How does your pharmacy’s financial performance compare? (Pharmacy Guild – April 2014)

Atul Mehta from Moore Stephens Markhams Chartered Accountants discusses key pharmacy financial performance indicators.

Summary

Outside of cost of sales, wages are the largest expense incurred by pharmacies.

The information obtained from the survey helps Moore Stephens Markhams’ clients make key management decisions and improve the performance of their business.

The full survey report can be purchased from Moore Stephens Markhams.  Please contact Atul on 09 306 7100 or email.

The Moore Stephens Markhams group works with over 115 pharmacies around the country. Because of these relationships we are in a prime position to provide accurate, useful information to assist pharmacies with their business planning and analysis.

We have recently completed a survey of some annual financial data. The following is an overview of the information included in our full report.

 

Important key performance indicators Average % of sales
Mark up % 59.6%
Gross profit % 37.1%
Net profit % 8.5%
Salaries, wages and locums 18.9%
Occupancy costs 3.4%
Interest expense 0.9%
Advertising 0.5%
Computer Expenses 0.5%
Subscriptions and licences 0.4%
Other expenses 4.0%

The key performance indicators identified in the table above provide a starting point for monitoring pharmacy performance compared to the results of other pharmacies.

Outside of cost of sales, wages are the largest expense incurred and can vary significantly across pharmacies. The level of wages paid will often have the highest impact on a business’ financial performance from year to year and optimising your wage structure is essential to improving business’ financial performance.

Other items of interest include:

  • the increased wages that pharmacies outside of Auckland have been paying
  • the sales mix and resulting profits of pharmacies located in various types of occupancies (malls, medical centres and standalone pharmacies)
  • the relationship between wage totals and turnover.

The full report includes the KPI results and other information relating to the following areas:

  • Results by geographic location (Auckland, other North Island, South Island)
  • Results by occupancy type (mall, medical centre, standalone)
  • Results by revenue size (turnover under $1.5 million, turnover over $1.5 million)
  • Relationship between falling revenues and increased gross margin percentages due to decreasing drug process
  • Common financial ratios required by lenders
  • Stock levels.

The information we obtained from preparing the benchmarking results has allowed us to help our clients make key management decisions and improve the performance and efficiency of their businesses.

If you would like to purchase a full copy of the report, please contact me on 09 306 7100 or email.

We also assist pharmacies with the preparation of financial statements and income tax returns, valuations and due diligence assignments, accounting and taxation services, restructures and acquisitions, financial forecasts and financing assistance, and business consultancy and advice.

Published in Contact Magazine April 2014. Written by Atul Mehta.

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