At the end of last year, we examined practice outgoings and financial commitments, and explored auditing the practice property and contract negotiations with a view to pricing and termination. In the second part of this miniseries, we will focus on staffing, regulatory obligations, dispute resolution and banking options.
Staffing – resourcing and reward
Recruitment and retention of veterinary professionals is tough and shows no signs of easing. With the cost-of-living crisis and recent budget announcements, your staff will be feeling the pressure in their own personal finances. This creates a heightened risk that they may seek higher wages or increased benefits with your competitors. Taking early steps to assess these risks is always a wise move.
Consideration of your “total benefits” package is a good starting point. Highlighting the benefits they enjoy in addition to their basic wage showcases the wider initiatives you offer. If that exercise leaves you with a sparse picture, it could be time to revisit your reward strategy.
Initiatives such as cycle-to-work schemes or online shopping portals can have real financial benefits to the workforce yet might not be as costly as you expect. Small gestures may make the difference between your offering and those elsewhere in the marketplace.
Initiatives such as cycle-to-work schemes or online shopping portals can have real financial benefits to the workforce yet might not be as costly as you expect
Avoiding recruiter fees is another way that can directly reward your team, so consider creating a new employee referral scheme offering a small lump sum to any employee who recommends a candidate who is recruited (and, importantly, is confirmed in post after an initial period). This can save thousands of pounds compared to recruitment costs, depending on the position you are recruiting. Likewise, by placing a job advertisement on your social media channels, which can be shared by your team, you can reach more potential candidates at no cost to the practice.
Finally, if you are spending large amounts on overtime enhanced rates of pay or locum costs, consider whether an extra member of staff would provide better value (noting the recruitment challenges), or canvass the team to see if anyone would like to increase their contractual working hours. This means the extra work is being paid at their basic pay rate rather than enhanced rates, which mount up over time.
Regulatory obligations
Of course, no cost-cutting measures should put you, your staff or the animals you treat at risk. Cost-cutting which increases risk (even if that risk does not actually materialise) is a seriously aggravating feature in any investigation, disciplinary process or prosecution.
By way of reminder, the RCVS standards are in place to ensure that veterinary professionals and practices perform to the highest level. Despite there being no strict guidance from the RCVS surrounding practice finances, there is a duty for veterinary professionals not to allow financial or commercial situations to affect their impartiality or to drive any decisions as to those in their care. It is key that all financial implications of their work are communicated to their clients and employees and recorded through consent forms and record books.
Dispute resolution
As well as looking at how to cut cash expenditure, it is also very important to make the most of the cash which should be coming your way. Every business has a portion of bad debts but consider what steps you can take to prevent your debts from becoming bad. Be prepared to be less lenient with credit and put in place steps to identify red flags with customers – for example, do they have a history of late payment? You may consider altering your policies regarding upfront payment.
Chasing down bad debts does incur a time cost of its own. It is a worthwhile activity but consider a flexible approach. Be prepared to revisit historic bad debts but consider whether you could offer instalment terms or even a discount – a partial payment is better than nothing.
While threatening legal action is not something you’d do lightly, a combination of this and an incentive of a discount for settlement may prove effective. You will also want to be judicious about which debts to focus on: prioritise the largest ones and those from current customers; small debts from old customers may be harder to recover and not justify the time investment.
Be judicious about which debts to focus on: prioritise the largest ones and those from current customers; small debts from old customers may be harder to recover and not justify the time investment
On a separate note, a word of warning: when looking at cost-cutting it can be tempting to terminate agreements you don’t think you need or want anymore. However, be careful to understand the contractual position before making any decisions. For example, you may have signed up to an agreement to make use of telephone or other office equipment and decide that you can do without. However, these agreements often contain quite onerous terms in their small print such as automatically extending terms or termination payments which can impose a significant financial liability – the salespeople don’t tell you that!
These can often be difficult to argue around and the last thing you want to do is become embroiled in a legal battle when you are trying to cut costs. The important thing is to know where you stand by reviewing the contract before you terminate to decide whether there really is a cost saving to be had. Even better, make sure that going forward you carefully review agreements like this before signing them, to make sure you know what you are getting into and can make an informed decision about whether the deal is as good as it appears. Once you have signed, it is too late!
Banking and financing arrangements
With the recent acceleration in the rise of interest rates in response to the cost-of-living crisis, we have seen a noticeable upturn in businesses approaching their bank to amend existing loan facilities to move from a variable rate of interest to a fixed rate.
Fixed rates can provide certainty for a business in a rising interest rate environment, particularly amid huge rises in energy bills and other inflationary pressures. However, amending loan facilities is likely to involve additional legal costs and care needs to be taken in repaying loan facilities early as early repayment costs can be considerably higher where a fixed rate is in place.
Amending loan facilities is likely to involve additional legal costs and care needs to be taken in repaying loan facilities early
If you do decide to opt for a fixed rate, make sure that you fully understand how fixed rate breakage costs are calculated and read carefully any explanatory leaflets provided to you by your bank.
