As a pharmacist today, you’re increasingly being called upon to help contain rising health care costs by assuming increased responsibilities and providing additional services. At the same time, you may also be managing an extensive inventory of consumer goods – everything from groceries to cosmetics. To help your business flourish, a strong cash flow plan can help you stay on top of your payroll, pay your suppliers on time, execute marketing initiatives, and cover your overhead.

Here are five ways to help ensure you successfully manage your pharmacy’s cash flow.

1. Understand your financing options       

When first setting up an independent pharmacy or buying a franchise, it’s important to understand your financing options terms and features. A 2023 Scotiabank Insights on Pharmacists report found that securing a business loan is one of the most important business first steps for future Pharmacy owners.1 It can help reduce your long-term costs and increase your cash flow. Pankaj Jain, Healthcare & Professional Specialist at Scotiabank, says, “for example, our bank may provide the flexibility to allow you to amortize your loan over a longer period to reduce your monthly payments.” Jain also notes, “you may be able to negotiate a set period during which you only have to pay the interest on your loan when you first start out. This could potentially leave you with more cash to cover your initial expenses and improve your cashflow.”  

With several financing solutions available, Jain recommends, if you are just starting out, that you meet with a Healthcare & Professional Specialist or banking advisor to review your options. He says, “the financial decisions you make at the outset can have a direct impact on your future cash flow.”

2.  Pay your bills as soon as possible 

Canadian pharmacies dispense nearly $35 billion annually in prescription drugs2, so paying for those drugs on time is paramount to managing your pharmacy’s cash flow. This is especially true given many drug suppliers offer discounts based on how quickly you pay for the product. 

To help ensure you can pay all your invoices as soon as possible, Jain recommends applying for a line of credit. “It’s good practice,” he says, “to ensure you have sufficient credit to provide you with financial flexibility so that whenever an invoice is due, you can pay for it on time. This can lead to a positive, on-going cash flow cycle and positive credit with suppliers.”

3. Look for ways to reduce costs

Always striving to reduce costs should be a key part of managing your cash flow. One place to start is with your staffing levels. Are they too high? Can staff be scheduled better around peak traffic hours? Or is there a less expensive way to perform a specific task? Can technology be implemented to save long-term costs? Jain suggests outsourcing non-essential work, such as accounting or human resources requirements. He says, “optimizing staff levels may improve your cash flow by leading to direct savings on expenses such as benefits and holiday pay.” Of course, getting the right staffing levels is an important balancing act that requires some learnings related to your location and some trial and error until you find what is right for your pharmacy. You want to make sure you are well supported, have a mentor when you’re starting out and your other staff members have a manageable workload.

As well, the next time you’re selecting products for your pharmacy’s shelves or ordering pharmaceuticals, stop and ask yourself if you have too much cash tied up in inventory. Inventory-tracking technology can help you determine which of your products are selling quickly and which are sitting on the shelves for long periods of time. This can help you to boost your cash flow by editing out the products that don’t sell and replacing them with ones that do.

4. Know your customers’ buying habits 

A critical way to help you avoid overstocking prescription pharmaceuticals is to get to know your customers’ buying habits. By leveraging customer relationship (CRM) technology, you can track their buying habits to better manage your inventory and cash flow. 

CRM software will not only allow you to track your customers’ prescription drug needs, but it can also analyze when their refills are due and what quantity of medication they require. This will enable you to order the right amount of inventory and have it on hand at the appropriate time. 

5.  Be mindful of your receivables

How quickly you are paid has a big impact on your cash flow. There may be a lag between when you submit an invoice and when an insurance provider reimburses you. It can also be a few days before cash from credit card payments arrives in your bank account. CRM technology can help expedite payments and maximize cash flow by sending out both invoice and payment reminders.

Equally important, storing your customer’s insurance information to facilitate the automatic reimbursement of their claims can help strengthen customer loyalty. Customers are more likely to come back if they know they don’t have to worry about having their insurance information with them when they arrive to fill a prescription or the process of having to submit invoices for reimbursement. 

For more information and customized advice and solutions to help you grow your pharmacy and optimize your cash flow, contact us today.

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