This site is intended for Healthcare Professionals only

Measuring value and cutting cost

Finance bookmark icon off

Measuring value and cutting cost

Cutting costs can be easier than increasing profits, but remember that the cheapest option isn’t necessarily the one with the lowest price. Mandeep Mudhar, Numark’s director of marketing, explains

All too often we are focused on increasing profits by generating additional income – easier said than done in today’s community pharmacy. Yet profitability can also be influenced by reducing overheads, and we spend far less time thinking about that and certainly far less time doing it.

Stock and staff are doubtless your biggest overheads. Last month we talked about balancing time spent saving money on purchasing generics against interacting with customers. It is an equation that only you know the answer to in your particular circumstances.

But what about those other regular expenses? When did you last review your other commitments?

Suppliers play a key part in your company’s success – you are dependent on them for your profitability and smooth operation. But without a proper system to evaluate and review their performance, you risk wasting money.

Business partners

You probably already view some of your suppliers as partners because they help grow your business and you have a mutually beneficial relationship. This may include your wholesaler(s), accountant, financial adviser, PMR and insurance provider. In the long run, having a win-win supplier relationship will be a competitive advantage.

Consider these partners as part of the team and treat them as such. Technology is great but don’t overlook the personal touch of a phone conversation or face-to- face meetings. Be upfront and transparent with business partners and make sure they understand your needs and expectations.

You can drop a business partner for poor performance, but strategically it is better to retain them and not be constantly trying to find replacements because it can be too disruptive. By giving a warning, you give the supplier an opportunity to correct the problem and help them to improve their service. No one, of course, should tolerate ongoing bad service but there may come a time when you have to let an underperforming supplier go.

Some people are aggressive with suppliers to get better terms or prices, but this can be a shortsighted way to do business. The lowest value can all too frequently mean the lowest quality too, so focus on quality of service rather than just price.

Other suppliers

Apart from these important strategic suppliers, your profit and loss statement will include items which do not rely on you having a relationship with their supplier. Numark has over 40 partner suppliers who offer discounts and special offers across the dispensary, shop floor and office. Many are part of our central invoicing system, which can save you a significant amount of time in processing invoices.

"Some people are aggressive with suppliers to get better terms or prices, but this can be a shortsighted way to do business"

All small businesses are guilty of looking at the bottom line – the invoiced amount. But this isn’t the true cost. Shoddy paperwork can mean extra time for you, additional deliveries can mean extra time for your staff. The cheapest option isn’t necessarily the one with the lowest price, so be realistic about the total cost to your business.

Two of the big ticket items are utilities and insurance.

Although we hear a lot about domestic switching of energy supplier, consumers are reluctant to do so largely due to apathy. The same is true of businesses. But some of the biggest savings can be made by changing provider and, thanks to technology, it has become much easier.

Review regularly

Telecommunications has become a larger outgoing in the past few years, and so should be the subject of a regular review. Specialist companies will review your utility suppliers for you and these brokers are now more accessible to smaller businesses.

With business or commercial insurance, van and car insurance, employer liability, not to mention professional indemnity, your various insurances can add up. We all mean to do price comparisons, but it’s too easy to leave things late so that you don’t have time to review alternative suppliers.

The easy option is to stay with your existing company – and that’s how they make their money. Don’t be fooled into treating insurance as a commodity, though. You never know how good it is until you make a claim, so make sure you check the cover that is right for you.

Changing supplier takes some effort but can save you money. Make a point of reviewing them regularly – you can’t afford not to.

Cost-saving tips

• Resolve to review partner relationships on a regular basis, perhaps every three years. Make a schedule according to cost, with highest outgoings first.
• Introduce performance indicators for these partners. • Review utilities and telecoms annually if possible.
• Look at the overall cost of an item, not just the price. Does it require additional administration? Has the supplier let you down in the past? Have you had to return items?
• What is the cost of changing supplier? Be clear on the pain versus longer term gain. Or is it an opportunity to renegotiate the relationship?
• Consolidate your buying of pharmacy utilities and services through Numark’s enhanced discount offering – not only do you get a great proposition, but you save huge amounts of time through Numark’s central invoicing system.

 

Copy Link copy link button

Finance

Share: