Keeping track of your pharmacy’s finances is vital for its success, writes John Thornett
Pharmacy owners quickly realise, one of the keys to success in business is well documented and thorough systems and procedures. Amongst those your internal financial systems must be the most important.
If you think about it, most of decisions that get made by business owners will have a financial impact. A good owner will track and assess the financial impacts of these decisions regularly.
Recording and tracking your financial position and trading performance accurately and readily is a key component in every pharmacy’s internal systems. What you can measure you can manage.
In this blog we share our top tips for a successful bookkeeping system, specifically for pharmacy.
1. Accuracy of Point of Sale data is vital if you want accurate and reliable financial data. Your Point of Sale system provides you with a whole wealth of information. Stock value, script numbers, customer numbers, prescription sales, retail sales, gross profits, GP Margins, departmental performance, sales trends etc. You cannot hope to have accurate financial reports if your Point of Sale system produces rubbish data. Garbage in, garbage out. Focus on getting your POS data accurate and reliable.
2. You don’t need to have vast shelving full of leaver arch files full of reports, invoices, statements, wage records etc. It is just not necessary. You can employ a full paperless bookkeeping system that is reliable, user friendly and more easily accessible than any paper-based system. The technology is there now. Take advantage of the software that is currently available to ensure your systems are as efficient as possible.
3. A key issue many bookkeepers suffer from is diligently following a system without stopping to ask the question “Does it make sense?”. Make sure you always have a thorough review of the data and financial reports and check for things that don’t make sense. You will be surprised by the problems we have uncovered because we looked at the data and asked, “This doesn’t make sense?”. Don’t be a robot; review and check the data like a hound dog, get it right and fix it up.
4. Reconcile Stock on Hand every month. A common factor with most “below-par’ bookkeeping systems is not reconciling stock no hand every month. Stock fluctuations are common in pharmacy and trading results are easily distorted by reporting this correctly.
5. Ensure the physical stock on hand is the same as the POS value. Again, a common factor with poor systems is the accounts have been reconciled to POS value, which bears no resemblance to the actual values
6. Ensure you take up and reconcile customer debtors every month. Customer Debtors are often over looked and can have an impact on your figures. It also pays to review these regularly, to chase up late payers and write off any bad debts.
7. Outstanding PBS also needs to be reconciled every month. Again, this is something that is often overlooked, but can have a huge impact on your trading results. However, it is one of the most difficult items to reconcile. You have two options here, you can raise a debtor for the PBS amount received on the first Friday or two in the next month that relate to the prior month (subject to the timing of month end). Or you can raise an accrual for the amount expected to be received as per your POS and offset that against the amounts actually received. There are pro’s and con’s to both.
8. Make sure any stock transfers are processed properly. Any stock transferred into the store should be treated as a normal stock purchase. With transfers out, make sure the transfer is processed correctly in your POS, and the sale recorded not as income but as a negative in Cost of Goods sold. Any stock transfers shown as income will adversely impact your GP Margins. (Buy and sell for nil profit).
9. Ensure all stock purchase invoices are entered based on invoice date and GST taken up correctly. Invoices entered in with the wrong dates and with the wrong GST treatments happens far too frequently.
10. Make sure you maintain strict controls over cash handling and banking. Misappropriations of cash happens far too often in pharmacy. Don’t think you will be immune.
We have plenty of other systems, ideas and tips for pharmacy owners to help them improve their internal financial systems. Accuracy of data is vital. Good decisions can only come from good data.
Remember, we’re available to assist should you ever need a review of your bookkeeping systems. Furthermore, there is the option to outsource the bookkeeping function of your pharmacy to us. We are the experts in pharmacy and will help you reach new heights in your business.
John Thornett is the director of Peak Strategies.