We have many bookkeeping clients, and I don’t need to invent or exaggerate when I give you examples of some of the, let’s call them oversights, we regularly see in businesses – all businesses, not just the veterinary practices. Variable, or general expenses are the easiest to control and the fastest to get out of control, so let’s look at a few. (Remember, fixed expenses are those over which you have little control: your rent payment, phone, equipment and auto leases, etc. Variable expenses are those you can control.)
Office supplies: I had a client who had the following range of charges, on a monthly basis: (the type and size of the business is immaterial – trust me when I say that the expenses were way over necessary.)
Amazon: $5,000 – $8,000
Printer Repair: $450
Office Depot: $1,000 – $3,000
Smart & Final: $1,500 – $3,500
Now, it doesn’t take a genius to see that there is room for some analysis here, and I don’t consider myself only a recorder of transactions; I am a consultant and advisor to my clients, and I watch these types of expenses. Without even venturing into the uncomfortable questions regarding where is this stuff really going, I started with: “How much would a new printer cost, rather than repair the old one?” Then it’s time to dive into an itemized list of the items purchased each month and keep track of the usage.
Meals and Entertainment: Need I continue? This is an expense that is relatively easy to cut back, and with little pain. Also, it helps to remember that meals are only 50% deductible on your tax return.
Software and Computer Expenses: It’s a good idea to review your monthly payments that are automatically deducted. There are probably a few apps that you don’t even use anymore. Go over your Microsoft, practice management, and QuickBooks accounts to make sure that you’re paying for the right number of users.
Advertising and Promotional: Are your Facebook and/or Google ads paying off? If you are paying someone to manage your social media, she may not have incentive to keep an eye on the budget and make changes. This is an area where your periodic review is needed.
Bank Charges: If you are maintaining a high balance in your operating account, your bank should be charging you a minimal monthly fee. If you’re not maintaining a high balance and getting a lot of overdraft fees or fees to transfer from savings, you need better cash management. These add up!
Credit Card Merchant Fees: This is the fee you pay when you are paid by credit card, and needs to be shopped around and reviewed every couple of years. Things to consider are the rate paid for each credit card (AmEx is traditionally more expensive to run than Mastercard or Visa), and how long it takes for the deposit to be in your bank. If you need the money in one day, you may pay a higher percentage than if you can wait two days.
Credit Card Interest: This is what you pay when you use your own credit cards for purchases and don’t pay them off monthly. The ideal goal is to use your cards for supplies and materials, build your points, then pay the balance off every month. When this is not feasible, use the cards with the lowest interest, if you must. It’s wise to contact your credit card bank every couple of years as well, to negotiate better terms.
These are just a few items that are not difficult to monitor on a monthly basis. The important thing is for you to get in the habit of reading your financial reports and drilling down to see where your money is going.