Simple ways to reduce your business expenses

From this autumn (2007) community pharmacists will be able to log on to a new internet site, input facts and figures about their practice and discover at the click of a mouse how successful their business is in comparison to pharmacies of a similar size.

Hypothetical accounts

This initiative will be available to members of the National Pharmaceutical Association, which estimates that it receives at least one call a day from community pharmacists who need advice about saving money and making their businesses more profitable.

The online financial modelling service was designed by the NPA’s pharmacy business manager Raj Nutan. He says: “It isn’t meant to replace the need for a management accountant but it will produce hypothetical profit and loss accounts and a bench mark report where pharmacists will be given a ranking which is linked to the number of prescriptions he or she dispenses every month.”

Mr Nutan estimates that he receives 15 to 20 calls a month from pharmacists seeking financial advice. “I hope that the service, which is really a business tool, will be of general help so that I can devote time to more complex problems which some pharmacists may have.”

Reducing bills

Community pharmacists who are looking to save money on their business costs can take a number of simple steps to keep the bills down.

Tom McGuire, a chartered accountant and partner at Wylie and Bisset in Glasgow, advises around 12 community pharmacists. He is a member of the health care group of the UK 200Group — an organisation for accountants and lawyers who work with small or medium-size businesses.

He believes most community pharmacists will fall under exemption criteria which excludes businesses from having to produce a certified annual audit. This could save between £3,000 and £5,000 in accountancy fees. To qualify for exemption the pharmacy has to meet two of the following criteria:

• Have a turnover of less than £5.6m

• Employ less than 50 staff

• Have gross assets of less than £2.8m

Another way to reduce accountancy fees is to make sure that good record keeping takes place. “If somebody comes to me at the end of the financial year asking to lodge accounts, and hands over a box full of invoices and bank statements with no attempt having been made to pull anything together, it is going to cost them an awful lot more than the chap who comes in who has attempted some kind of book keeping,” says Mr McGuire.

He recommends that pharmacists invest in some book keeping computer software, such as Sage, and employ a trainer to explain how to use it. This may cost around £2,500 (including the training) but it makes economic sense. “You will get that money back time after time — it could be the difference between paying your accountant a fee of around £2,500 compared to £10,000 if your accounts are a dog’s dinner.”

Smart banking

Using Girobank for paying in money is another way of keeping business costs down. Mr McGuire says: “Their charges are a fraction of what the high street banks charge so pharmacists could lodge their cash with Girobank and then transfer money by cheque to their main account, which may be at another bank. In effect they can use Girobank as a clearing house, although this option is dependent on how near your business is to a post office.”

Loans

Choosing which bank to borrow money from can also bring cash savings. Numark, which has 1,750 community pharmacies UK-wide, has negotiated a special loan rate for its community pharmacists with HSBC, although the final rate will depend on the pharmacists’ individual “risk profile”.

An alternative option is to borrow money from pharmacy wholesalers who will act as a loan guarantor in exchange for pharmacy wholesale business. Stephen Marks, company secretary for Numark, says: “This is a pretty popular option — it often involves cheaper rates of interests than the pharmacist would get from a bank.”

However, pharmacists should not be put off approaching their high street bank for favourable terms, says Mr McGuire. “Health professionals — doctors, dentists and pharmacists — are seen by banks as very strong at the moment because their roles are changing. Because of the sector pharmacists are in, they could get beneficial terms of around one per cent above base rate.”

Paying VAT returns monthly, rather than quarterly, can also improve cash flow, and keeping up-to-date patient records is also a good idea to maintain income streams, says Mr Marks.