- 1/3 of new small businesses fail within first 2 years

- 56% of new small businesses fail at 5 year mark

- Major corporations have filed for bankruptcy (or Chapter 11) in last several years

• Hard to make a profit in first few years in a new business: Possible poor initial planning, or lack of sufficient money to start up

•  Bad locations for business
• Inexperienced business owners and/or managers

PROFIT

Problem? Not so openly discussed in veterinary medicine “Profit & marketing” more frowned upon than in human medicine

- Increase our fees

- Increase amount sold or served

- Reduce costs

Or combination of some or all of the above

- Cash Flow (overhead, services, products)

- Monitoring (Audits, financial statements, balance sheet)

- Audits (Internal vs External)

- Financial Statements (Profit and Loss statements, Income statement)

- Balance Sheet (Annual report, Assets vs Liabilities)

Audits

External vs Internal

monthly, quarterly, annually

External- outside company comes in to review ALL books (CPA firm)

Internal - you have someone inside the business look everything over (most times this is the person writing the books)

Assets

(fixed & liquid)

"things" that the practice 'owns' that have worth to the company

Fixed - not easily transferred to currency (ex. equipment, facility)

Liquid - easily converted to cash/currency (ex. bonds, accounts receivable)

PRACTICE SHOULD HAVE BOTH

the cost of running a business or ongoing expense of opening a business

Ex. mortgage/rent, utilities, taxes, non-revenue generating employees (bookkeeper, PM), accounts payable (NOT saleable accounts), non-saleable inventory (cleaning supplies, toiletries)

this is ANYONE we owe money to

Avoid finance charges to keep costs down!

ALWAYS document all payments made:

- Date paid

- Amount remitted

- Check # or E-pay confirmation #

ALWAYS establish a paper-trail !!

Asset - able to sell and make a profit off of the product

Liability - any products not sold that the practice loses money on (expired, damaged, theft) GOAL: meet the needs of the practice without exceeding them!

Accounts Receivable

(explain aging)

money owed to the practice l

ess than 5% is IDEAL --> MINIMIZE!

account aging:

0 – 30 days = current

30+ days = not current

60 – 90+ days = may be financial loss

120+ days = very probable financial loss

post ALL ACCEPTED methods of payment and policies in clinic so clients are aware

EX "due at time the service is rendered"

** know all policies, fees and procedures from creditors they reflect on both you AND the practice

- Cash

- Debit

- Credit (2-6% upcharge)

- Personal Checks (not post dating!)

- Cashiers Check

- Creditors/Lending Institutions (ex care credit)

- "on account" or "on credit" (minimize! this will go into A/R we want less than 5%)

- Bartering ("in-kind" is common with contract workers)

- 3rd Party --> Pet Insurance (RESEARCH!)

NEVER ASSUME CLIENTS ABILITY/WILLINGNESS TO PAY

RESEARCH (benefits you and clients!)

Pros

May allow treatment that client otherwise could not afford

May prevent euthanasia due to lack of money for care

Cons

Not all services or treatments are even covered

Coverage limitations & policy structure (Will vary from company to company) Ex. Veterinary Pet Ins. (VPI), PetCare Pet Ins, AKC Pet Heath Ins, ASPCA Pet Ins, Iams Pet Health Ins. etc

Collection Agency

- affects not only the client and our client relationship

- clients credit rating (7years)

- we lose 50% of the original bill to the collection agency

- may break the relationship with the client so you need to consider if this is a client you want to continue servicing (repeat offender?, worth it?)

Payment Policies & Patient Outcomes

(affects/exceptions)

Decisions for limited or less desirable care if inability to pay for tx

Prolonged suffering for patient if no medical care given

Unfortunate decisions for euthanasia (only option)

STICK TO ESTABLISHED POLICIES! - but consider payment plan when: a well established and reliable client going through a tough life crisis (ex, divorce, lay-off, etc)

Fees & Charges: discount w/ sales and marketing (ex. seasonality, or discount bulk sales)

Establish figures with cost accounting: Real numbers NOT estimates

Consider fixed costs (cost to the practice)

Volume sold

Cost of labor & materials

Consider seasonality

Add % to ALL products & services to cover overhead costs

Do NOT forget sales taxes! (MI = 6%)

Sales Tax

(taxes remitted)

MI = 6% (currently on ALL products sold)

Use tax in MI is also 6%

Taxes remitted to State regularly

- Quarterly remittance $750 - $3,600

- Monthly remittance > $3,600

- Annual remittance if < $750 per year

when products are bought out of state MI loses out on the 6% SALES TAX, so they add a USE TAX to make up for this

MI = 6%

MI Corporate Income Tax

(CIT)

- Replaces MI Business Tax

- 6% income tax on corporations whose gross receipts > $350,000

- Insurance companies and financial institutions pay alternative taxes (in effect as of May 25, 2011)

ALL tax types, rates and filing depend on business structure!

- Partnership Each partner files individual income tax (1040 tax return)

- Corporation Annual business profits taxed Distributed profit/dividends taxed twice (Business tax = profits; Income tax = shareholders)

- S Corporation Shareholders share income & losses, then report on own individual income tax return

- LLC (Limited Liability Company) Federally treated as partnership or corporation

TAX FORMS TO KNOW

(corporate)

1120 – Income tax return

1120W – Estimated income tax return

941- Employer’s quarterly federal tax return (shows wages, tips, FICA, Medicare)

940- Employer’s annual FUTA return

W-9 – Request for taxpayer ID; requests name, address, social security # or Employer I.D. # to file 1099

1099 – Disclosure for contract employees; reports income paid to contract employees

TAX FORMS TO KNOW

(employee)

I-9 – Declaration of U.S. Citizenship / Alien status; parts for both EE & ER to complete Keep on file 3 years OR 1 year past termination, whichever is longer

W-2 – Reports wages, tips, compensation and withheld income, social security & Medicare taxes

W-4 – Withholding allowance certificate; ER uses this to determine correct amount of withholding for EE’s

Payroll

(how it works)

~ 18-22% of gross practice income

Things to consider: - minimum wage (varies), salary vs hourly, gross vs net earnings, part time vs full time, contract labor, overtime (MINIMIZE), comp time for salaried EE's

Gross - your wages prior to taxes & deductions being taken out

Net - your wages after taxes & deductions have been taken out

- Income tax withholdings (EE cost) Federal, State, City

-FICA: (SS or Federal Insurance Contributions Act) 6.2% of EE gross earnings withheld and matched by ER up to $117,000/year

- Medicare: 1.45% EE earnings withheld and matched by ER (no CAP)

- FUTA: ER pays 6% of gross earning of each EE on first $7,000/year is CAP, quarterly, business could qualify for tax credit based on amts paid to SUTA

- SUTA: variable (2.7 for new business first 4 years up to 13%) % paid quarterly by ER on the first $9,500 gross earnings of each EE (increased turnover = increased SUTA rate)

- Worker’s Comp: ER pays rates (0.1-16%) based on payroll & business claims hx, state fines for lapses in WC ins., premiums paid to private ins companies (shop around!) - work comp & SUTA can markedly

- Federal Income Tax % of EE’s gross earnings Variables include: exemptions, marital status

- State Income Tax 4.25% of employee’s gross earnings

- City Income Tax (where applicable) Practice standpoint: Payroll taxes average > 2% of gross income – at a minimum

- Remittance to government (monthly/quarterly) - Report EE's (by jan. 30th) W-2's for regular EE's and 1099 for contract employees

Benefit Expenses

(EE concerns)

Retirement/Pension

- Annuity

- IRA: investment retirement

- 401k, etc.

* NOTE * ER matching any investments by EE are a GREAT benefit to have & make sure you VARY your investments in different ways

OTHER: Health/Dental/Life/Disability Insurance (consider 100% ER paid vs. shared costs) Profit sharing, Bonus, Continuing education, Professional dues, Uniforms

Benefit Expenses

(ER concerns)

- Average 2 – 9% of gross practice income

- Same “packages” must be offered to all full time EE’s (ex. ER paid health ins, paid vacations, etc.)

- Should give $$ compensation to all EE’s who decline benefits

- Budget Wisely: attention to financial trends, CASHFLOW, use resources wisely (accountant, audits, staff suggestions)

- Long Range Planning: future equipment purchases, future additions to staff, watch trends before making BIG decisions

Government Agencies

(monitor employment)

U.S. Department of Labor

WHD (wage and hour division)

ESA (Employment Standards Administration)

STATE

Department of Licensing and Regulartory Affairs

Fair Labor Standards Act (federal labor law)

Covers: ER's w/ 2 or more EE's age 16 or older

Wage & Overtime Req:Federal wage requirements = $7.25/hr minimum, 1.5X for all hours > 40 in 7 day work week

–NOTE:  Agricultural workers covered by State’s minimum wage laws

EXCEPTIONS? YES 2004 Fairpay Initiative Exemptions- must be paid salary basis based on job meeting criteria

Youth Employment Standards Act

MI LAW

Covers: minors 14-17 & workers < 18 years of age in MI

NOTE: minors < 13 years old can: babysit, deliver newspapers, golf caddy

YESA

(exceptions, requirements and limitations)

 Exceptions

16 – 17 yr olds meeting requirements for H.S. graduation,17 yr olds passing GED, Married minors, Students in work-study, Minors selling newspapers, etc., Minors working in parentally owned businesses, Domestic work in private residences, Agricultural work

Requirements/Limitations

Work permit required (signed by parent/guardian), No hazardous work (roofing, construct, radiography)

WAGE: ER can pay sub-minumum (85% of adult minimum) or training wage

YESA

(limited hours)

Minors may not work more than:

 24 hrs/wk during school, 48 hrs/wk when school not in session, 6 days/wk, 10 hrs/day (wkly average of 8 hr/day), 5 hrs w/out a 30 minute break AND NO cash transactions after 8 pm w/out adult supervision!!

Immigration & Nationality Act

requires ER's to comfirm ALL EE's are eligible to work in the US by filing proper I-9 form

US Citizens: confirm with drivers license & social security

Non- US: confirm with green card

Disability Laws

(laws/purpose)

Americans w/ Disabilities Act (ADA) Federal

Persons w/ Disabilities Civil Rights Act MI Law

Purpose: prohibits discrimination in selection/hiring/tenure/terms/conditions and priviledges of employment, equal opportunity in promotions and benefits

Disability Laws

(ER)

ER may agree to make job accomadations for hired EE (ex. special equipment, facility mods, adjustment in work duties and schedules, other creative solutions)

ER needs to consider: required job tasks, functional limitations, level of hardship on the practice (Undue Hardship)

Wage adjustment can be made if disabled EE cannot perform ALL tasks of the job adequately

Family Medical Leave Act of 1993

equal for MEN and WOMEN

eligible ER: have 50 or more EE's during any 20 workweeks of current year working within 75 miles of worksite, may request substitution of paid leave time

eligible EE: must have 12 or more mos employment withing years (1,250 hours during 12 mos in year preceding leave), MUST give 30 days notice only IF possible, 12 weeks unless ACTIVE duty 26 weeks

WHY? birth of child, placement of fosterchild, immediate family member or personal serious health condition, military contingency

FMLA

what can the ER inquire?

KNOW YOUR RIGHTS!

date of onset and probable duration: intermittent tx and periodic status reports, NEVER under estimate

medical certification: ER must give 5 days notice and EE must comply within 15 days

NO specific details may be requested

Uniformed Services Employment & Reemployment Rights Act

- prohibits discrimination of uniformed personnel

- protects job upon leave/active duty

- prohibits denial of: intitial employment, reemployment (if they CANT they must provide PROOF), retention of employment, promotion, benefits, application of military service

WHO? all branches of military, national guard/air guard, comissioned corps of public health service, persons designated by President in time of war or emergency

EXCEPT: dishonorable discharge, court martial, AWOL

Timely Reporting :1-30 days of service: RTW at next scheduled work period, 30-180 days of service: RTW w/in 14 days, greater than 180 days of service:  RTW w/in 90 days, IF injured recovery period may not exceed 2 years

Employee Retirement Income Security Act

Purpose: protect our pensions

Pension Protection Act of 2006: states that if pension fund if underfunded by ER then the ER must pay additional premiums etc.

Occupational Safety and Health Administration

General: ER must provide a place of employment that is safe and free of recognized hazards that could potentially cause injuries/death

"Right to Know": EE's have the right to know potential dangers they may be exposed to in the workplace

MSDS: material safety data sheet

must be kept on all (harmful) chemicals, solvents, materials that EE's may be exposed to, must provide info on risk/hazard and first aid, available under Freedom of Information Act (FOIA)

OHSA

(record keeping/accident reports)

FORMS required of all ER's w/ 10 or more EE's

- form 300: injury/illness log (running total)

- form 301: individual incident form

- form 300A: summary of prior years work related injuries/illnesses

Prompt Accident Report: ER must file report w/in 8 hours if 1 fatality or more than 3 EE's injured from the same accident

Violation Penalties: other than serious (violation could cause harm but not death/serious) serious violation (violation could definitely cause death/serious harm, willful violation (serious hazard w/ no effort to correct it, 5k-70k), repeated violation, failure to correct prior violation - $7,000 or less per violation

part of OSHA

- prohibits discrimination against EE who exercises their right to freely participate in health and safety activities

these incidents must be reported within 30 days

Consolidated Omnibus Budget Reconciliation Act of 1985

purpose: allows for temporary continuation of health coverage at group rates for certain former EE's, retiree's, spouses/former spouses, dependent children for up to 18 mos or longer if you file for it. the EE may pay 100% or more of premiums

- BOTH federal (ER's w/ more than 20 EE's) and state coverage (ER's w/ less than 20 EE's)

Qualifying Events: voluntary or involuntary termination of employment (other than gross misconduct or reduced hours) For spouses: termination of EE, EE becomes Medicare eligible, divorce/legal separation, death of EE For dependent children: all of the above, plus loss of dependent child status under the plan rules

Who?

Employees

How?

ER can't discharge EE because EE's wages have been garnished for any one debt

Limits the amount of earning that may be garnished in any one week

Prohibits discrimination based on: age, race, gender, religion, disabilty (sexual orientation is NOT protected by this law) prohibits personal questions by ER

This federal law applies to ER's w/ more than 15 EE's

vs the MI Elliott-Larsen Civil Rights Act

includes: height, weight, family status, marital status, and national origin

This state law applies to ER's w/ 1 or more EE's or ALL
Violations: result in fines and in MI emotional distress damages!

Job Descriptions: provided by ER to all EE's, clear and complete details of the job and what it entails

Documentation (all reprimands): written/signed by ER and EE, witness by a 3rd party, little documentation needed for 'at will' EE's, for union EE's follow ALL procedures and fully document reprimands

* justafiable terminations will NOT affect SUTA *

Immediate dismissal for "gross misconduct" (theft, physical violence/abuse, falsifying records, must have PROOF or a "caught in the act" situation

At Will = job duration is for EE, can leave at any time

Contract = signed documentation binding an EE to the job until the end of the agreed time or completion of a job