Your pharmacy business could be bleeding and you don’t even know it. And you might never know it.
Over time, a little profit seeps out, slowly dissolving your bottom line. Or small inconspicuous losses compound into big losses and take you by surprise.
Like a nail in your tire. The air trickles out until one day, you’re stranded.
But it’s not just flailing businesses that lose money without realizing it. Even fast-growing companies lose profit as they increase revenue.
Put a stop to your pharmacy’s profit leaks. Pay attention to these seven ways you could be bleeding profit.
1. Outdated technology
What was groundbreaking for your pharmacy 10 years ago, may be hurting you now. (For example, an out-of-date website.)
Relying on old technology will prevent you from scaling and adapting to the market, and can take a toll on your profit.
Forgoing upgrading your technology can also hurt your business.
For example, not upgrading your credit card reader on your POS system from a stripe card reader to a chip reader. If you don’t upgrade, you’re liable for fraudulent transactions.
Performing tasks you could automate can also put you behind.
For example, performing third party claims reconciliation by hand can waste time and cause costly errors. Non-reconciled claims can add up to more than $8,000 of lost money per year on average, according to an NCPA Foundation Grant Report.
If your technology is behind-the-times, patients might also worry about what else is behind at your pharmacy.
Have you considered these technologies?
- Automated dispensing
- Telepharmacy
- Claims reconciliation software or service
- Point-of-sale upgrades
- Mobile app
- Automated marketing
2. Employee turnover
Experts estimate that employee turnover can cost up to twice as much as a person’s salary.
For example, a tech who makes $50,000 a year could cost up to $100,000 to replace when accounting for total hiring costs.
High turnover also makes it difficult to foster trust with your patients. People are often skeptical about a business that can’t keep its employees.
And seeing different faces makes it harder for patients to feel known and cared for through a trusted relationship.
These factors can help employee retention:
- Thorough interview process
- Effective training
- Enjoyable culture and workplace environment
- Comprehensive benefits
- Team comradery
- Employee appreciation
- Asking them if they’re happy
3. Failure to calculate soft costs
Soft costs are a hidden money pit.
They’re the costs not measured in money, such as time, energy and reputation.
But they ultimately affect your bottom line.
Time translates to money; reputation to brand; and energy to productivity.
Do you consider your time an expense that’s included in return on investment calculations?
Take, for example, a membership organization. You have clear fees, but you also attend events. Add the opportunity cost for your time to travel and participate in the event, and include the gas expenses and the cost of the event.
Do you see how it can add up over the course of a year?
When you plan your pharmacy’s business strategy and calculate costs for the year, consider all your soft costs so you’re not counting on that money in your targets.
More importantly, ask yourself if those soft costs are worth their investment.
4. Lack of organization
How much money you’re losing to disorganization might shock you.
According to a survey by Brother International, the estimated annual dollars spent looking for misplaced items in the office and on the computer is nearly $178 billion.
Disorganization also kills employee morale, which further decreases productivity, resulting in additional money loss.
You can easily improve your pharmacy’s organization. Dedicate the time and make a plan. Here are a few tips to get you started.
5. Poor accounting
Independent pharmacy owners often try to do everything for their business—even if it’s not their specialty.
Sometimes it works. Most of the time it’s costly.
With margins as tight as ever, your pharmacy can’t afford to miss any details or mess up any numbers on your books.
And the complexity of accounting can swallow up your time and your focus, which could be spent on improving patient care.
While the initial cost might hurt, hiring a professional to do your accounting can save you thousands of dollars each year and free up your time to improve other parts of your business.
CPAs know all the deductions and designations to use, along with numerous other money-saving processes that you might be missing.
If you’re set on going solo, be sure to avoid these common accounting errors.
6. Spending too much on inventory
Many pharmacy owners and managers don’t realize how much they overspend on inventory.
Did you know:
- Choosing a different manufacturer on a single drug could save you hundreds of dollars
- Not meeting your volume with your primary wholesaler could cost you in rebates
- Not buying from your source contract could destroy your margins
How much do you think these choices across your entire inventory affect your bottom line on a weekly basis?
Right. They have a huge effect.
Optimizing your purchases can produce big savings.
But as an independent pharmacy owner dedicated to patient care, you likely don’t have time or means to compare how adjustments affect your price on every order.
That’s why PBA Health’s ProfitGuard service includes data analytics tools that provide item-by-item recommendations on every order. They compare how adjusting factors like primary and secondary wholesaler rates, manufacturer, package size, and source contract can save you big money on every purchase.
The tools also monitor your generic compliance rate to help you maximize your rebates.
And the tools make sure the rate the wholesaler promised is the rate you receive by pinpointing any discrepancies.
You’ll also spend less time worrying about inventory and ordering and more time improving patient outcomes.
You’ll have peace of mind that you’re maximizing your money and your time.
Just ask Densow’s Pharmacy.
In the case that your primary wholesaler doesn’t have what you need, you’ll need a reliable secondary supplier waiting in the wings.
BuyLine®, an NABP-accredited secondary supplier, offers a full line of brands, generics, OTCs, and controls at the lowest prices in the secondary market. In addition to having low list prices, BuyLine also rewards purchases with cash rebates and significant discounts on brands. Earn up to an additional 10% cash rebate on generics and up to WAC -4% on brand.
7. A less-than-optimal wholesaler contract
Often independent pharmacies negotiate with one wholesaler before signing a contract that will in large part determine their profit.
With limited knowledge of how to negotiate and what other wholesalers are offering, how do you know if you’re getting the best deal?
You could be losing thousands of dollars annually.
If you want to get the best wholesaler contract with the best cost of inventory, you need a few things:
- Group purchasing power: When you join a group of regional pharmacies, you gain buying power through volume.
- Bids from multiple wholesalers: When you get bids from multiple wholesalers, you drive prices down through competition.
- Expert industry negotiator: When you use an expert negotiator with decades of experience and a thorough knowledge of wholesaler contracting practices, you get the best terms and avoid hidden conditions.
Can your pharmacy get all these on your own? If so, what are you waiting for?
If not, ProfitGuard can provide all three—and turn your profit leak into profit growth.
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