Latest News July 2023

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

New year reminders!

It’s already a new financial year! There are a few things to remember to do at the start of the year and a few things you need to make sure you’ve ticked off your list:

• Payroll needs to be finalised and submitted by 14 July, your employees can’t get their tax returns done until you do this so don’t forget!
• Superannuation is now 11% (this will happen automatically if you use an up to date payroll software system). You need to factor this into your costs.
• If you are an advisory client have you remembered to book a workshop. Non advisory clients please contact us for information if you’d like to attend a workshop.
• Award rates will be changing – do you need to do wage increases?
• Equipment can not all be deducted anymore there is a limit of $20,000 per item. Equipment costing more than this will need to be depreciated, the $150,000 instant asset write off that was introduced over COVID is now over.

Veterinary industry tracker

Below is the chart of the veterinary industry tracker which is also available for you if you create a login on the www.profitdiagnostix.com website. Here we track in real time around 200 full time vet equivalents across Australia. Below we are showing the chart we use to track the ‘workload’ of the practices – essentially how busy is the industry compared to the previous year. 

Based on the last few months and as we have repeatedly mentioned, we are clearly facing a downturn when compared to the previous years. Both animal numbers seen and invoices generated have generally been just below zero – implying less has been done in those months than the same month in the previous year. 

April was a terrible month with around an 8% reduction in workload, but the numbers bounced back nicely in May and were close to zero – meaning similar workload in May 2023 compared to May 2022.

The very volatile nature of the chart due to very unpredictable drops has made it difficult to understand what the months in the future will look like, but it seems that generally holiday months like December and April are having a significant reduction of work. The months immediately after then increase, perhaps a bit more than they should, because holidays have created a deferral of some work to the next month.

However, on average the animal number and invoice number have been below zero for over 12 months, either by a long way or a slight amount, so the downturn is real, with the exception of animal number in  May which managed to sneak in just above zero – once again indicating the unpredictability of current times.

The green line shows quite the opposite – this is the number of consultations delivered to the current population of pets seen. This shows how the profession, when faced with a less busy environment, gets better about delivering better quality care to patients. Although we just show consultations here, the same trend exists with blood testing, hospitalisations and dentals. Our thoughts here is that the veterinary profession is fairly resistant to recessions – veterinary businesses can pivot between high volume workload to better delivery of care when the workload changes – but from our extensive data, we can see that some do it better than others.

So where are we actually seeing problems at the moment? We see very few problems as a result of the ‘business doing badly’ or the ‘business getting too quiet’. Most of the practices we service still have reasonably good profit margins. However, because interest rates have increased so significantly, most of the stress we are currently seeing is around the cost of borrowing and servicing loan repayments which historically were half the amount, particularly where business owners have committed to large personal investments in hospital builds and fit outs. Whether this is reason enough to hold off such endeavours is another aspect altogether which involves knocking back the entrepreneurial spirit (something we don’t like to do) – it may be no co-incidence that some of the best businesses that have existed were born or thrived in a recession (Disney, Microsoft, Airbnb).  

Dog Tales!

Are you snoozing on sending in your information for tax? You know those naughty clients that forget to bring their dog in on the day it’s booked for a big 3 hour dental and then arrive 3 days later expecting you to ‘fit it in’? Well that is you when you don’t send in all your information for tax by the date that is scheduled it for you.

Our human owners run one of the few accounting firms that works on ‘scheduling’ every clients tax. You are notified every year in advance with a specific date for all your paperwork to be submitted. This means that each and every one of you is allocated a specific time in the year for our human owners to complete your work with minimal distraction. This is similar to the way that you manage your consultations and surgeries – I’m sure you would agree that doing long jobs like cruciate operations cannot be managed on a walk-in basis.

We don’t like to miss our walks and tricks because suddenly mom, dad and the rest of the accounting crew are overloaded with unscheduled work, so we have put our paws down this year and make it clear that this won’t happen anymore.

If you don’t send your tax information in by your scheduled date then it will either be done when somebody else later in the year forgets to send their information or you will have to wait until late June – exactly like a surgery that does not arrive on the allocated day, the job has to be moved to the next available slot. Do you know that for our pack to complete tax for one simple client takes a minimum of 2 days and upwards of a week? This is because we do very few ‘simple’ tax returns – almost all our clients have complicated businesses and multiple business structures. Our pack works as hard as they can but also need their play time so please be respectful of the date you need to send your information by or don’t complain when your tax is lodged late.

You will be reminded repeatedly as to when all your paperwork has to be submitted to us, and if you don’t know, just ask. Remember also it is better to get your paperwork ready in advance rather than try to look for it the day before – sending ‘most’ of your paperwork on the due date is not enough, to complete your tax we need all of it.

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Latest News June 2023

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

End of financial year tips

We are nearly at the end of the year! Yes it has flown and you’re all really busy, but there are a few things that can’t be done after 30 June. Timing is everything and some things have to be done by 30 June or you miss out. A few things you may need to remember to do:
– Top up your personal super
– Pay all your staff super
– Pay back any money you have drawn out of the business bank account and planned to return
– Top up your wage or pay a family member

Have you booked in for our annual workshop?

All advisory clients are welcome to attend our annual workshop. If you haven’t booked in yet please email us for more information on venues and dates.

Veterinary industry health update

I think we all know that we are staring a global recession in the face and it would be surprising if we didn’t have one when you consider that the whole world went from being fully productive one month to running inefficiently for 2 full years. When one considers that the scope of economic loss over the GFC must surely have been less, then its hard to deny that there must be tough times ahead. But everything in economics lies in relativity  – in other words it is important also to understand where you are relative to everyone else. And we feel pretty comfortable that the veterinary industry is doing relatively better than most others. 

Yes there is a general slow down. Our extensive data across many Australian practices undoubtedly indicates that:
-Patient numbers seen every month are dropping, but dropping slowly
-Number of invoices raised every month are dropping, but dropping slowly

Revenue/Sales and average invoice value are however holding a lot more firmly and there are a few reasons for this.
Firstly, the veterinary industry has always had the natural potential to pivot from going between high workloads and lower patient care to low workloads with higher patient care. This simply means that when there are fewer customers coming through the door, clinicians find that they have more time to work up cases more thoroughly. And we could clearly see the reverse of this in our data at the height of COVID when practices became too busy and  the number of diagnostic tests, hospitalisations and dentals delivered to the pet population decreased.

Secondly, most practices we have been dealing with have increased their prices more than they would have done historically. Although this may seem counter intuitive when there is less money to spend in the general population, it is the only way a business can offset the increasing running costs, particularly wages, drug supplies, loan interest rates and rent. And yes it is in fact better to lose a few low value clients in the interest of offsetting significant business running costs.

Also be mindful of simply assuming that your business is following the national average trends! not every practice is reducing in client numbers and we do still have clients who have exponentially growing practices. This can be area specific and linked to population growth in certain areas or because they have simply weathered the storm better and made better decisions than their competitors.

Another potential silver lining, even though its early days, is that in other industries, the workforce seems to be returning. This is possibly because higher interest rates are forcing people who went part time over COVID back into full time jobs. We are hoping this will start to be noticeable in the veterinary industry as well.

So our advice to you now is not to go into any recessionary panic. Remember that you can adjust prices and your business can ‘pivot’ in the manner that it offers services, giving you a relative advantage to many other industries that don’t have these options.

Its time to learn to play together

As the vet industry shifts to larger numbers of equity holders, vets are going to have to learn to play together or give decision making for the profession to someone else.

In spite of weak global economy, vet practices continue to be popular investments. This means that over the years, veterinary businesses have been selling for more than many other privately held businesses, and with a trend like this, there comes a point where new private buyers cannot easily raise the finance to purchase a veterinary business in its entirety.

Is this a bad thing or something that veterinary professionals should run away from? Absolutely not, its a great thing that the profession has successfully built itself up to this stage! So why are so many business owners wanting to cash out when there are few better investments? This is often because they are worried about staffing and bringing in a current employee to share ownership seems too hard.

We recently ran a four part web series on gradual buy ins. This series covers all the parts you’ll need to consider to allow current employees to buy in slowly and you keep your investment for longer. If you missed it then watch the recordings here 

https://vetbusinessuniversity.com/checkout/?product_id=8208

When you click this link you will be requested to donate $5 which goes towards creating impacts globally for a better world. This will give you access to the recording for 14 days.

If you are already a member of Veterinary Business University as an APL Accountants advisory services client, then login and go to  

https://vetbusinessuniversity.com/watch-last-web-event/

Latest News May 2023

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

Do you own your business name?

We have had a few enquiries from clients this past month about their registered business name. They have been told by their lawyer (when selling part or all of the business) that they don’t seem to have their business name attached to their trading entity. On further investigation it seems that a number of clients have let their business name lapse – they have not actively paid and renewed it when getting a notice to do so. Fortunately so far in all cases the name is still available and so it has been easy to purchase it again.

Is your business name currently registered to your entity? You can check this easily here https://connectonline.asic.gov.au/RegistrySearch/faces/landing/bn/SearchBnRegisters.jspx?_adf.ctrl-state=njlpshsgk_21

Business names are registered through ASIC connect and clients have always done their own, however Helen at out office is happy to do this for you if you need assistance. Take the time to double check this as you don’t want somebody else to take it!

Have you registered for our succession planning web series yet?

We will be planting trees for each registrant so register now!

To register for this event click here:

https://us02web.zoom.us/webinar/register/WN_TxrfsAzqTaG2L3CQHj6jsQ

This will register you for all 4 events, Wednesdays at 1pm (Qld).

This series is for all veterinary business owners and entrepreneurial employees. We have legal, accounting and valuation experts showing you the path forward with gradual succession and hand over of the business from the current owner to one or more of their team.

3 May – Ultimate exit plan and strategically structuring – how and why you need to plan succession, structures and restructures for buyer and seller

10 May – Essential tax Considerations  including Capital Gains Tax – Sellers you need to think about the best outcome for tax, buyers you need to understand why the sale is being structured in a particular way and plan your entry to be tax effective when you finally sell.

17 May – The ins and outs of valuations – both buyers and sellers need to understand the valuation process 

24 – May – Potential problem areas – Sale contracts and shareholder agreements – don’t be caught without one. Lots of tips for buyers and sellers to consider to protect the interests of both sides and create a happy relationship.

Join our seasoned industry specialists as they navigate you through succession strategies:

Joanna Oakey – managing partner at Aspect Legal (Commercial law specialist)

Paolo and Anne Lencioni – partners at APL Accountants (Business valuation specialists)

Kezah Alincastre – partner at James Noble Accountants/MyTaxVet (Veterinary tax specialist)

All of these specialists have extensive hands-on experience with vet practices.

To register for this event click here:

https://us02web.zoom.us/webinar/register/WN_TxrfsAzqTaG2L3CQHj6jsQ

This will register you for all 4 events.

Dog Tales!

Last week we celebrated my third gotcha day! Some of us rescues never had birthdays and the only special day a human remembers is the day we first got to snuggle up inside with a special family to love us. I was super spoilt and got three toys (so that my two best friends could share) and my very own cabriolet (pram). No more being left behind on walks because I’m old and slow! I feel so special and important and realise that I would never want to leave this pack. 

It got me thinking – do you give your pack at work special things on special days? Remember it’s very much appreciated and makes us want to stay.

Latest News April 2023

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

Lets discuss a business model for the profession that actually works!

Lets cut to the chase – when it comes to succession planning and future ownership of veterinary practices, the best outcomes are achieved when the ownership is passed on to people who actually know a thing or two about animal welfare rather than people who do not. And by this we don’t mean just vets, we mean also nurses and practice managers who have taken the time to passionately work in this industry for some time and understand it’s complexities.

We will deliver 4 one hour sessions over lunch time between the 3rd of May and the 24th May and anyone who owns a veterinary business or is remotely thinking about their financial future as employed veterinary professional should attend.

We will be dealing with the complex topics of succession planning in vet practices, how to sell, how to buy and all the intricacies you need to understand as a business owner or prospective partner so that these deals can progress and everyone working in the profession wins.

How do we know this? After more than 12 years of being involved in succession planning for veterinary businesses as an accounting firm and veterinary business valuers we have been able to watch the results of hundreds of veterinary practice sales and review where they are after a long time under new ownership. And practices that sell primarily to shareholders that know nothing about the profession and manage from an office in the distance is like watching a train smash in slow motion. And here we don’t just mean that the business degrades and affects the sellers, it effects those that have not wanted to step up to the role of becoming owners in terms of job losses, dealing with unhappy clients and clinical policies being dictated by non-professionals. So its time for employees to find the courage and secure their future.

On the other hand we have been involved with a hundreds of sales of small practices to younger veterinary professionals and watched them become wealthy millionaires (we are not exaggerating here) whist still servicing and treating animals ethically – and we cannot understate the importance of the word ‘ethically’ and the fact that their teams are happy!

The problem for the future however is that successful veterinary businesses like these are now very valuable and it is difficult for younger vets to buy them outright – they simply cannot raise the finance. So more recently we have been working with a number of practices to introduce younger business partners because buying the practice in small pieces is still very affordable and always will be. This takes trust and courage on both sides, but it works! No surprises because more than 30 years ago other service professionals had similar challenges and applied the same solution. Accountants and lawyers are good examples where they transitioned to larger ownership restricted primarily to people who actually understood their profession. That is why so many years later these professions are dominated by large firms who are structured with most of the ownership still in the hands of professionals.

We look forward to seeing a large audience of both veterinary business owners and younger vets who want to secure their financial future.

Dates: 3rd of May to the 24th May for 4 weeks over lunch time. 

Click here to register early https://us02web.zoom.us/webinar/register/WN_TxrfsAzqTaG2L3CQHj6jsQ

Have you thought about your 2023 tax bill?

If you are interested in minimising your tax for 2023, join us at this web masterclass:

Date: Wednesday 19th April

Time: 1 PM Brisbane & Sydney time

Register here: https://us02web.zoom.us/webinar/register/WN_S3Uu0j7JRGmottvDPNJV9Q

For those of you wanting to know more, this is the time of year that we start looking at ‘tax planning’ with our clients. One of the most important aspects of this is estimating how much tax you will need to pay on your 2023 tax return. If your profit has gone up this year then you will not have paid enough in tax instalments during the year and will likely need to be paying more tax than usual.

For many of you this extra tax won’t fall due until this time next year, so it could be easy to spend your surplus cash now and then end up stuck for cash next year when you need to pay your tax. Make sure you have factored this in to your current spendings!

Planning some of your expenditure sensibly BEFORE the end of the financial year can help minimise your tax. You also have to consider the amount of money you have withdrawn during the financial year both as wages and as loans/drawings out of the business so that you can calculate the best tax outcomes in both your business tax returns and personal tax returns. The ATO also has some very specific rules around how business owners can take money out of the business. All of these decisions and money movements often have to happen in the current financial year, they can’t be even one day late without incurring unfavourable tax and legal outcomes.

This is why ‘tax planning’ is so important and should be completed well before the middle of June.

Once again, there is the registration link to the Tax Planning masterclass:

Date: Wednesday 19th April

Time: 1 PM Brisbane & Sydney time

Register here: https://us02web.zoom.us/webinar/register/WN_S3Uu0j7JRGmottvDPNJV9Q

Dog Tales!

SO looking forward to easter!! We have been told if we are extra good and stay away from these silly looking foil wrapped bunnies and eggs then we will get something extra yummy. All paws crossed that you get something yummy too and have a very happy easter!

Latest News March 2023

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

Are you in the ATO’s sights?

February has been an interesting month and don’t think the ATO aren’t looking for you.

A couple of warnings based on the last month:

1. Do you have a company motor vehicle that you use for business? You MUST have  a logbook to prove your business mileage. If you are pulled for a review this will be the first thing that you are asked for, so make sure that you have it.

2. Does your superannuation for your team always get paid in time? If you pay late you must lodge a super guarantee charge statement. Late includes 24 hours late – 1 day is all it takes to get you into trouble and it is very easy for the ATO to monitor. If you pay late or can’t pay superannuation make sure to let us know so we can discuss the paperwork involved.

Look out for a web masterclass on this and a few other traps in the next few months.

Web Masterclass on dealing with client push back on prices and estimates

Everything is more expensive and most likely so are your services (in order to pay your team appropriately). How do you deal with those owners that don’t want to take up services, especially elective surgeries like dentals? How do you deal with that difficult client that complains about the price? Join us with Alison Lambert on 16 March 6pm (Qld)/ 7pm (NSW/Vic) where she will discuss how best to deal with these situations. Many of you already know Alison and she is a master of words and client communication, so don’t miss this opportunity.

Register here to join us

https://us02web.zoom.us/webinar/register/WN_jx8PUm1yROOw1ytvhkpc6g

Dog Tales! – make sure you understand the difference between a wage and a loan from the business

Where did my yummy food end up?! Yesterday we went to training club and I got lots of yummy food when I was there doing all my special tricks, but when we got back home I realised that I only got the yummy stuff when training. At home I have different food, the yummy food doesn’t seem to come home! Mom and dad explained it’s much like money the business makes. That money has to stay at the business and can’t come home with the owners unless it gets ‘taxed’. This means that for all the business owners out there, leave your money in the business bank account and only move it into personal accounts if you plan to pay tax on it. From a practical perspective as a business owner this means only taking money out through payroll or as dividends and distributions. Money taken out of the business in any other way needs to be treated as a loan from the business.  Loaning from the business can have serious consequences and the tax office has a special name for it – a Division 7A loan. If I try to steal the yummy food out of the treat pouch when I see it on the bench at home, my human handler will expect me to do some special tricks afterwards to make sure I deserve it. Similarly, looking after Division 7A loans requires business owners and their accountants to do some special tricks to keep things legal and the ATO happy.

Latest News February 2023

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

The expected December downturn happened as predicted, but will it continue?

It was no surprise when we aggregated out National Industry Healthcheck for December 2022 to see that there had been an 8.7% decrease in invoice numbers and a 6.7% decrease in the number of patients seen when compared to December 2021. 

Pet owners are eventually going to go back to their pre-COVID behaviour. This means going on holiday, visiting relatives, spending more than they should on presents and having hundreds of social commitments. And these things are not compatible with having elective procedures done on your pet. 

Pre-COVID, December was always a bad month for workload in veterinary practices. This temporarily changed over COVID, but now it’s back to the old habits for most.

Does this mean we expect to have a booming 2023? Probably not.
The workload in veterinary practices has had negative values for almost 12 months, so the boom actually ended in 2021 about 12 months ago.

We don’t foresee that any well run practices will suffer considerably in 2023, but there will be a gradual loss in workload which will likely effect practices running at low profits. This pressure may actually put some slight relief in the staffing shortage where these poor performing practices may reduce staff numbers and good performing practices won’t be so busy that they can’t cope.

Regular price reviews is also something that we will look forward to this year. Last year having assisted many of you maintain healthy profit margins with strategic price rises, we will be doing the same this year. Because inflation is still on the up, if you fail to increase prices, your money is worth less and less. At the current rates of inflation we are advising 2 or more price increases in the year. If you don’t do this you will not be able to keep up with increasing staff wages and supply costs.

If you want to look at the actual numbers in the industry tracker, just go to the http://www.profitdiagnostix.com website registration page: https://profitdiagnostix.com/register
This will give you a login that allows you to see the data every month when we publish it.

What should you do if your client numbers are dropping?

Because we predicted the fall in workload around 12 months ago, for those of you who fit the ctiteria, we have prepared in advace a ‘customer reactivation service’ which is proving to be very useful.

So what are the criteria?

• You have to be using Profitdiagnostix software, if not, you can just sign up.
• You have to be able to fit in more appointments ie. your appointment schedule has some available spaces.

Don’t do this if you are a practice that is struggling to fit in consultations and having to turn clients away because your appointment book is full. Our feeling is that at least half of the veterinary practices are in this position. These practices would be better off increasing prices significantly and losing more of their bottom tier clients.

However we have been helping a number of practices over the last few months who were fortunate enough to find sufficient staff over the COVID boom and now want to maintain the workload in the face of slowly decreasing client, patient and appointment numbers.

For these practices we have been using very advanced and unique tools that track patient visits over a period of 24 months. We use these to identify high value patients that have become disengaged with the practice and send them 3 text messages in an effort to re-engage their owner.

What’s more, the really unique part is that we can then track if they return and actually spend money at the practice. This allows us to accurately assess if the cost of the campaign is worthwhile so we can stop it in subsequent years if it is not working for that practice.

If you are interested in this please let us know, we will assess your client loss and whether you fit the bill for this type of customer re-activation. We are estimating between 30-50% of practices may be in this position.

Interested parties please email: [email protected]

Web Event – Wed 1st Feb 12 noon QLD time

The year has kicked off so its time to get online and have some fun over lunchtime with one of our entertaining web events.

In theme with todays news, we will be discussing:

• The current state of the industry
• How we think things are going to play out over the next 12 months
• Inflation and price changes
• How to re-activate highly engaged clients that have fallen off the wagon

Click here to register:

https://us02web.zoom.us/webinar/register/WN_YBqMKcFEQgWfh906mzHVaQ

12 noon QLD time
Wednesday 1st February

Dog Tales – What makes me a high value patient!

Humans love to talk! Sometimes they just don’t shut up! I remember once, when my mom and dad were watching a marketing web event, this crazy person started talking about the 80/20 rule – in most businesses 20% of clients are responsible for 80% of the revenue.

I remember thinking ‘what a lot of rubbish, this guy should just stop yapping!’. I was basing my logic on my experience with bone-chewing. The 80/20 rule certainly does not hold true for this – get equal entertainment and nutrition for 100% of the bone and would never even think about only keeping 20% of it and giving 80% away to one of the other pooches around me.

It seems however that it is wrong to compare bone-chewing with business dynamics. Enlightenment came to me this month when, alongside my pancreatitis, missing front leg, deafness, heart failure and renal failure I got a melting ulcer on my eye (because I also have corneal degeneration). This prompted my mom and dad to compare themselves with the ‘average veterinary client’ and they added up their annual vet bills. Remembering also that I have a rather accident prone Dachshund with growth deformities as a step brother and (fortunately) a fairly health step-sister Chihuahua cross. How much I wonder, if at all, did we exceed the national average annual client spend of about $900?

We won’t go into the precise numbers but let’s say it exceeded 20X that value! It therefore stands to reason that our family is worth more than 20 average clients. The reality is that there are probably a few families just like us – hence I have to accept the 80/20 rule is a reality.

You may ask how do you identify such a pet family? The answer is easy, in these families the pets are in control!

Latest News December 2022

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

Christmas Parties

We have had a few queries about this so just a reminder for you.

Don’t let the ATO crash your party!  We’re all about having fun here at APL but we are also accountants therefore ‘rule followers’ – even when we party!

The ATO have some grinchy rules in place to make sure they put a damper on things.

Here is a summary:

The gifting process must be ‘irregular and infrequent’ (much like Strudel and his weeing in the house). 

There is also a limit of less than $300.  Anything $300 and over will incur a fringe benefits tax obligation.

 Any gift under $300 will not incur fringe benefits – but is it a deductible expense?  It is only deductible if it is not classed as entertainment.  For example:

1.  You buy your staff member and their pet (of course) a bag of treats worth $100 (it’s a big bag).  This is a deductible expense and no fringe benefits is triggered.

2.  You take your team out to a (pet friendly) restaurant and the meal costs $200 per head.  This does not trigger fringe benefits tax but is not a deduction either because meals out are classed as entertainment (regardless of how tame the gathering is – it’s still entertainment).

3.  You buy gifts worth over $300 for each staff member.  This is like taking your dog to a no dog beach.  Of course it’s possible to do, a ton of fun, your dog will love you and you will probably get away with it 80% of the time, but this would trigger fringe benefits tax, and you would be hit with a penalty and a ton of paperwork that no one wants to take care of.

With these 3 scenarios in mind – party as you wish!

For more information visit: https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/FBT-and-Christmas-parties/

Client Christmas Greetings

In true APL style this year we will be buying “Joy to the Earth” gift bundles on behalf of our clients. Instead of buying and sending gifts and cards to you we are buying gift bundles that protect our planet from reforestation to conserving the ocean. This way we help prevent you getting diabetes from too much chocolate and help improve the planet!

Dog Tales!

Christmas is nearly here and not only do we get lots of cool doggy presents, mom and dad stop work for a while so we can go to cool places too!

Our office will be closed from midday Wednesday 21 December and will reopen Monday 9 January!

Have a merry Christmas and we’ll make sure we are good dogs and don’t eat chocolate or too much fat and try not to disturb the vets.

Latest News November 2022

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

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.

Latest News September 2022

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

Don’t believe an email just because it comes from someone you trust!

The amount of phishing and scams happening on the internet is really alarming at the moment, so don’t get caught out. At APL and James Noble accountants we run special internet monitoring tools to monitor if hackers are sending emails pretending to be us, and some weeks the amount is significant, coming from mail servers anywhere between China and the Netherlands.

This got us thinking to giving you context as to how you or your business could easily be compromised – we put our ‘hackers hats’ on and thought how would we scam a veterinary clinic. So you don’t have to get buried in technical jargon, just some simple examples of how you or your customers can get fooled in the veterinary space.

Step one – a hacker uses you email address:

Surely your email address belongs to you and is private? Well if you think this is the case then you are wrong – ANYBODY IN THE WORLD CAN USE YOUR EMAIL ADDRESS! Anyone can know your email address because you use it so much in the public space. In fact just knowing your web site address is enough to create an email that looks like it’s coming from your business. If xyzvets.com.au has a website, then a hacker can create a fictitious email from that business by prefixing the domain name with any name they please eg. [email protected] At our offices where we have a small amount of tech savvy it would take us 5-10 minutes to send emails from any of your email addresses! This hacking technique is called ‘spoofing’ and it is within the technical capabilities of a 10 year old. Emails were never designed to be protected or private and the only protection you have against this type of behaviour is your spam box. Most mail services that receive your emails check the route of the email (where it has come from), and if the route looks suspicious they put it into spam. How accurate this is depends entirely on who you use for your mail service and how your emails are set up.

Step two – a hacker starts sending invoices using your email address:

Knowing that your email address can be freely and easily copied, the next step is to start sending out invoices asking for payment to a bank account owned by the hacker. Of course this practice is initially very ineffective – if I send out 1000 invoices using the email address of [email protected] to a random list of targets, then the probability of it going to someone that actually knows and trusts XYZ vets is very unlikely, but if you play the numbers game correctly then you will get the occasional successful payment. This practice of sending random emails to the world at large is what we have been monitoring on the internet for some time now.

The scam is a lot more effective if you send emails from a business that is trusted by the public and that is widely used – this significantly increases the likelihood of a successful payment. For this reason medical professionals (including vets), accountants, government offices and banks are commonly used for this sort of scam.

A hacker can take this to an all new level of effectiveness if they can get their hands on another bit of ‘not so private’ information – and that information is a customer email list. On the surface if someone gets a list of your customers and their emails, its annoying but no big deal……..

However imagine now that the hacker sends emails from [email protected] to your entire mailing list pleading for a charitable donation to a pet sanctuary that has just burnt down. With this they provide a bank account information to transfer the money and your logo and branding on the email. How many of the 3000 clients of xyz vets do you think would make a donation – our guess is probably more than 300! And with that goes a complimentary big slap in the face to your reputation.

This is the vulnerability we think is currently the most significant for veterinary practices (and for any trusted professional service).

Step three – being on the receiving end of such a scam

If a hacker has your email address (which they do have because its public as explained above) they may put you on the other end of a scam like the one above. They may send you an invoice from your accountant or from the ATO asking for a tax payment or from a bank asking you to log in to verify a payment. With this they provide a bank account in which you can pay the money or even worse, a link that asks you to log into your bank to make a payment.

Receiving log in requests is a very dangerous scam that allows hackers to complete access to private places like your online bank account. They create a web page that looks EXACTLY like the bank’s log in page – once again, to do this would take our office tech team less than 5 minutes to do and is within the technical capabilities of a 10 year old, in fact is just a simply copy/paste of text from one web page to another, so the hackers site will look exactly like the banks. The only way you can tell it apart from the real thing is by looking at the web address at the top of the browser when you click the link. Below is an example of the legitimate login page for anz, the important thing being that the part of the web address before the .com.au is ‘anz’

What a smart hacker will do is use a similar domain for example ‘anz-banking-online-au/business/online-banking’. When in a hurry, you can’t really be blamed for not noticing. You will then type in your credentials, the login will fail (your pasword will however be sent to the hacker) and you will be redirected to the legitimate site. From your perspective you will just think you typed the password in wrong.

How can you prevent this from happening?

1. Be aware of the web address of every single link that comes in your email. If a bank sends you an email to log into your account then either make sure that when you click on the link you go to the right place, or better still, don’t click the link and log it your bank by browsing there directly. And by the way, banks very rarely if ever send emails with links to log in, if you get such an email with a link without having asked for it, then it is likely to be malicious.

2. Use 2 factor authentication for every online account you have when its available. 2 factor authentication often abbreviated as 2FA is that frustrating thing that happens when you log into a site and you are asked to verify the log in on another device like a mobile phone. Yes we all hate it, but for a hacker to gain access to your login becomes virtually impossible because they would need to have access to your mobile phone as well as your passwords. Of course many services are not 2FA enabled! Even the ANZ bank login is not and certainly not most of the software systems that veterinary practices use – this is not surprising because medical professions tend to lag behind with technology and our estimate is that over 50% of veterinary practices would struggle to implement 2FA across their entire teams logins. So an alternative to this is to force everyone to use very strong passwords of at least 9 characters long, a combination of upper and lower case letters and at least one non-alphabetic character.

3. That brings us to another problem – if you are using complicated passwords, how do you remember them? Post-it notes on computers are not a smart thing – many malicious attacks on software systems originate from disgruntled employees or ex-employees. You just have to post the credentials on the dark web and watch the fireworks if you want to annoy your boss. The best way around this is to use a password management tool. At APL and James Noble Accountants we use lastpass.com which gives us a safe place to store all passwords without having to share them among our team or use post it notes and emails to give other team member access.

4. When asked to make payments by bank transfer online make sure that the bank account number for that supplier is the same as the one you have always used. If the account number has changed then contact that supplier by phone to verify the new account. If it is a request from a new supplier then contact them to verify the account before paying.

We hope that this information is simple enough and proves useful to you. It is also important that you educate your team to these risks so that the whole business is on board and understands the current urgency of better online security. We would hate to see your great businesses compromised because we have not informed you of the risks.

Beware of text messages too

Just like email addresses, mobile phone numbers are not that private and easy to get hold of or even to just guess. Recently we have also been receiving a lot of text messages from someone pretending to be a bank and asking to click a link and log in. So treat your text messages in exactly the same way as you would treat an email – be careful about clicking on links and then entering your passwords.

A couple of terms you need to understand to update your payroll

You may have seen some information about STP Phase 2 being released. This is some additional payroll information that will need to be sent to the ATO each time you process a payrun. For those of you on xero, it isn’t completely ready yet and when it is we will let you know. It will mean you need to make some changes in your payroll set up for each employee, and when it is ready if you need us to assist please let us know.

In the meanwhile some of you may have started the steps, and the first one is changing employees to categorise them as contractor, employee or closely held associates. Here is what you need to know in order to categories them correctly:

Non – employee – person that you are only using payroll software to report super liabilities eg. locum that you pay on invoice but still pay super using xero autosuper function.

Closely held payee – person that is directly related to the entity eg. Family member of business, director or shareholder of the company or beneficiary of the trust. 

Casual – person that does not have a firm commitment about how long they will be employed or what days or hours they will work and they may not take all the work that the business offers them.

Dog Tales!

Hope you like my new haircut! Many of you know that I had my special bum glands removed and so I thought I’d give you an update on how that went. It was a great day. I got to go to my usual vet and hang out with the nurses that all know and love me. I heard that a special visiting vet was doing my surgery, but I never really got to spend time with him. Mom was very happy when she fetched me and has kept telling everyone that I’ve been a superstar. The best thing is I go back to my usual vet for my check ups and mom keeps saying how great it is that she hasn’t had to drive too far. I love my usual vet so it’s worked out well for me too!

If any of you don’t currently have special visiting vets (I think they’ve been calling them mobile specialists in the office) then it’s definitely worth doing. Dad says the usual vet makes more money this way, and mom and I love going to our usual vet. It looks like everyone wins this way!

Latest News August 2022

http://www.aplaccountants.com.au

http://www.mytaxvet.com.au

Economic downturn – The resilience of the veterinary profession will once again get tested

The last few months have seen interest rates go up and had global governments talking about a recession. We have also seen a dramatic increase in everyday goods such as food and fuel – so inflation is on the way up.

We have also been telling you for the last 3-4 months that the growth in the veterinary industry has stopped after experiencing a huge boom in the first 2 years of the COVID pandemic. 

The month of July brings the same news – a further drop in the revenue of veterinary practices compared to July last year, and an even more significant reduction in the number of patients seen and invoices raised (see chart at the end of this article). 

So does it mean that you need to panic? Absolutely not, there are a lot of things that you can do to mitigate the effects of a recession in a veterinary business, and in fact do even better. Research shows that recessions are good at weeding out the weak businesses, leaving the better ones to come out stronger when the economy improves again.

Many of the clinics that we have been working with have had an excellent 2 years and now have a buffer of savings. Wages have gone up but so has invoicing and productivity – so your teams are working better. We are confident that a small downturn in the industry will easily be accommodated in well run veterinary practices.

Remember also that assessing your service quality vs pricing is critical in times like this – If you are an independent/privately owned practice your only option is to maintain profits by providing better service, don’t reduce your prices. If that sounds counter-intuitive then understand that all your suppliers prices are going to increase. Wages have already increased and other generally fixed costs like electricity, telephones, software and rent are likely to increase. If you drop your prices whist all your supplier costs increase this will have an exponentially negative effect on your profit margins. This is why we are regularly assessing and benchmarking the prices and invoicing habits of many practices whilst also carefully monitoring their wages and cost of drugs. In many practices we are now having to review this every 3 months(we also make sure that their clients numbers are not declining because of higher prices, and they never do).

Another reason why independent practices cannot compete on price is ‘supply chain squeeze’. Large equity companies now have significant interests in both corporate veterinary practices and wholesalers. How do you think corporate practices have managed to halve their drug costs in countries like the UK? By having control of the supply chain from manufacture of some products, owning wholesalers and owning veterinary clinics, they can afford to give product to their veterinary practices at cost whist offsetting this discount by charging independent practices more. Furthermore in times of supply shortage, they can provide drugs and supplies to their clinics whilst withholding supplies to competitor practices (If you don’t believe that this can happen, then read the next article). 

Fortunately when it comes to pet owners, service always seems to win against price. So once again, focus on your service!

Veterinary industry tracker comparing Jul 1, 2021 to Jul 31, 2021 to Jul 1, 2022 to Jul 31, 2022 (most recent month)

Covetrus sale – have you thought about this?

Whilst you are all busy in the clinic getting on with your veterinary work major financial transactions are happening with your suppliers being bought and changing ownership. Late in May a deal was signed that Covetrus will be sold to two parties – TPG Capital and Clayton, Dubilier & Rice (both private equity companies).  Have you heard that name TPG Capital before a few years back? Yes you did, they are the company that bought Greencross.

Is this the start of supply chain management? What will happen if there is a shortage of food, drugs or even software support people? Would a supplier preferentially supply a group of clinics that they own rather than you? What prices will they be charging their own group of clinics compared to what they charge you – for every $ extra they make from you they can charge their own clinic that $ less. 

It’s time to think hard about who you use as your supplier as supporting a competitor who controls your supply chain may not be the best strategic option.

Owners of private practices need to think about a longer game if they want to maintain profitability in the future. Is it wise to support equity companies and their subsidieries who care only about shareholders and put a squeeze on independent businesses because they control the supply chain?

For those of you who are interested in financial markets read this article in VIN https://news.vin.com/default.aspx?pid=210&Id=10962381

Furthermore you will see as quoted below that some large operators have a lot of pressure to raise finance, so your business will certainly feel a ‘squeeze’ if times get tough:

Covetrus was rattled in its first year by earnings that disappointed Wall Street and a tanking stock value. A pair of pension funds filed a class action, accusing the company of making false and misleading statements to inflate and maintain the share price artificially. 

The case is nearing a $35 million settlement, judging from a motion plaintiffs made on May 9.

Dog Tales! Last impressions count!

We have a good friend that we do dog dancing with, she is of course a border collie so a much better dancer than us but we still love each other.

She had a very small lump on her back just under the skin which the vet thought should be removed. Her mom is a really good mom and booked her in straight away. We think the vet probably did everything well in the surgery as she was back home that night and very happy, but her mom was horrified and no longer confident in the care she got. When our friend was fetched from the vet they had put a dressing over the wound as it bled a little when they got her out to go home, and said to leave this on for an hour. When her mom removed the dressing the wound was still bleeding, she got blood all over the house whilst trying to find a new dressing. But more than that the wound is raggedy and lumpy bumpy, not all neat and tidy like when we have had stitches.

Our mom and dad chuckle to themselves and say ‘it will heal up the same anyway and once the hair grows back nobody will notice’ – the vet just didn’t take the extra 5 minutes to make the wound look neat and tidy.

Remember however that the pet owner does not see the ‘bear hugger’ warmer, the pulse oximiter, the iv fluids on an infusion pump and the nursing care given in recovery – they only see the end result. This means that the few last sutures placed in a hurry can leave them wondering how competent the surgeon is.

As part of our quality control, Strudel is having his anal glands removed this week so all paws crossed here that his surgeon takes his time to make his back end look even better than it does does right now. If not we’ll certainly let you know.