Every business runs on a budget, and your independent community pharmacy is no exception.
Budgets aren’t easy to plan, and it’s common to set one and then forget to follow it.
But without a plan of action, you can’t manage your pharmacy’s costs, project your profits or know what’s realistic for the future. So, to maintain your pharmacy’s financial success, it’s essential to adhere to a budget.
Here are seven easy ways to stick to—and make the most of—your budget.
1. Build a budget
You have to create a budget before you can follow it.
If you’re not sure where to start, the Service Corps of Retired Executives (SCORE), a partner of the U.S. Small Business Administration (SBA) that counsels America’s small business owners, has an easy-to-follow budgeting guide.
SCORE also offers a free downloadable 12-month budget template.
2. Make a list of your expenses
The SBA defines a simple budgeting method as identifying the profit you want to make and listing the expenses you’ll incur to reach that goal.
Start by making a list of your expenses. What does it cost to run your pharmacy? Take into consideration costs, such as employees’ salaries and rent or mortgage payments for your pharmacy’s building and taxes.
Knowing all of your expenses will help you identify and remove ones that are less important.
3. Identify essential and non-essential expenses
After you compile a list of your expenses, categorize them by essential and non-essential.
Essential expenses include payroll, taxes, utilities, rent and computers. Non-essentials include free snacks for employees or ineffective marketing.
Non-essential expenses are easier to cut and will help you run on a leaner budget, but you can also find ways to reduce essential expenses without sacrificing customer service.
For example, find ways to reduce utility bills, look at your labor costs, invest in more efficient technology and improve your cost of goods.
4. Pay attention to your sales cycle
How much does your pharmacy make off of prescription sales, front-end retail sales and patient care services each month?
Know when your pharmacy’s high and low periods are, so you can focus your budget accordingly.
For example, increase your front-end marketing efforts during a slow month to keep revenue coming in.
5. Look at your metrics
Taking into consideration the hard numbers is critical when developing a budget.
You need to know where you’re at in order to improve where you’re going. And that means knowing your numbers. Calculating the right metrics can tell you where you’re succeeding, where you need to focus your efforts and how this all works into your budget.
For example, if your pharmacy’s profits are 90 percent prescription-based, you may want to spend more time growing your pharmacy’s front end sales as a new revenue-generating opportunity.
We have an easy-to-follow guide that includes the important metrics your pharmacy needs to be measuring.
6. Leverage technology
Technology can come in handy when creating and adhering to your pharmacy’s budget plan.
Consider purchasing accounting software, such as QuickBooks, to help make managing your budget easier. These other useful business tools can help you run your finances more smoothly, too.
7. Continually update your budget
It’s important to periodically update your budget. Your budget should not be static.
Revise your budget each month and each year to make sure your pharmacy’s financial needs are under control. Doing so will give you a better picture of your finances, which can help you better forecast for unexpected expenses.
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