An accounts payable ledger will help monitor expenses on a monthly basis (Figure 20-3). A team member can add invoices as they arrive as well as enter a due date and the amount of the payable. This ensures bills will not be overlooked and gives a running balance of those accounts with revolving credit lines. It also allows easy access to retrieve information if the payment of a specific bill comes into question.

FIGURE 20-3 Sample accounts payable ledger.

Accounts Receivable Summary

Accounts receivable (AR) must be monitored on a monthly basis. A large AR can be detrimental to the practice. AR reports should list the amounts due in 30-, 60-, and 90-day increments. Clients who owe practices money after 90 days not only are unlikely to pay, but also prevent practices from being able to pay their own accounts and employees. The practice must implement a no-charge policy to prevent AR from growing rapidly and hurting the practice’s gross revenue. AR should never be more than 1% of the gross revenue in 1 year.

Figure 20-4 is an AR report that shows that the largest balance of the accounts receivable is the current

FIGURE 20-4 Sample accounts receivable report.

PRACTICE POINT

Accounts receivable should never exceed 1% of the gross income.

amount due, followed by 90 days past due. The sum of $3661.32 is unlikely to be collected, and the AR manager must determine appropriate strategies to collect these funds as soon as possible. The current balance must also be monitored; if this balance does not decrease within 30 days, strategies must be implemented to prevent past due amounts from rolling over to 60 and 90 days past due. Chapter 18 discusses AR in more detail.

Average Client Transaction

The average client transaction should be monitored to ensure that team members are making recommendations and clients are accepting them. If the average client transaction is consistently low, leaders must determine why and develop a solution to increase the low figure.

One reason for low client transactions may be lack of team member training. Assistants and technicians may not be educating the clients regarding the benefits of certain products. Veterinarians may not be educating clients regarding the benefits of recommended procedures or may not be recommending sufficient diagnostic workup on their cases. For a practice to offer high-quality medicine, diseases and conditions must be diagnosed with tests, along with consideration of the presenting clinical symptoms. Whatever the reason, management must determine the cause of the low transactions and implement changes immediately.

PRACTICE POINT

Low average client transactions can indicate a decrease in the number of diagnostics performed by the veterinarian.

Cash Availability

The cash available for reinvestment is very important to managers who are planning to purchase capital equipment. Practices may wish to purchase equipment through financing if cash is not available for reinvestment. Purchasing equipment outright is a better option because the interest that practices pay can accumulate to high amounts. Interest could be considered profit or cash for reinvestment with proper planning and budgeting.

Client Surveys

Client surveys are an easy monitoring solution to understand the satisfaction and level of client comfort with the services the practice provides (Figure 20-5). Clients maintain the business; therefore it is imperative to make sure they are satisfied and perceive the value of the service provided. If clients are unsatisfied, practices want to be notified and given the opportunity to address the problem. Hospitals do not want to lose clients or have negative comments made about them throughout the community. It is very important to strive for a high level of satisfaction from every client.

Compliance Rate

Monitoring client compliance rates is useful in many ways. If clients are accepting recommendations, then the staff is doing an excellent job of educating clients and clients perceive the value in the services that are advised. Second, client compliance drives profits. The client relationship has already been established, and it is essential to maintain that relationship. It is easier to maintain relationships than to build new ones. Compliance reports should include reminder compliance as well as the profit centers the practice has chosen to monitor (Figure 20-6).

Inventory of Equipment

It is very important to keep a list of equipment owned by the practice along with the purchase date and original purchase price. This is excellent for taxation purposes and also aids the practice if the equipment is stolen or damaged by fire or other natural causes. Serial numbers and model numbers may also be added for security and act as a quick reference when looking up information for warranty purposes.

Figure 20-7 lists equipment that was purchased before and after the practice manager began a capital inventory list. Anesthesia machine #1 was purchased before the list was developed. However, the model number and serial number are available for reference in case a fire or theft ever occurs. Anesthesia machine #2 was purchased in December 2003 for $400 as one unit. This is valuable information, along with the name of the manufacturer, in case a machine malfunction occurs and warranty dates come into question. A column could be added for warranty expiration dates, which would also help the practice manager.

PRACTICE POINT

The number of active clients may indicate excellent internal marketing techniques.

Number of Employees and Total Number of Hours Worked per Payroll Period

Payroll is important to monitor because overtime can eat practice profits. A payroll budget should be created, allowing raises when needed with flexibility to add additional team members if needed (Figure 20-8). Payroll and payroll taxes are a large portion of expenses and must be monitored closely. Payroll budgets are discussed at length later in this chapter and include estimation for taxes. Overtime is not estimated; team member schedules and hours should be monitored closely to cut this undesirable expense.

Number of New Clients

Some practices want to monitor the growth of the practice in new clients and compare numbers on a month-to-year basis. The number of new clients per year can be affected by the type of service offered, species, demographics, and external marketing. If a marketing technique has been used, this is also an efficient way to monitor how effective the technique has been. If the number of new clients is low, an external marketing plan should be initiated to help increase the number.

PRACTICE POINT

The number of new clients may indicate an excellent external marketing technique as well.

Taxes Owed

Taxes must be paid on a monthly and/or quarterly basis, depending on what type of tax is due. Amounts should be calculated at the first of each month, with the scheduled dates of payment.

Tax ledgers can be beneficial when paying monthly bills, preventing overspending. Quarterly taxes can be shockingly high and must be budgeted for when paying current accounts payable. Figure 20-9 lists the history of tax payments as well as those due for the month of April 2009

Team Member Surveys

The team is the primary asset to the practice. It is essential to understand team members’ thoughts and concerns and address them in a timely fashion. The team is the practice; every member contributes to the success of the practice. They relate to clients on a daily basis and have valuable input regarding clients’ perceptions and values. Surveys should be conducted one to two times per year and should not coincide with employee evaluations.

Team member surveys should vary by position. Figure 20-10 gives examples for veterinary technician responsibilities. The survey could also include how team members value other positions within the practice as well as how they feel each department completes its tasks. Each department and/or position affects other departments or positions in a practice and must be considered.