In an ideal world, a comprehensive system would be in place that provides you with accurate sales and stock reporting for your pharmacy. You would have access to a supportive accounts team available at all times and your pharmacy staff would all be fully trained in the world of COGS (cost of goods sold), margins, credit and debts, cash security and accuracy.
However, in the busy running of the pharmacy, it often falls to the pharmacy manager to oversee this aspect. Since Omega Pharma acquired Warman-Freed, and transitioned it to become The Learning Pharmacy, the team has worked hard to review existing finance procedures. They have sought to ensure that an up-to-date, accurate and easy-tomanage finance system is in place that can be managed across the team.
Farah Ali, general manager of Warman-Freed explains, “While we had a good handle on our sales targets, our actual margins and profit figures were difficult to decipher due to numerous factors, such as inconsistent billing from our suppliers, varying discount offers based on the quantities of stock purchased and deals from reps not being captured on our computer systems.”
It’s one thing knowing what your sales targets are, but if you don’t have an accurate picture of the evolving costs of your products, it can make calculating your profit and loss accounts difficult and inaccurate. With the many variables in pharmacy finance, having a hold on the different discounts, schemes, buying discounts and promotional prices can be a daunting task.
There are no shortcuts to putting the correct financial procedures in place – it is a timeconsuming task but one well worth the investment given the long-term saving implications. In addition, getting a real understanding of your P&L will enable you to be proactive with your financial planning to set an accurate budget for the upcoming year.
Key to beginning this process is being confident that you understand the data you are working with. Start by tidying up your data, implementing disciplines around data entry for your team and decide what your key performance indicators are going to be and how you will track them.
The five considerations below provide some strategies to strengthen your approach to financial management:
Ms Ali comments, “One of the first things we did was assign a team member to review the costs of all our products by scanning the product through the till and ensuring the information on the system gives an up-to-date picture. It’s a laborious process, but a vital one if you’re going to start making sense of your costs.”
Once you have a clear overview of your products’ costs, implement an SOP to ensure that staff are continuously updating prices as goods arrive, so that you have an accurate stock audit. This will make your end-of-year tax process a great deal easier and also enable you to budget for future activities such as marketing or advertising in the year ahead.
Don’t be afraid to talk to financial partners – such as your accountant – about any concerns or questions you have. They have a wealth of knowledge and can offer advice.
By getting to grips with financial procedures, you will be equipped with the right knowledge to enable you to grow and diversify, but also to understand any potential issues that need to be addressed. Take the time to share your knowledge with the broader pharmacy team, so that they too can understand how product sales, discounts and their job roles play a part in the financial success of the pharmacy.
Different business units within pharmacy need to be treated differently. For example, profit margins in retail will differ significantly from those of prescription products. By assigning departmentspecific targets, we were able to help the pharmacy teams pull together in their units, engage with the financial outcomes and recognise their role in achieving these.
Make suppliers aware of the information you need. The Warman-Freed Pharmacy often found that invoices from suppliers were not particularly clear. Challenge the content of an invoice to ensure that you are completely comfortable and have absolute clarity with what, why and when you are being charged. Remember that you are the client, so don’t be afraid to ask.
It cannot be the responsibility of just one person to keep the finances of your pharmacy on an even keel. It is about accountability, making sure each member of your team is responsible for the smooth running of their departments and how this, in turn, impacts the overall running of the business and your bottom line.
“Don’t assume you’re making a profit and leave it to chance,” says Ms Ali. “We have done this and it has made me feel uneasy. You need to truly understand and scrutinise your numbers in order to make meaningful decisions for the future of your business and to make a profit. But don’t go it alone, lean on your accountant, suppliers and your pharmacy teams to get the support you need from all available resources.”