Common KPI's and other tools for Financial Oversight

Common Key Performance Ratios and other tools for Veterinary Practice Financial Oversight

Return on Sales= Net Profit/ Gross Sales

Net Operating Income= Money left over from Gross Sales after all reasonable expenses have been paid.

Average Invoice=  Gross revenue in a period/# of invoices in the same period

Average Client Invoice= Gross revenue in a period/ # of clients seen in the same period

Average Patient Invoice= Gross revenue in a period/# of patients seen in the same period.

Client Retention= Active Clients previous period+ new clients this period- active clients this period= # of clients lost (you may wish to increase the active search for clients ‘this period’ to be 18 months to account for stragglers)

New Client Retention=  New Clients seen last period and this period – New clients seen last period

Value of a lost client= avg # of pets per owner X avg transaction X avg # of visits per client X # of years client owns pets X number of friends client may refer over the life time of a pet

Financial Terms Defined: 

Gross Revenue:  Total Income for a practice (found at the top of the Profit and Loss Statement)

COGS:  Cost of Goods Sold.  These are your variable expenses or all of the expenses that change proportionately depending on the amount of business you do.  COGS for a health practice should be 18-22%.  Aim for 14-18 % if you are a hospital with a small staff and a straight- forward case load, but even larger practices should not exceed 22%.  Referral hospitals often have a much higher COGS.

Gross Profit:  Money left over after you take out the COGS

Expenses:  Listed after the COGS in the Profit and Loss.  These are a practice’s fixed and semi-fixed expenses.  The biggest expense in this section of the profit loss is payroll.

Net Profit:  The amount of revenue left over after all the COGS and the Fixed and Semi Fixed expenses have been removed.

Pricing:

Pricing Calculator=

Fixed Costs per minute + Semi Fixed Costs per minute+ Minutes it takes to do a service+ material/lab/radiological costs to do the service+ desired markup = price

Formulas to determine markup:

If you are looking for a mark up on cost the formula is

Cost+ (Desired Markup X Costs)= Final Price

If you are looking for a mark up on final price the formula is

Costs + (Desired Mark up X Final Price)= Final Price

If you are paying doctors on production and want to include your doctor production costs in the final price the formula is:

Costs + ((Desired Mark Up + Doctor Production) X Final Price)= Final Price