with the clarity you need to make better business decisions.
- The Balance Sheet will tell you about your assets, liabilities and equity at a given point in time.
- The Income Statement tells the story of your profitability over specific time frame.
- The Statement of Cash Flows tracks the sources of your cash – and where your cash is going – for a specific time frame.
October is Financial Awareness Month here at PDS. We believe that having financial awareness is crucial to developing a plan for success and growing your bottom line (which is what we all want to do!). You need to know where you stand now to figure out where you need to go. By knowing and understanding your financials, you will be able to take control and make better and more informed decisions about your pharmacy.
So how do you get started?
Meet with your accountant or bookkeeper to review your financial statement. Ask them to compare your finances against industry benchmarks. For example, some good questions to ask are:
- How much inventory should I be carrying?
- Are my payroll expenses in line?
- Are my accounts receivable where they should be?
With answers to these questions and others you will know where you stand and be able to set a course for improvement if necessary.
Knowing where you stand financially can determine if you fail or succeed. Take the steps to succeed.
PDS can help you get started. We offer a Pharmacy Performance Analysis to independent pharmacy owners. This is a no-obligation analysis that will provide you with an understanding of your pharmacy across four quadrants and eight key performance indicators, including finances.
Available to both members and non-members, PDSfinancials offers pharmacy-specific accounting services. Working with industry professionals, you will receive unique, actionable insights in additional to traditional bookkeeping and monthly financials.
For PDS members, log into PDSadvantage to find the applicable financial resources in the the Knowledge Library that will help you develop a stronger awareness around your financials. Cash Flow Projections, Budgeting Worksheets, and the Financial Report Definitions are just a few that are available to you with additional detail so you can expand your knowledge and start making your finances work for you.
You can also reach out to your Performance Specialist and they can assist you. To accelerate your financial learning curve, sign up for the upcoming Cash Flow 101 training on November 14 – 16 with Dan Benamoz and Tom Wheelright, the leading authorities on pharmacy finances.
“If you can’t read the scoreboard, you don’t know the score. If you don’t know the score, you can’t tell the winners from the losers.”
-Warren Buffet
