BUSINESS IN FOCUS


our online Cash flow Planner has been specifically designed by Bank of Ireland UK to support business. Visit www.bankofireland.co.uk/business and follow the link for our Credit Application Process. If looking to explore funding solutions for your pharmacy business, please contact Mark Cunningham, regional Business Development Manager MarkA.Cunningham@boi.com


IT IS AlWAyS hElPfUl To TAKE A frESh looK AnD KEEP A CloSE EyE on yoUr CASh floW. BEloW, WE SPEAK To onE PhArMACy MAnAgEr ABoUT hoW hE KEEPS EVEryThIng rUnnIng SMooThly, AnD WE looK AT SoME KEy ArEAS ThAT WE BElIEVE ArE IMPorTAnT To rEVIEW.


Keeping on top of cash flow


William McCaughey Kells and Connor Pharmacy


Cash flow within our business is dependent mainly on the split between dispensary and counter.


Are you tracking the flow of funds from Department of Health for your prescription sales? With 90 per cent of our business dispensary, one payment from BSo provides the majority of our monthly income and thus makes it much easier to maintain and manage cashflow. Since the introduction of 30-day payment of account by BSo, cash flow management has been much easier as the payments received at the end of each month should collate closely to what is being paid to pharmaceutical suppliers.


How do you plan to fund your stock? Have you considered approaching a bank for an overdraft facility? We as a business use an agreed overdraft with the bank to fund stock payments. Stock management, with two deliveries daily from our mainline wholesaler, allows a tight control on stock quantities and reduces the need to carry excessive volumes of product.


What credit terms have you agreed with your key suppliers? Can you meet these terms? All of our suppliers offer 30 days’ credit, with one offering a further 30 days.


Have you set aside funds for the payment of VAT/tax when they fall due? To ensure we meet our obligations, we pay on production of statement either by email or post. As a business, we operate two separate accounts within the bank, with the second having a regular payment on a monthly basis from our working account to accumulate funds for tax and other one of payments. These payments are calculated roughly and a fixed sum drawn down each month to cover exceptional payments such as tax. We use a spreadsheet to show income and expenditure on our prescriptions and can see very clearly when reductions have been made by BSo to payments.


Have you considered the cost of any capital expenditure that may arise over the next twelve months and how do you plan to fund this? Have you considered approaching the bank for a term loan or HP funding? At the beginning of each year we spend time with our accountant to highlight any capital expenditure that may be necessary to grow or maintain the business. his advice is used to then decide whether the business can sustain the expenditure or whether finance is required.


52 - PhArMACy In foCUS


DEBTorS – for most pharmacy businesses their customers pay in cash, with the main debtors often being BSo and nursing homes. This gives a high degree of certainty of timing of payment and makes this side of managing cash flow more straightforward than many other trading businesses.


SToCK lEVElS - Don’t carry more stock than you need. high stock will result in high storage and insurance costs and the risk of obsolete stock if customers’ demands change. While attractive discounts may make it seem like a good idea to hold high stock quantities, it is worth considering whether the cost of holding the stock will outweigh the benefit of the value of the discount.


CrEDITorS - A well-managed supply chain saves time and money. negotiating benefits for purchasing in bulk and favourable credit terms are for the cash flow of the business are important factors which help build and maintain strong cash flows. robust relationships with suppliers are also key as they help to ensure a common understanding of the business.


SoME hInTS AnD TIPS on CASh floW Ensuring you have a cash flow plan in place that you or someone in the business is monitoring on a weekly or monthly basis can help identify opportunities and challenges.


Try using ‘what if’ scenarios to see what will happen to your cash flow if sales are 20/30 per cent greater or less than your forecast.


Stress test your cash flow. for example, if your debtors take an extra 30 days to pay, or if your creditors


want payment up front, how will this impact your forecast?


Be cautious about how quickly you expect your customers to pay you. It’s better to expect slow payment and then receive the cash more quickly.


Try to have a contingency reserve of cash to cover unexpected costs, or a sudden shortfall in receipts.


If you run into difficulty and cannot pay a supplier on the due date, talk to them immediately. The earlier you talk to them, the more flexibility they will be able to show and the more likely they are to accommodate an extension.


KEy QUESTIonS • Do you proactively manage your cash flow?


• What are your stock levels? • have you considered the impact of scenarios such as; - what might happen if your business suffered a financial loss due to the unexpected illness of you or your key staff? - have you assessed your management capacity? - Do you have the capacity to trade through challenging times?


• Are you examining your cost base regularly to ensure that it is in step with sales?


• Are you introducing new income generating services to supplement your current activities?


• Are you looking for new channels, such as online channels to reduce stock / costs?


• Are you looking to exit unprofitable lines?


• have you thoroughly reviewed the market – sector performance, prospects, competitors, opportunities and threats?


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