Have You Herd? AABP PodCasts

Improving practice profitability using managerial accounting

May 17, 2021 AABP
Have You Herd? AABP PodCasts
Improving practice profitability using managerial accounting
Chapters
Have You Herd? AABP PodCasts
Improving practice profitability using managerial accounting
May 17, 2021
AABP

Dr. Fred Gingrich, AABP Executive Director, is joined by Dick Lewis, a businessman for over 40 years in large and small companies. Dick met AABP member and past president Dr. Roger Saltman on an airplane in 2013 and became involved with our organization, volunteering his time to teach practice management to veterinary practice owners to improve profitability. Veterinarians in rural communities will not be able to provide services to their clients if their practice is not profitable. Unfortunately, many practices only utilize tax-based accounting which is a prescribed treatment of numbers so that every business has some degree of standardization for taxes. Managerial accounting is a system of evaluating revenue and expense categories in a way the helps you dissect your business. Dick suggests setting up 6 to 8 revenue categories and 15 – 20 expense categories in an Excel spreadsheet to monitor trends over time. We discuss COGS (cost of goods) and how to evaluate it within different revenue categories to more accurately evaluate the profitability of each service. Services should continue to increase business profitability to ensure that each category is accretive, meaning the profit margin is not decreasing but is adding to the improving profitability of the practice. He suggests a revenue category of “call fees” or “farm trip fees” and assign a COGS to it to assist owners in designating appropriate fees to this service instead of operating call fees as a loss leader. Dick suggests that all partners sit down and agree to each category to implement managerial accounting principals in their practice and if one partner is managing this each month, assigning a value to that to reflect the partner’s work on managerial accounting versus service revenue. AABP continues to provide business management resources. You can find many resources on the Veterinary Practice Sustainability (VPS) committee resource page. Not a member of AABP? Become an AABP member at this link so that our organization can assist you in making sure your rural practice not only survives but thrives!

Show Notes

Dr. Fred Gingrich, AABP Executive Director, is joined by Dick Lewis, a businessman for over 40 years in large and small companies. Dick met AABP member and past president Dr. Roger Saltman on an airplane in 2013 and became involved with our organization, volunteering his time to teach practice management to veterinary practice owners to improve profitability. Veterinarians in rural communities will not be able to provide services to their clients if their practice is not profitable. Unfortunately, many practices only utilize tax-based accounting which is a prescribed treatment of numbers so that every business has some degree of standardization for taxes. Managerial accounting is a system of evaluating revenue and expense categories in a way the helps you dissect your business. Dick suggests setting up 6 to 8 revenue categories and 15 – 20 expense categories in an Excel spreadsheet to monitor trends over time. We discuss COGS (cost of goods) and how to evaluate it within different revenue categories to more accurately evaluate the profitability of each service. Services should continue to increase business profitability to ensure that each category is accretive, meaning the profit margin is not decreasing but is adding to the improving profitability of the practice. He suggests a revenue category of “call fees” or “farm trip fees” and assign a COGS to it to assist owners in designating appropriate fees to this service instead of operating call fees as a loss leader. Dick suggests that all partners sit down and agree to each category to implement managerial accounting principals in their practice and if one partner is managing this each month, assigning a value to that to reflect the partner’s work on managerial accounting versus service revenue. AABP continues to provide business management resources. You can find many resources on the Veterinary Practice Sustainability (VPS) committee resource page. Not a member of AABP? Become an AABP member at this link so that our organization can assist you in making sure your rural practice not only survives but thrives!