Cash Flow

Financial Management Tips for Better Pharmacy Cash Flow

Money problems? Don't sweat it. Here are some top tips from Lisa Faast on increasing your pharmacy's cash flow.

Virtually every independently owned business has experienced cash flow issues at one time or another. For independent pharmacies, cash flow has become a huge point of concern. Pharmacy cash flow problems might be long term, or short term. Caused by low profits, high expenses or just the timing of when you receive money from your insurances compared to the due dates on your bills.

No matter the reason, or the duration, one thing is certain. No pharmacy owner wants to deal with the stress caused by low cash flow. And stress aside, low cash flow limits the growth of your pharmacy business. There are a lot of great profit generating services you can offer in your pharmacy, but many of them require start up costs.

Dr. Lisa Faast from DiversifyRx is an expert in helping pharmacies succeed through diversifying and growing different revenue streams. Dr. Faast joined us recently to share some financial management tips that could help improve your cash flow. Here are some of our favorite takeaways. (With a few extra RMS tips thrown in!)

Improve cash flow by decreasing pharmacy inventory.

Inventory is the biggest expense in your entire pharmacy. You can picture each bottle on your shelf as a little stack of cash. While there is a whole strategy to decreasing your inventory, a quick way is to simply aim for a 10-15% reduction in cost when you process your order each night. You can find your cost of goods sold in your pharmacy management system to get the right numbers. This isn’t a hard and fast rule because you may need large quantities for a machine or an expensive drug but if you aim for a reduction as regularly as possible, it should definitely help improve your pharmacy cash flow.

Will-Call management is also an important part of optimizing cash flow. Make sure that customers get every prescription they have available for pickup and return unsold prescriptions to stock rather than letting those dollars collect dust on your shelves.

Review your payroll.

Right behind inventory, payroll is the second biggest expense for most independent pharmacies. Even so, payroll still represents too big of an expense for many pharmacy businesses. The proportion of payroll to revenue should be 13% or less as a general rule. Reducing payroll does not mean you have to make hard cuts or layoffs because small changes can still add up. You can rotate through your team, cutting 1-2 hours a day to make a sizable dent in your payroll expenses. You can also offer employees the opportunity to take unpaid time off. Not everyone will go in for this option, but you might be surprised at the number of employees willing to take a bit of extra time.

Use your pharmacy point-of-sale reports to look at transaction volume broken down by day and hour to make sure you maintain adequate staffing.

Look at additional expenses.

Outside of payroll and inventory there are a whole bunch of other expenses. Go through your profit and loss statement and see what you really need to be spending money on. Also shop out your costs. Save on your ink and toner, receipt paper supplies, etc. (If you’re sending statements, consider emailing them instead of mailing to save money.) Remember, even little cost savings can add up big time.

Another pharmacy expense that you can decrease, is charitable giving. We know that’s a hard one to let go of, even short term. Luckily, you can still give back to your community in a cash flow crunch. Checkout charity is a great way to give back. You can ask for donations at the pharmacy point-of-sale. Many businesses offer customers the opportunity to “round-up” for charity. This can be integrated as part of the transaction and easily augment your current contributions. You can also offer customers the opportunity to donate their loyalty rewards to charity.

Here’s a great video on checkout charity.

Leverage due dates.

There’s a big difference between a due date and a late date. The due date of a bill might be the 1st,  but it’s not late and incurring late fees until the 10th. Those extra few days can make a difference and loosen up your cash flow. And if you need additional time, you can consider using credit cards, but this comes with a few big caveats. Do not use credit cards unless you have the discipline to pay them off each month. They are not a loan. However, a bill that’s due on the first and paid on the 10th before late fees accrue with a credit card can net you 2 or 3 extra weeks and really help to free up cash flow.

You can also talk with your business partners about options for flexibility. We can’t speak for everyone, and we know that not every business you work with will be sympathetic, but at RMS, we’re always willing to listen and work with you as much as possible. You might be surprised at how many of your vendors just want to help. After all, we can’t succeed without you.

Resources to learn more.

Want to see more about these tips and get some additional questions about pharmacy cash flow answered?  We have some great resources lined up.

First, you can watch the full presentation from Dr. Lisa Faast, complete with Q&A.

Plus, Lisa’s full list of quick cash flow tips is available at

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