As health care professionals, pharmacists are experts in their specific field, with a wealth of knowledge in patient counseling, medication management, improving patient health outcomes, and much more, but business and accounting knowledge isn’t taught at pharmacy school. As a result, when pharmacists open their own retail pharmacies, they can struggle with the financial portion.
A pharmacy-specialized accountant can streamline your finances to make sure you are not paying more taxes than necessary, losing money unnecessarily in overhead costs, and leveraging money more effectively. Although many pharmacy owners believe they can save money by handling accounting themselves, the potential savings that an accountant with the right expertise brings more than offsets the cost.
However, not all accountants have the right expertise or business model to provide services that offer this level of benefit, so it’s important to shop around to find one that does, and talk to potential accountants to be sure on what they will offer. In this way, you can make sure you are getting the full benefits possible.
Ensure Your Accountant Is Proactive
Most accountants will save you a certain amount of time, and prevent you from obvious wasting of money by filing taxes properly and not making errors. However, good accountants who specialize in helping community pharmacists can offer much more.
If your accountant isn’t giving you timely, up-to-date information that lets you make informed decisions in time to benefit, you will be losing money unnecessarily.
Business Planning and Timely Information
Your accountant should be communicating well with you, as well as being proactive, to help you avoid unexpected costs and give you time to take advantage of opportunities. Many accounting organizations simply provide a year-end summary, which doesn’t provide actionable information. If you’re not getting information and advice proactively, discuss this with your accountant, and don’t feel pressured to stay if your accountant can’t provide this.
Review What Services Your Accountant Is Providing
An accountant can help you with a wide range of services, from AP/AR to payroll and much more to help you be fully on top of all of your finances. Make sure to review what they are doing, and ensure there are no gaps. Also, consider whether your accountant is providing expert advice and recommendations in each of these areas. This can provide you with significant money-saving opportunities.
Tax Planning vs. Tax Preparation
Many accounting organizations offer tax services, but they mean only tax preparation and filing, when it is too late to take advantage of many tax opportunities. It’s like finding out after you filed your taxes that if you had contributed a little more to your RRSP, you would have received that amount back in tax. There are many tax opportunities specific to pharmacists and their pharmacies, but if you don’t know about them ahead of time, you won’t be able to take advantage.
There are many opportunities available to pharmacists that other health care professionals are unable to take advantage of, so ensure your accountant has the right expertise to let you access these benefits.
There are over 250+ tax strategies available, we lump them into 7 key categories:
- Corporate structure
- Maximizing tax deductions and credits
- Setting a Proper Compensation Strategy
- How to split income
- How to build wealth tax efficiently
- Insurance tax strategies
- Estate Planning strategies
Get Specialist Advice for a Pharmacy Business
Support With Pharmacy Services
Medication therapy management and inventory management is a critical part of the business. While many businesses have inventory, they don’t have all of the complex and stringent legislation, security, and other requirements involved in inventory management that community pharmacies have.
Many pharmacy owners aren’t aware that their accountants can help with inventory management. A general accounting service can help; however, one that specializes in supporting retail pharmacists and has the knowledge and experience of the rigorous requirements you are bound by, will be able to offer more meaningful help with these processes, such as how to reduce overhead costs associated with maintaining inventory, which cuts into your profit margin.
For example, tracking inventory turnover is especially critical for a pharmacy. How many times did you sell your entire inventory throughout the year? Most generalist accountants won’t have an idea what that number should be for a pharmacy. If turnover is less than 12-13 times, then that may be a signal that you have too much cash tied up in inventory and may be costing you money in write-offs. But where is the problem? In the dispensary or front shop? Further digging is necessary to determine the root problem.
Support With Decisions
Pharmacists have complex roles, and their business is highly regulated and involved. This can make it difficult for an accountant to provide good advice if they are not familiar enough with the pharmacy industry. This may be why your accountant is playing a more passive role with your finances. If this is the case, discuss your needs with your accountant, or find one that has the expertise you need to help you grow your business.
A common question we get is, “can I afford to hire someone else?” Many accountants won’t have time to help you analyze the numbers because they are too busy filing tax returns. A proactive accountant can help you model different scenarios and forecast how numbers would look if you hire someone and what the potential impact to your numbers would be.
Support With Streamlining and Modernizing
Surprisingly, many pharmacies still do bookkeeping and other accounting manually. An accountant can help set up cloud accounting systems, specific to pharmacy, and recommend digital tools to cut down on administrative time and increase accurate record keeping.
Support for Growth
Your accountant should be able to help you set up a corporate structure that is more profitable and saves on taxes, as part of business and tax planning. However, this is only the first step in guiding pharmacists on how to grow their community pharmacies safely and profitably. There are strategies to maximize tax savings and reinvesting the wealth for growth that doesn’t impact your personal financial comfort or put a strain on finances.
For example, pharmacies in Canada are not mandated to operate under a professional corporation. This introduces the opportunity of potentially introducing family trusts, holding companies, and your family members to your corporate structure to save money in taxes every year. These structures can also potentially help you sell your pharmacy completely tax free in the future.
The pharmacy accounting specialists at Pharma Tax have expertise in helping the health care industry, and specialize in helping pharmacists specifically with business and tax planning, as well as other accounting services. We’ll help you get a competitive edge in the tough market you face.