You’ve worked hard all year and banked the profits. You feel flush and pretty good, but it’s that time of year again, when vendors focus their energy on one last push to improve their sales numbers, cloaked in amazing offers to your practice:
- Pharmaceutical manufacturers want to thank you for your patronage by offering you a discount and an opportunity to increase your inventory levels over the winter
- Medical device companies want to help you reduce your taxable income by increasing your equipment purchase expenses instead
- Subscription services offer to save you time during the holidays by automatically signing you up for another year (or two) without the hassle of evaluating your needs
It’s the curse of no budgeting. Practice owners who build up cash in the practice account and only make distributions after closing the books are more easily seduced into making decisions in December that negatively impact the performance of their practice during the other eleven months.
Let’s take these in order:
- Pharma: Most of the products we use can be ordered and delivered within 24 hours, so there’s no need to tie up capital in excess inventory unless the terms are awesome and include both delayed billing and delayed shipping. Moreover, many new (competitive) product releases are timed to coincide with the large winter meetings (VMX and WVC). It’s tough when you’ve got six months of the old drug on your shelves to pivot to the new drug your doctors prefer to prescribe.
- Devices: While it’s no fun to pay taxes, profits are a very good thing for your practice. Reducing your profit by buying equipment for which you’ve develop no viable business plan doesn’t substitute for strategic tax planning. If you wouldn’t have bought it in March, question why it makes sense to order it in December.
- Services: More and more services push you to choose their auto renew feature. Online services are notorious for the “set-it-and-forget-it” sales model, burying a modest monthly charge in your practice credit card statement. It does take one small decision off your plate during a hectic holiday season, but these small subscriptions add up, and you should annually evaluate their use and value.
You’ve had a good year – you drove revenue up and controlled your cost, dropping more profit to your bottom line. Don’t blow it in the home stretch. Finish strong, enjoy the holidays and have a very Happy New Year!