Accounting is an essential aspect of your business, but as a pharmacist, you might feel in over your head. Even if it seems like you’re getting by from month to month, you’re probably not maximizing your potential outcomes. Worstcase scenario, your lack of accounting expertise could be putting your pharmacy at risk.
“The pharmacy owner who believes he can be an accountant as well as a pharmacist spends precious hours stressfully doing the books that most often end up inaccurate,” said Phil Reck, a mentor with the Service Corps of Retired Executives (SCORE), a partner of the U.S. Small Business Administration that counsels America’s small business owners.
Your accounting needs to be accurate to not only handle your day-to-day cash flow, but also, to be able to set long-term goals for your pharmacy.
Accounting is the “language of business,” and if utilized correctly, can give you important insights into your pharmacy’s financial health. If managed incorrectly, however, it can cause your business to sink before you even know what’s happening.
Here are some common accounting mistakes small business owners make. Avoiding these in your pharmacy can set you up for success.
1. Not knowing where you stand
If you don’t know the state of your finances, or if you aren’t using reliable, accurate numbers to guide you, then you might as well be driving blind. Without this knowledge, you can’t set goals for your pharmacy, find areas to improve on or even see what you’re doing right.
“Eventually,” Reck said, “the owner will find the business is dying a slow death.”
It’s important to have reliable numbers, and to know how to use them. For example, you can use resources such as the NCPA Digest from the National Community Pharmacists Association. The digest highlights independent pharmacy financial trends, so you can see how your pharmacy’s numbers stack up.
2. Not having a formal system in place
Your accounting procedures are the foundation of your pharmacy business. Without a system in place, your business lacks the structure it needs to operate efficiently and effectively.
“I call this managing your system by the seat of your pants,” Reck said. “You need to make a time commitment to put proper systems in place, and a dollar commitment to acquire the right system to do the job.”
Know what you need to do, and how and when you’ll do it.
3. Not keeping track of expenses
If you aren’t keeping track of your expenses, then you can’t properly manage your business. You need to make sure that you’re recording all of your spending, and saving all receipts. Additionally, it’s important to keep your personal and business accounts separate.
Not properly recording your spending might not directly hurt your business, but it will cost you eventually. “Small business owners without proper record keeping pay income taxes they wouldn’t have had to pay if they’d captured all their expense deductions,” Reck said.
4. Not staying on top of receivables and reimbursements
Monitoring money coming in is just as important as watching what goes out. And as a pharmacy owner or manager, you aren’t only keeping track of payments from your patients for your products and services, but reimbursements from their insurance, too.
“As in all health-related industries, collecting payment from the client’s insurance can be very challenging,” Reck said. “Lack of a proper system to track your outstanding receivables and reimbursements will result in a loss of thousands of uncollected dollars.”
5. Not hiring a professional
Sometimes, the most important part of managing your accounting is knowing when to ask for help.
“Accountants don’t attempt to fill their own prescriptions,” Reck said. “They understand the value of using a pharmacist.” Accountants, just like pharmacists, are experts in their field and they can save you a great deal of time and money in the long run.
A professional accountant can serve as a valuable business advisor, but make sure you find someone who is a good fit. You need to meet with your accountant regularly, and make sure he or she speaks in terms you understand. Then, you’ll have someone who’s more than just a bookkeeper and tax preparer.
“Quite often, the owner sees only costs and not the value,” Reck said. But when it comes to your accounting, it pays to look beyond the upfront costs to see the future value of your investments.
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