Key performance indicators, part 1: Benchmarking your practice to the industry
As a practice manager or owner, in order to effectively keep your practice moving forward, you must measure where you are now on a regular basis. Typically, monthly measurement of key performance indicators (KPIs) benchmarked against not only industry standards, but also against your practice’s historical data, is the cornerstone for effective veterinary practice management. By utilizing a systematic approach to gathering data from your practice management software in a timely manner each month, you can improve your practice’s bottom line.
In order to begin extracting the key performance indicator data each month, you need to begin with a chart of accounts. A chart of accounts defines and organizes your practice’s financial data. Many practices use the AAHA Chart of Accounts, the most widely accepted industry standard for categorizing income and expenses. Unless you plan on doing your accounting as AAHA outlines, it will make little sense to compare your practice to the statistics shown in the AAHA benchmarking publication, Pulsepoints.
Common KPIs that are measured in the industry include:
- Practice revenue on a monthly, quarterly and annual basis
- Production totals by doctor on a monthly and annual basis
- The number of transactions each month
- Average transaction per client (ACT) for the practice, and by doctor each month
- New clients each month
- Unique clients each month
- Client retention rates on an annual basis
- Practice revenue, broken down by category on a monthly basis
- Accounts receivable, as of the last day of each month, broken down by age of receivable account
- Accounts payable, as of the last day of each month
- Cost of goods sold, as a percentage of gross revenue on a monthly, quarterly and annual basis
- Costs of payroll, as a percentage of gross revenue on a monthly, quarterly and annual basis
When it comes to benchmarking your practice’s KPIs within the veterinary industry, there are several published sources you can use for comparison and goal setting. The American Veterinary Medical Association (AVMA), the American Animal Hospital Association (AAHA), and the Veterinary Hospital Managers Association (VHMA) all publish data and benchmark reports on a regular basis. Additionally, experienced veterinary consultants are able to provide private practices with KPI coaching and industry benchmark standards.
The VetSuccess monthly Practice Overview Report delivers incredible insights into the economic health of your veterinary practice. In it, you’ll find easy-to-read graphs and charts showing data on your key practice metrics. Get one month free with a six-month membership!