Measuring your practice’s success in terms of revenue, compliance and return on investment are just a few areas that indicate how your practice is performing. In order to move forward, you not only need to know where you want to go, but where you are now. This enables you to create a plan that includes stepping-stones from your practice’s current situation to the goals you have set. These key performance indicators are stepping-stones to creating the smaller strategic goals and plans that will help you meet your practice’s long-term plans for practice growth and market dominance.
Additionally, your key performance indicators can help you find opportunities for growth in key areas of your practice. By tracking and measuring these KPIs, you can spot variations in compliance between associate veterinarians, as well as variations from the practice’s standards of care. The opportunity to get all associate veterinarians to the same levels of compliance has a direct impact on not only the bottom line, but also the level of patient care in the practice.
Benchmark against your own key performance indicators to lower your costs
With any financial benchmarking, looking to industry standards and benchmarks is a starting point, but it’s better to strive to beat yourself year over year. When it comes to your practice’s budget, there are big-ticket item areas to focus on: inventory, laboratory and payroll. Most practices who are cognizant of their inventory costs, and who practice high standards of care, tend to run right around 18-20% in costs of goods sold, or COGS (COGS are all the variable expenses of a practice or those that change proportionately with the amount of business you are doing). There’s definite room for improvement here, and practices should aim for 15-16% in this area.
[bctt tweet=”Most practices who pay attention to their inventory costs and practice high standards of care, typically run around 18-20% in costs of goods sold (COGS). The goal should be 15-16%.”]
Strategies for lowering your costs here include:
- Choose one distributor.
Work with them to assure best pricing for your practice. You also have the added benefit of spending less time placing multiple orders with different companies.
- Make sure you aren’t carrying multiple items that do the same thing.
Try paring down your choices of inventory items by choosing one or two items, rather than carrying several different products to avoid duplication. If you are going to bring a new product into the practice, make a conscious choice to remove something similar, so you don’t have redundant stock on hand.
- Practice just-in-time inventory ordering.
You want to keep your shelves stocked with just enough items so that you won’t run out, but also so that you minimize the amount of cash you have tied up in inventory. Bulk product buy-ins usually do not pay off for your practice, so avoid them unless you will be able to secure the surplus stock AND be able to dispense it all before the bill due date.
- Keep a close eye on expiration dates.
Return products for manufacturer credit before the product expires.
- Use an outside lab.
In most cases, sending your laboratory samples to an outside lab is more cost effective. Negotiate with your laboratory to get best pricing in exchange for sending all your lab work to them.
Promote patient care and boost your revenue by increasing compliance
When looking for opportunities to improve the practice’s revenue, and in turn the bottom line, we first should look to our “low-hanging fruit” categories. These sales categories include:
Increasing compliance with fecal testing improves the bottom line too!
By monitoring these key performance indicators and comparing the compliance rates between veterinarians within the same practice, we can find opportunity in variance. Or, if we focus on raising compliance in one of these areas through our standards of care, we can generate additional revenue through improved compliance. As an example, if we increased the average fecal testing rate from 10.5 fecals per day to 16.5 fecals per day, and 0.6 out of every ten tests is positive, in one month’s time that’s an increase of one new patient diagnosis with an endoparasite every two days. At $25 test, that’s $39,000 in additional revenue annually for just one service area category.
In order to improve, you must measure and monitor your key performance indicators. [bctt tweet=”When you track and report your compliance rates to your team, after establishing tangible goals, they will be able to see their progress and work towards meeting the team’s goals.”] Not only will your practice’s bottom line improve, but also your patient and client care.
Brenda Tassava Medina is veterinary consultant and veterinary conference speaker. She consults privately with veterinary practices around the U.S. Brenda can be reached at [email protected].
This blog has been updated and was originally published on March 9, 2016.