Date: 12 October 2017
1) Stock Movements not considered – a common element missing on most internal accounts is the monthly movement in stock values. Considering the size of the investment most pharmacies make in stock, it would make sense this is managed and measured regularly. This can have a big impact on the assessment of any pharmacies performance and is a vital component.
The question is how you measure Stock on Hand (SOH) at any given time. Some pharmacy owners will base the stock on hand value on the Point of Sale system data. Others will base stock movements on a defined Gross Profit margin with regular adjustments to the physical stock takes. Either method has positives and negatives.
2) Inaccurate recording of closing stock values - Your Point Of Sale (POS) system can give you Stock on Hand reports which provide you with a stock value, but the accuracy may be questionable. Many experienced owners and pharmacy accountants will tell you their SOH reports are notorious for being inaccurate, unless strict data management is performed. Poor POS housekeeping can produce negative stock counts (understated) or stock numbers well higher than what is on the shelf (overstated). There are been many examples of businesses presenting accounts based on a POS stock value that bears no resemblance to what is on the shelf. The pharmacy owner and manager must ensure this is managed properly to ensure accurate financial data.
To ensure your POS stock counts are correct you must undertake regular stock takes. We would suggest twice a year. One must be at 30 June and the other half way through the year. 31 January is usually a good month to do so. By undertaking regular stock takes and updating the POS stock counts you not only have a more reliable stock reporting systems but you also have more reliable financial reports.
3) Customer Debtors not reconciled – many pharmacies have customers with accounts that they maintain, yet their financial systems and reporting may not properly account for this. Proper financial systems would ensure customer debtors are reconciled each month and taken up in the financial records of the business. Also like stock management, the customer debtor’s system also needs to be managed properly to ensure the outstanding balances are correct and recoverable. Talk to your accountant about how to deal with those amounts that are not recoverable (bad debts).
4) PBS Debtors – another item that is often not taken up is the PBS amounts owing at the end of any given month. Again, this can be quite a large amount and is a fundamental component of pharmacy income. These monies represent amounts owing to the business and should be treated as an accrual, no different than Customer Debtors.
5) Scripts Owing – those pharmacies that deal extensively with residential care facilities often have large numbers of scripts owing from doctors. Outstanding owing scripts can become a significant problem from a cash flow perspective. Of course besides the outstanding PBS funds, pharmacies leave themselves at risk of regulatory issues if the owing scripts are not received by the prescriber in a timely manner. Ensure the value of the scripts owing are identified and recorded in the financial accounts monthly.
Written by John Thornett FCA CTA, Director, Peak Strategies Pty Ltd.
Every effort has been made to ensure that the information and/or advice contained in these pages are free from error and/or omission. You should seek your own advice prior to acting on any information contained within these pages. No responsibility can be accepted by the Pharmacy Guild of Australia or its employees involved in the preparation of these pages for any claim which may arise from a person acting on information and/or advice contained herein.
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