Latest News November 2022

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Measuring Client Loyalty

One of the KPI’s we regularly refer to is one called ‘client loyalty’. This measures the percentage of your active clients who engage with your practice by spending a significant amount frequently. For our purposes to measure the behaviour of pet owners in your clinics we have defined this as a client that has paid money to you on 3 or more occasions over the past 12 months. AND for these 3 or more transactions the value of the invoice has to be higher than the national average for ‘average invoice value’. But over the last 18 months average invoice value in the veterinary industry has increased by more than 10% – that means, to qualify as a loyal client, pet owners now have to hit a much higher target. Such is the quirky nature of looking at KPI’s on a national level.

So, some of you will notice that the target client loyalty has dropped from about 19% to 16% in your annual reports from APL and on your Profitdiagnostix reports. The client loyalty score of your business will also have dropped by about 2%, much like the national target. This does not mean your practice has gone backwards or that the industry in general has gone backwards. Instead the perceived drop is more due to the nature of the KPI and how we measure it – the higher average transaction fee is just harder to achieve 3 times in 12 months.

So when you look at your client loyalty now and notice it is lower than you remember it being, don’t worry about the absolute percent, it’s the 12 month trend for your practice that is more important. Generally as long as client loyalty is staying at the same value or increasing over the last 12 months, there is nothing to worry about.

The example below shows a practice that has client loyalty better than the national average. In this practice about 20-21% of the pet owners visit 3X or more with a spend greater than $202. Also note how 12 months ago the loyalty was at 18.9% and now it is 20.6% – the increasing trend is what is the most important.

Average invoice value – a popular KPI that may be losing its relevance

For as long as we can remember, veterinary businesses have used average invoice value to measure their business performance. It’s a simple KPI that is calculated by dividing your total sales by the number of invoices over a period. This gives a result showing on average what a customer pays when they go to the front desk to settle an invoice. 

Historically this has been a great indicator of whether a practice is pricing high enough, if enough services are promoted and if there is an issue with missed billing – all 3 of the situations above affect average invoice value.

However in more recent times, whilst it may still be fairly accurate internally for comparing various staff members within the SAME practice, it can get very confusing if you compare your average invoice value to that of other practices. This is because it can be extremely biased by billing habits and different practice management systems.

One of the reasons it has lost its accuracy is something we call ‘invoice splitting’. This is a scenario where a procedure that would normally be priced up on one invoice is instead split across multiple invoices. This is often driven by practice policies for example a practice may opt to raise a new invoice for a hospitalised patient for each day it is in hospital – there is really nothing wrong with this and you would just have to accept some loss in accuracy.

However more recently we have started to notice some software driven splitting of invoices that will potentially have an enormous impact on your average invoice value. One such example is where a pet owner pays on a credit card and instead of the credit card surcharge going on the same invoice as the rest of the services, an entirely new invoice is created for a tiny value of just a few cents. In this case, every single invoice paid by credit card will effectively have its value halved, the result being a possible artificial drop in average invoice value of as much as 50%, rendering this KPI virtually useless.

If this is the case, there is some consolation in that we have never fully relied on this KPI because of invoice splitting problems. We instead have also used annual client spend to measure exactly the same things within a practice – so all is not lost. If you suddenly become concerned and notice your average invoice value dropping dramatically, APL clients are welcome to contact us to check if it is really a problem with the business or just ‘invoice splitting’.

Veterinary industry health checker – September results.

We have run the analysis for the veterinary industry economic health and September looks very similar to August. Number of invoices raised decreased by 7.7% and number of unique animals seen decreased by 6.7% when compared to Sept 2021. This is very similar to the results of the previous month indicating that the industry is stabilising at this new normal. Revenue has remained similar to the previous September close to 0% change.

The slight contraction of the industry seems to have had limited impact on the profitability of our customer base over the last financial quarter, indicating that price rises that we have recommended have been adequate to offset the drop in patients. This drop will also gradually alleviate the excess workload that many practices have been feeling. Rising interest rates may also put enough financial stress on households to encourage a lot of people to come back to work full time – a trend to part time work has been part of the labour shortage. Also, hopefully there will again be a small influx of foreign vets which will further help with labour shortages.

Dog Tales! – If you forget my treats you may find yourself falling foul of the law!

I’m very good at doing my moves with my mom – our latest routine is ‘Jailhouse Rock’. I really enjoy it and will do it without treats. However, if she doesn’t regularly give me treats for doing my moves she gets into trouble with our trainer. 

We have heard that a few of you aren’t paying superannuation to your locums that are sole traders. Much like giving me my treats, the locum might be okay with it but the ATO are not! Remember that you must pay superannuation directly to their superfunds (and not to them) unless they invoice you as a company or trust. We don’t want to find you in the jailhouse.