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Show me the money!

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Show me the money!

Does your pharmacy business have cashflow problems? As community pharmacies deal with real-term funding cuts and rising prices, Atif Butt looks at how you can get your hands on extra cash to see you through the hard times…


All business sectors are having to contend with rising prices. Community pharmacy with its fixed funding model has been hit hard as the sector doesn’t have the option of raising the prices it charges to its main customer – the NHS.

Over 450 community pharmacies closed in 2020-2021 and more may be forced to shut their doors this year. A report in September by the National Pharmacy Association said if no action is taken, England is likely to see “several thousand pharmacy closures” in the next few years.

So, what can you do if your pharmacy is having cashflow problems?

Prepare a cashflow forecast

Work with your accountant to prepare a cashflow forecast. This is a report that look at the funds you are expecting to come in and out of the business over the course of the next few months.

Of course, this will be based on estimates of your future costs and revenues, so the further you are looking ahead the less accurate it will be, but you can update it with more accurate figures as the months go by. This will enable you to track how your cashflow position is expected to move each month and identify periods where you may have a surplus or shortfall, so you can plan and prepare for the future.

Preparing a cashflow forecast can be a great first step in looking at your cash incomings and outgoings and finding areas you can improve.

  • Income – If you are not doing so already, now is the time to maximise existing income streams and seek to diversify into other areas, such as private services like in-house vaccination clinics. Also, make sure you’re claiming for everything as soon as possible. This is even more important now, with the new Early Payment System dependent on timely filings for earlier payments. Consider if you are eligible for any rates reimbursements and if there any local or national grants you could apply for.
  • Expenses – Focus on costs and look for areas where savings are possible. Negotiate hard on your supply costs, and particularly drug and stock purchasing. Staff costs are also an important area to focus on as they form a high proportion of your overall costs. Shop around. Do not be afraid to ask for a discount, and consider joining a buying group. Also, keep an eye on your utility bills and other expenses, and keep pushing for the best possible deals.

Planning for the worst-case scenario is key. If you are concerned that your cashflow position might deteriorate in the future, it’s a good idea to look at different sources of finance that are available so you can be aware of your borrowing options.

While pharmacies usually have good working relationships with their banks and this might be your first port of call if you are considering taking a loan, it makes sense to also talk to a finance broker that specialises in the sector to explore all your options. With interest rates at historically high levels and predicted to continue rising in the short term, it’s more important than ever to compare rates, fees and the terms of each alternative to find the one that’s right for your business.

I spoke to the managing director of FTA Finance, David Brewer, who specialises in providing solutions to funding and finance needs within the healthcare sector. Where possible, your own cash savings or family savings (the bank of mum and dad) is usually the best option because you won’t be at the mercy of unpredictable interest rates. An overdraft facility or short-term loan can also be popular but it’s important to shop around for the best deals.

Invoice finance or factoring is where a lender advances you funds based on the amount you’re currently owed by your customers. Factoring charges can be confusing to understand and compare. If you are considering raising funds for your business through factoring, talk it through with your accountant first. They can help to look at your individual circumstances and advise you accordingly so that you don’t end up making any costly mistakes.

I asked David if he has any advice based on what FTA Finance have been seeing in the pharmacy sector. This is what he said: “These are certainly tough and challenging times for most businesses, and whilst pharmacies have weathered the storm well so far, they are not immune and it would be wise for most to plan ahead and have contingency plans in place.

“Be it simply reviewing existing supply and utility arrangements, diversifying and maximising alternative income streams or speaking with your bank/specialist funding provider to ensure you have a fall-back finance option, all pharmacy owners should be thinking ahead.

“It’s best to have plans in place for the worst-case scenario as the likelihood is the reality will be much better.”


Atif Butt is a senior accountant at Hutchings Accountants.


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