Your prescription dispensing logs can do more for your business than you might expect.
“They help you check in on what’s going on behind the bench and how you’re managing the business,” said Scott Sykes, CPA, of Sykes & Company, PA, an accounting firm focused on independent community pharmacies. “It’s a supplemental tool to help break down and provide analysis for how your pharmacy is performing.”
You most likely check your prescription dispensing logs every day for billing information and dispensing errors. But do you use them to help maximize your margins and track your business growth?
Prescription dispensing logs give a snapshot of your pharmacy’s prescription operations. When used to their full potential, they reveal surprising insights that can help you manage your pharmacy better.
How prescription dispensing logs help your business
Incorporate your monthly prescription audit log into your monthly accounting process. “A good pharmacy CPA compares that monthly audit log with your financial statements,” Sykes said.
The CPA will compare:
- Total sales
- Third party sales
- Margins from scripts
- New versus refill
At a minimum, prescription log information alerts you to discrepancies. “If there are large differences, it raises a flag,” Sykes said. “You’ll see if something’s not quite right in that script issue. Or, you’ll see you have an inventory issue you need to address or a third party receivable issue.”
This discrepancy check can help pinpoint major problems. “If margins on the financial statements show a 14 percent gross margin but the script logs show 20 percent, you need to ask what’s going on there,” Sykes said.
Prescription dispensing logs also reveal missed opportunities and areas for improvement. In particular, Sykes said to use the logs to review your margins. “If your margins on your audit log are 12 percent, for example, then either you’re not buying well or you’re not getting the most out of what you’re submitting and adjudicating,” Sykes said. “Maybe you have opportunities to increase that margin per script.”
Sykes & Company uses script log information to monitor gross margin for its pharmacy clients. At the end of each month, the firm compares the adjudicated amount and the margin amount against the perpetual inventory system and the actual costs of goods sold. The firm uses it as a test for what the gross margins should be on the profit and loss statement.
And that information is paramount to any pharmacy’s success. “The most important thing for a pharmacy is how well they buy,” Sykes said. “If their margins are off, you can see that through these reports.”
Monitoring business growth
Prescription dispensing logs also help monitor the growth of your business.
The ratio of your new scripts versus refills indicates whether your pharmacy is trending up or down. If your percentage of new scripts is lower than your percentage of refills, that signals a lack of growth. That single piece of information reveals the need to attract more new patients or risk going out of business in the future.
Sykes said prescription logs can help pharmacies better understand their acquisition costs. Issues commonly crop up with acquisition cost data, particularly when pharmacies purchase from multiple secondary suppliers.
“Perhaps the daily feed from the main wholesaler is overriding other prices if you’re buying a lot from other suppliers,” he said.
To check that, your pharmacy can download the acquisition cost sheet from the wholesaler and compare it to the recorded acquisition costs in the script log. To prevent it, consistently compare the cost sheet and script log and keep the system up-to-date with accurate acquisition costs.
Invest time in your logs
Check your prescription logs daily, monthly and annually, Sykes said.
Prevent extra burden on busy pharmacy owners by delegating the duties to a qualified tech or pharmacist. “Experienced pharmacists and techs can identify discrepancies or errors right off the bat,” Sykes said. “It shouldn’t take long if they’re doing it every day.”
And, Sykes emphasized that prescription logs can’t replace financial reports.
“What you adjudicate behind the bench isn’t what you’re going to receive,” Sykes said. “You shouldn’t use these to record any accounting or revenues or adjustments. They’re supplemental.”
If your pharmacy hires a CPA to do its accounting, make sure your CPA understands the benefits of prescription logs. Not every CPA knows how to use prescription logs in this way, especially if they don’t specialize in independent pharmacy.
“In today’s environment, you can find an industry-specific CPA like our firm that can work anywhere,” Sykes said. “Finding one that fits your needs can certainly add value.”
What to look for
Your pharmacy management system provides summaries that contain a gold mine of data on your pharmacy’s performance. Use your prescription logs to check:
- Acquisition costs
- Adjudications
- Average compounding margin
- Average markup on cash scripts
- New prescription fills
- Refills
- Third party scripts
- Total cash scripts
- Total margin
- Total scripts
A Member-Owned Company Serving Independent Pharmacies
PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy-side of their business. Founded and owned by pharmacists, PBA Health serves independent pharmacies with group purchasing services, wholesaler contract negotiations, proprietary purchasing tools, and more.
An HDA member, PBA Health operates its own NABP-accredited secondary wholesaler with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products — offering the lowest prices in the secondary market.
