As a veterinary practice owner, you’re dedicated to the health and well-being of animals. But to provide top-notch care, you also need a healthy business. You’ve likely heard the term “working capital,” but while it might seem like financial jargon, understanding it is crucial. Working capital is the funds that keep your clinic running smoothly, allowing you to deliver exceptional patient care and maintain a profitable practice.
What Exactly Is Working Capital?
Before I dive into how to leverage it, let’s define working capital in the context of your veterinary business. Essentially, it’s the readily available cash your practice has to handle immediate, short-term expenses. Think of it as the financial cushion allowing you to order essential medications, cover payroll for your dedicated team, stock up on pet food and supplies, and be a cushion for your practice’s needs.
Why is Working Capital a Necessity?
Like any business, veterinary practices face a constant stream of outgoing expenses. Here’s how working capital specifically addresses the needs of your clinic:
- Supply bills (accounts payable): From crucial pharmaceuticals and vaccines to surgical supplies and pet food, veterinarians rely on a steady inventory flow. Working capital ensures you can pay your suppliers promptly, maintain good relationships, and secure the best possible prices and delivery schedules. Supply bills include payments for labs, diagnostic services, and specialized veterinary equipment leases.
- Taxes: Tax season isn’t anyone’s favorite, but it’s a critical part of responsible business operation. Working capital ensures you can meet your tax obligations on time, avoiding penalties and keeping your practice compliant. (Always consult a qualified tax adviser regarding your individual tax situation.) Your obligations also include property taxes on your clinic, payroll taxes and business income taxes.
- Maintaining inventory: Your practice relies heavily on inventory — from prescription medications and preventive treatments to retail items like specialized diets and pet care products. Working capital empowers you to maintain optimal stock levels, ensuring the right products are readily available to meet your patients’ needs and clients’ demands, minimizing lost sales, and ensuring patient care isn’t delayed.
- Payroll: Your veterinarians, technicians, reception staff and kennel assistants are the heart of your practice. Meeting payroll consistently and on time is paramount to attracting and retaining skilled and compassionate professionals. Working capital guarantees you can honor your payroll commitments, fostering staff loyalty and minimizing turnover, which is crucial in a specialized field like the veterinary industry.
- Human resources and staff development: Investing in your team is investing in your practice’s future. Working capital can be allocated to staff training, continuing education for veterinarians and technicians, professional development courses, and crucial HR software for managing schedules, employee benefits and regulatory compliance, such as tracking radiation safety training.
- Marketing: In a competitive landscape, attracting new clients and retaining existing ones is essential. Working capital allows you to invest in targeted marketing efforts — from local advertising and an online presence to community events and sponsoring pet adoption drives. Marketing and advertising ensure pet owners in your area know about your clinic’s exceptional services.
- Emergency fund: The veterinary field is inherently unpredictable. X-ray machines and anesthesia monitors can malfunction, the roof can leak, and other crises can arise. Having a working capital emergency fund provides a financial safety net to handle unexpected situations without disrupting your clinic’s operations or compromising patient care.
Supporting Your Practice’s Goals
Many small business owners lean on personal funds for business needs, with 58% dipping into personal savings, according to an Intuit report. While understandable, commingling personal and practice finances can be risky and blur financial clarity. Relying on personal credit cards can also seem like a quick fix but often leads to high-interest debt, eroding profitability.
A working capital loan is a strategically sound option for many veterinary practices. These loans are designed for flexibility and speed, recognizing the time-sensitive needs of businesses like yours. They can cover all the aforementioned expenses and are typically structured with faster application processes and smaller loan amounts than traditional business loans.