If you are starting a new pharmacy business, or have been running one for some time, you may be realizing you will need help managing your money and bookkeeping.
Many pharmacists and owners of pharmacies handle their own accounting, but hiring an accountant can reduce the risks of costly mistakes, increase the efficiency of your financial processes, and can save you money.
What Can An Accountant Do For A Pharmacy Owner?
An accountant can help you and educate you about how to grow your business in ways that pharmacy school never taught you. Good accountants help you have accurate, up-to-date information for better business decisions.
They help financial activities be more proactive, so there are no unexpected payments or other unpleasant surprises and identify opportunities to save money and maximize gross margins. They can help you with different processes such as accounts payables, accounts receivables, and payroll, to help make all financial processes smoother. Their expertise will benefit both you individually and your business.
Unfortunately, many pharmacy owners who have accountants get little to no help in these areas. Many owners think their accountant is doing all these things, but really they are just filing your taxes and provide little to no advice.
One frustration we hear a lot is not receiving timely information. For many, their accountant provides a summary of how your business did last year, but only 3-6 months after the year finished.
That means most owners are running their business blind, do not know their own numbers, and are acting on delayed information.
A great accountant can help you stay on top of your numbers and be in frequent communication throughout the year, so that you can make timely decisions that affect your business such as hiring, taxes, or managing cash flow.
A Chartered Professional Accountant (CPA) in Canada, or Certified Public Accountant in the US, is a highly-qualified individual who can help with your financial management.
It is important to note that it is not mandatory to have the CPA designation to offer tax and accounting services in Canada. However, it is required if a review engagement or audit is to be done, but that rarely is required for pharmacies.
When interviewing accountants, it is important to get a clear idea what value added services you will receive over and above tax filing. Remember, price is what you pay, but value is what you get.
Accountants are very much like pharmacists - our powers stretch far beyond tax return filing (or in a pharmacist’s case, dispensing). We offer many value added services, such as the following services to help you take your store to the next level.
Perhaps the most critical area your accountant can help you with is minimizing the amount of taxes you pay.
Unfortunately, the number one frustration that we hear from pharmacy owners is that they receive little to no tax advice from their accountant.
A good accountant will start your tax planning at the beginning of your relationship with him or her, to make sure you get the maximum benefit of tax-sheltering or tax-reducing opportunities as you work together.
As each year goes by, these strategies are reviewed and updated to accommodate any changes to tax laws or changes in your business/personal circumstances.
Tax planning typically involves discussions in the following areas, with examples of how much taxes we have been able to save our clients:
Corporation structure ($449,574 tax savings)
Compensation strategy ($40,000 tax free withdrawal)
Income splitting with family ($28,672 tax savings)
Maximizing tax deductions & credits ($19,779 tax savings)
What to do with your business profit ($33,320 tax savings)
Protecting your greatest asset - YOU ($100,000 tax free payment)
Insurance tax strategies ($16,475 tax savings)
Succession planning, buying or selling a pharmacy
Estate planning strategies in the event of death/sickness/illness
A good accountant will help you keep good documentation, so that if you are reviewed or audited you do not run into trouble with the CRA.
At any time, the CRA may request to review any transaction that happened in your business.
For pharmacies, the most typical review happens with sales tax (GST/HST/PST) returns, where the CRA requests to see the top ten expenses claimed in your most recent return. By keeping your receipts, and having a good accountant represent you, you decrease your chances of being hit with penalties and interest for lack of documentation.
If there are questions about the day-to-day accounting practices, for example if there may be fraud present - this may lead to an audit. An audit could be requested if you are purchasing or selling a pharmacy.
An audit is an official inspection, done by a CPA or a third party, of the entire accounting system for the pharmacy. An opinion is given to ensure the books are properly maintained as required by law.
With daily deposits from insurance plans, your POS system, and frequent purchases from vendors, knowing your exact financial status at any time, including knowing who you owe and who owes you, can be difficult.
Your bookkeeper or accountant can keep financial statements and finances up-to-date and organized on a daily, weekly, monthly and annual basis so you know what your financial situation is at any time, and can be more proactive. Problems can be addressed as they arise, before they become a bigger issue; your accountant’s professional expertise helps with noticing these, too.
Your accountant can help set up an easy, effective cloud accounting system, such as Quickbooks online, for hassle-free bookkeeping, specific to pharmacy.
For example, to give you clarity on how each department is doing in your pharmacy, we separate revenue, cost of goods sold, and gross profit margins into:
Home Health & Wellness
Other (rental income, for example)
When your bookkeeping is up-to-date, your accountant can produce financial documents like a profit and loss statement, balance sheet, and cash flow statement to show the business' financial health.
For many pharmacists, looking at these numbers can be as clear as mud! This is where accounting services play a role. Accounting services are meant to help you understand what these numbers mean and help identify if there is an opportunity for growth or issues to be addressed. Your accountant can then provide you business advice to help address these issues.
For example, a critical metric to track and understand in your pharmacy is: gross profit margin. For a pharmacy, this should be at least 30% or higher. If it is under, we drill deeper into each department’s gross profit margin to see where the problem is and, together, we come up with a game plan to address the issue.
Unfortunately, many pharmacy owners do not have these types of conversations with their accountant and more often than not, are leaving money on the table.
This advice can include help with financial budgeting, forecasting, tracking key performance metrics, setting targets, and monitoring your progress towards your goals. Together, you can make better business decisions, and have more effective budget and goal setting to grow your business.
Benefits Of Outsourcing To An Accountant
Proper bookkeeping is time consuming, and it is more effective to use your time, and your employees' time, doing your proper jobs. With outsourcing accounting and the streamlined systems that will be set up for you, significant time savings are possible.
Pharmacy owners are busy enough as it is. Doing your own bookkeeping to save a few dollars per month is not worth your time, which is better spent servicing your patients and with your family.
Let alone the mistakes often made when doing your own bookkeeping usually cost more than if a professional bookkeeper or accountant handled it in the first place.
A great accountant can save your business a great deal of money.
This is why it is important to understand what services you will receive over and above routine bookkeeping and tax filing for the price you are paying.
From providing tax advice to help you save money in taxes to providing business advice to help you increase the profitability of your store, working with a great accountant can actually make you more money than what you pay to work with them.
Up-to-Date Financial Statements and Bookkeeping
Accountants will use accounting software and other tools to streamline the bookkeeping process, and can help you pick the best option for you.
Most accounting software is cloud-based these days, meaning you can login at any time to see how your store is doing.
Peace Of Mind
Busy pharmacy owners usually don't have the time or skills for effective and timely bookkeeping, allowing things to slide until they become an issue.
Pharmacy school did not teach you the financial information you need to proactively identify issues before they arise, and don't have enough cash flow visibility to make decisions. Accountants ensure timely and clear financial reporting to prevent this.
Outsourcing to a great accountant will give you peace of mind knowing that your business finances are being looked after on a timely basis and receive advice if things are not going well.
Ability To Grow With You
As your pharmacy business grows, an accountant is more and more necessary; having one in place before it becomes essential can help you grow, and do it more smoothly. You already have scalable pharmacy accounting services in place.
What About A Financial Planner?
A financial planner helps with different activities, such as savings and investment strategies, but does not replace an accountant. If you are looking at buying or selling a pharmacy, planning your retirement, or setting up an investment portfolio, a planner can help.
Often, an investment strategy will be implemented. Planners can also help with retirement, insurance, and succession planning.
Pharmacy Accountant Specialized In The Pharmacy Industry
While most accountants can manage basic bookkeeping and accounting services, pharmacy accountants are specialists and often have enhanced skills and experience to maximize financial opportunities for pharmacies.
They are familiar with pharmacists and the industry, for more proactive help. They are familiar with the unique activities pharmacists and pharmacies are involved in, and can provide more targeted professional advice. They can advise better on growth opportunities and industry strategies, especially tax strategies unique to pharmacy.
Pharmacy Accountant Experienced In Financial Planning
PharmaTax is composed of skilled and experienced pharmacy accountants who also can help you with financial planning. We plan tax strategies in advance, not just at tax time, for maximum benefit. We can help owners of community pharmacies and other pharmacists with both accounting and financial planning, giving you more comprehensive expertise and assistance.