Understanding Staff Expenses
Employee costs (including payroll and overtime) are the number one operating expense of any veterinary practice-more than pharmaceuticals, more than supplies, more than the debt service of your practice loan. It is critical that every practice owner and manager tracks payroll costs regularly and establishes the appropriate benchmarks for their individual practice. As a new business owner getting a hold of payroll will represent one of your most challenging and critical challenges during your first few months of business. Actively monitoring payroll cost allows you to:
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Establish the appropriate scheduling requirements for your business
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” ” Set appropriate commission targets for your doctors
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” Understand the seasonality of your new business
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” Bridge the gap between the perceived staffing requirements in your practice and what is operationally and financially appropriate
So, what is the appropriate payroll for your practice?
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Employee costs (including payroll and overtime) are the number one operating expense of any veterinary practice”
What to Do About It
So where can I find reports on employee costs and how do I track this in my practice? The two most direct sources to access your employee costs are your biweekly and monthly employee payroll reports made available from your payroll provider as well as your profit and loss statement available through your financial advisor. Studying and monitoring your periodic payroll reports allows you to understand the total scope of your employee cost in a normal payroll as well as identify additional costs associated with overtime hours.
Monitoring your profit and loss statement each month will enable you to see if you are keeping your employee costs within your target ranges and budget.
It is vital to monitor employee costs on an ongoing basis. This means reviewing and monitoring every payroll report for every payroll. In addition, it’s important that a practice owner and/or their manager is actively reviewing the aggregate payroll cost on a monthly basis to ensure that they are staying within budget of the hospital. Actively maintaining and managing employee costs is one of the most important actions to ensure profitability within practice and failing to actively manage these costs is one of the quickest path for practice to find their way into a cash flow crunch.
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Responses
I was not aware that payroll should be managed that closely, but it makes sense. Thank you for sharing this insightful information Ian!
Adding this to my to do list so I am more aware of these numbers and how we are doing!
It was interesting to see the statistics on total employee compensation, especially related to gross revenue. I will definitely be utilizing these tools and keeping this in mind once I start practicing.