From COVID and supply chain issues to The Great Resignation, “quiet quitting,” and inflation, various challenges have required veterinary management professionals to adjust their practice’s financial plans repeatedly.
The question I often get is, ‘Why am I even bothering with a budget when every time I turn around, something else changes?” said Lisa A. Lisa, CVPM, SHRM-CP (retired), PHR (emeritus), CCFP, a semi-retired veterinary finances expert who owns Birds Eye View Veterinary Consulting.
From Lisa’s perspective, the always-changing, never-ending unpredictability of the business side of veterinary care only makes a budget more valuable – in the same way a map or GPS is valuable when there’s an unexpected road closure.
“A budget is always a work-in-progress, but it is a huge part of a strategic plan,” Lisa said. “A budget is a reflection of practice goals. So when changes happen, you go back to the budget and make changes that align with the original goals.”
Set Up a Budget that Flexes Easily
Lisa recommends that managers keep the need to monitor and adjust budgets in mind when they create them. “Use software that makes it easy to track what you spent and quickly see where you were over or under budget,” she said. “Simplify the process by setting up your budget with formulas that do the math for you. If you use Excel, for example, set up your worksheet with formulas so that if you go in and change one line item, you don’t have to go back and do the math; you just look at the bottom line.”
Those sorts of up-front steps can save a manager from the sort of frustration that can lead to throwing a budget away, Lisa said.
Don’t Look Away!
Lisa recommends that practice managers compare actual revenues and expenditures with budgeted revenues and expenditures monthly or at least quarterly. “This is when you will notice if your net is going down or if you are having cash flow issues and can make adjustments in spending,” she said. “If you don’t have a budget, you start moving in unknowns that can cause a financial crisis. Business goes on as usual, and before you know it, you’re working in arrears.”
Familiarity with monthly projected and realized revenue and expenses will help a practice manager steer through huge changes – such as a loss of a veterinarian.
“You know that next month's revenue is going to go down. So you go back to the budget you’ve planned for the year, to that veterinarian’s projected revenues, and you take them out of the projected budget and start looking for ways to keep the budget balanced.”
A manager can pick some low-hanging fruit, such as goods the veterinarian consumed while providing services that will no longer be consumed, and products that won’t be sold because one less doctor is making recommendations. “Make sure your inventory manager adjusts purchases so there’s not an overage - that saves money that doesn’t need to be spent,” she said.
Likewise, there may be purchases of goods or services or physical improvements to the practice that can be deferred until a new veterinarian is hired. “Keeping an updated budget allows you to make a different choice and avoid a bill,” Lisa said. “The money saved might be used to allocate extra training dollars so that you can efficiently leverage staff to be able to see more clients and keep revenue loss at a minimum,” she said.
Seek Staff Input on Budgeting Decisions
Lisa is a proponent of the Open Books concept – sharing financial information with staff so that they have a better understanding of the practice’s position. In times of budget challenges – or just in standard times - “The team can come up with good ideas that they will support, and guide the manager away from changes that could themselves cause problems,” Lisa said.
For example, a manager might decide to put off buying new staff uniforms to save some money, but it’s likely the staff who knows when they are so threadbare that not replacing them could impact the perceived quality of pet care.
If a part-time receptionist quits, it’s essential to know if existing staff would rather hire someone new or absorb that person’s work if doing so would free funds for raises.
Learn more
More about this topic is covered in the Financial Management VHMA/PVU Management Essentials education course.