As the healthcare system in the UK constantly evolves, pharmacies are dealing with growing financial strain and complexities. The funding and reimbursement structures of the National Health Services (NHS) and the rise of online pharmacies are causing survival difficulties for many retail pharmacies.
Amidst these challenges, efficient accounting for pharmacies has become essential to maintain profitability and provide top-level patient care. Having said that, many struggle to manage basic financial planning. This is where specialist pharmacy accountants come into play. As a business owner, it is vital that you understand the importance of specialist accounting for pharmacies. Pharmacy accountants are known for their expertise in maximising pharmacies’ profitability by navigating the intricacies of their specific financial landscape.
How an accountant can help pharmacies improve their business productivity
1. Optimising NHS reimbursement
The NHS is the primary source of income for community pharmacies in the UK, accounting for 68% to 85% of their revenue. But many find it challenging to navigate the NHS funding because of its complexities; any inaccuracies and missed claims in the system can significantly impact cash flows.
An expert pharmacy accountant can help you maximise your income and improve your cash flow. Typically, pharmacy accountants thoroughly analyse your claims so that you receive accurate payment for dispensed medicines and services outlined in the NHS. There are a mass of important things to remember.
Additionally, they will also pinpoint opportunities to maximise your company revenue by optimising the dispensing income. The accountant will ensure that all your digital records comply with NHS guidelines to minimise delays or discrepancies during reimbursement claims.
2. Minimise tax burdens
Often, pharmacies fall into the maze of complex tax regulations such as VAT, income tax, and corporation tax. Non-compliance with any of these will result in paying penalties charged by HMRC. In this scenario, hiring a specialist pharmacy accountant will explore various tax optimisation strategies beyond basic tax return filing.
They will also list every possible tax relief and allowance available for community pharmacies, which will help you minimise your tax burden. For instance, capital allowances for pharmacy-related tools and software upgrades will help you lower your taxable income.
Additionally, there are different research and development tax credits that you can claim if your business is involved in innovative activities, such as exploring new methods of dispensing medicine and developing medical formulations.
Claiming these credits can significantly minimise your tax burden and improve business development. Pharmacy accountants will also work on your ongoing compliance with the pharmacy industry-specific tax rules while reducing the risk of penalties. You will get ongoing guidance about tax regulation changes, enabling your business to take measures to remain tax-compliant proactively.
3. Staying competitive
It has become a challenge for brick-and-mortar retail pharmacies to stay competitive with the rise of online pharmacies. Rather than struggling to gain a competitive advantage, hire an experienced pharmacy accountant to help you with relevant insights to compete.
A specialist pharmacy accountant can identify areas of cost-optimisation through cost-variance analysis within your pharmacy operations. This data-driven strategy streamlines processes by identifying discrepancies, enabling you to compete efficiently with lower online prices.
In terms of optimising profitability, a pharmacy accountant can analyse the profit margin for different medicines using profitability analysis exclusive to the pharmacy industry. With this level of granular data, you can make informed decisions regarding inventory, pricing strategies, and service offerings, which enables increased profits.
To remain competitive against online retailers, a pharmacy accountant can provide critical insights by leveraging competitor trend analysis and pharmacy industry benchmarking. You can use these insights to create efficient pricing strategies and modify your service offerings according to market demand.
4. Predictive cashflow management
Adequate cash flow is essential for any pharmacy business in the UK to remain competitive and profitable. Delayed private customer payments and NHS reimbursements can disrupt operational expenses, which might impact payroll and daily expenses.
Unlike traditional practices, a specialist pharmacy accountant will use various cash flow forecasting methods. It takes into consideration seasonal demand for medication and timelines of NHS reimbursements. With this, you can proactively plan for upcoming expenses, thus preventing cash flow disruption.
Inventory optimisation is another aspect in which pharmacy companies suffer and can become a prime cause of cash flow disruptions. Working with a pharmacy accountant will help you plan inventory management meticulously, as you will get real-time data on your stock and market demand. It will free up your money on expired stocks and you can invest in other business development aspects.
5. Guiding business through every stage
Pharmacy accountants offer a wide range of services, from planning to buy a pharmacy company to planning its exit strategy. A pharmacy accountant will conduct due diligence during the initial phase of acquiring a company. They will analyse historical NHS reimbursement data and potential liabilities of the company. Thus, you can make an informed investment decision.
Depending on your business registration status, the pharmacy accountant will also decide the best business structure based on your goals and tax implications. They will also provide ongoing guidance on financial aspects and tax regulations related to the pharmacy industry so your business remains profitable.
When it comes to selling your company, you will need an accountant’s help to attract potential buyers. Pharmacy accountants will also help you prepare financial statements and navigate the intricacies of tax implications.
Over to you
Accounting for pharmacy in this competitive healthcare environment is not a luxury anymore; but an invaluable asset. As a business owner, you must understand what is pharmacy accounting and how it is different from traditional accounting practices. Whether you own a single pharmacy store or several, you need a dedicated team of pharmacy accounting specialists to ensure you adhere to the tax regulations. At 3E’S, we have over a decade of experience in providing accounting and tax services to cater to the unique needs of pharmacy businesses. To learn more about our services, book a free consultation and see how we can help you achieve your financial goals.
