{"id":22412,"date":"2022-09-28T11:58:32","date_gmt":"2022-09-28T11:58:32","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=22412"},"modified":"2022-09-28T16:22:27","modified_gmt":"2022-09-28T16:22:27","slug":"savvy-spending","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/savvy-spending\/","title":{"rendered":"Savvy Spending"},"content":{"rendered":"

Owning and operating a high-quality veterinary practice requires continuous reinvestment. <\/span><\/p>\n

\u201cThe physical building, the equipment inside, the standard of care and technology continue to advance,\u201d said longtime veterinary consultant Fritz Wood, owner of H.F. Consulting in Lenexa, Kansas. \u201cEvery veterinarian in my experience has a wish list, often for a significant upgrade. Some tend to want what they want, not necessarily what they need. Maybe I just want, with all my heart, the latest and greatest \u2014 say, digital radiology \u2014 while at the same time my practice management system is 20 years out of date. Practice management systems aren\u2019t as sexy as a new surgical or diagnostic tool.\u201d<\/span><\/p>\n

The \u201cneeds\u201d must count, he said, but if a veterinarian really wants something, they\u2019ll find a way to get it. And that\u2019s not all bad.<\/span><\/p>\n

\u201cFor example, in-house labs have reinvigorated people\u2019s careers,\u201d Wood said. \u201cThere are whole different ways to use knowledge to help patients right now. If it\u2019s fun, makes you a happier person, differentiates you in your community, damn the torpedoes.\u201d<\/span><\/p>\n

And while many upgrades bring the prospect of added revenue, that isn\u2019t the only reason to consider upgrades.<\/span><\/p>\n

\u201cThere are absolutely nonfinancial reasons to make continuous upgrades,\u201d he said. \u201cIt prevents burnout and causes employees to stay with you. If you fall behind the modern standard of care in your geographic area, good luck finding new employees and getting people to stay.\u201d<\/span><\/p>\n

When to Upgrade<\/h2>\n

\u201cThe obvious reason is when it breaks, stops working or is not working ideally,\u201d said Karen Felsted, DVM, MS, CPA, CVPM, president of PantheraT Consulting in Dallas. \u201cAnd technology changes so much, so fast, that clinic efficiency can suffer.<\/span><\/p>\n

\u201cYou might have an autoclave that\u2019s old and you\u2019re not confident it\u2019s working the way it should. When new and better technology becomes available, you need to upgrade to be able to continue offering quality care, to help the efficiency and productivity of the practice.\u201d<\/span><\/p>\n

While it\u2019s not exactly equipment, Dr. Felsted said practice management software should be upgraded periodically. She noted that some brands are forcing practices to move to the cloud and she expects that trend to continue.<\/span><\/p>\n

Clinic owners should ask questions in considering upgrades or new equipment, said Robin Brogdon, MA, CEO of BluePrints Veterinary Consulting in Huntington Beach, California. \u201cIs the warranty up? Is maintenance reducing efficiency or effectiveness? Are newer models available that can do more? Is the equipment still adding value to the practice in its current form?\u201d<\/span><\/p>\n

If clinic efficiency is lagging because of older equipment, it\u2019s time to consider upgrades, said Tom A. McFerson, CPA, ABV, of Gatto McFerson CPAs in Los Angeles. <\/span><\/p>\n

\u201cIf your cash flow is in position, look to upgrade,\u201d he said. \u201cIt\u2019s like a house; at some point you want to freshen things up. If you can get equipment at a reasonable price, do it. Sometimes these improvements are good for morale of the staff and client as well as patients.\u201d<\/span><\/p>\n

Some clinic equipment can last nearly forever, but that doesn\u2019t mean you should always keep it.<\/span><\/p>\n

\u201cIf you\u2019re remodeling,\u201d Brogdon said, \u201cyou might find you no longer like the metal fold-down exam tables. You might want a more modern look. Sometimes improved design and functionality are good reasons to upgrade.\u201d<\/span><\/p>\n

Wood agreed: \u201cNewer fixtures can be more aesthetic, better for the animal, easier to clean. If what you have is unattractive, you probably want to make changes. If it\u2019s dented or damaged, as a client I\u2019d probably jump to the conclusion that the medicine is not state of the art.\u201d <\/span><\/p>\n

Upgrading isn\u2019t the only reason to look at equipment purchases. Adding new equipment can also lead to additional revenue streams for the practice.<\/span><\/p>\n

\u201cIf you\u2019re missing certain services and have a demand for them, consider adding new equipment and those services to the practice,\u201d McFerson said. \u201cDo a cost\/benefit analysis and make sure the expense is worth it to the practice. In general, the more services you can offer to clients, the better.\u201d<\/span><\/p>\n

Tax Considerations<\/h2>\n

Are you hesitating to make a big purchase because the cost is daunting? If you need extra incentive for investing in new equipment, consider Section 179 of the Internal Revenue Code. <\/span><\/p>\n

It allows immediate expense deduction for purchases of depreciable business equipment instead of capitalizing and depreciating it over time, according to Investopedia. The site notes: \u201cThis allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years.\u201d<\/span><\/p>\n

For tax year 2022, the capital equipment expenditure allowed is limited to $1.08 million. But states\u2019 allowances can vary, so consult your financial adviser about your state\u2019s eligibility limit. McFerson explained that the Internal Revenue Service typically allows capital equipment depreciation over the life of the asset, at the rate of $2,000 a year. But with Section 179, a veterinary clinic can write off the entire cost of equipment, whether financed or leased. The caveat: The equipment must be signed for, in the hospital and functioning by December 31. \u201cYou can\u2019t sign the paperwork December 30,\u201d McFerson said. <\/span><\/p>\n

For example, Wood said, if you buy a piece of equipment for $100,000, Section 179 lets you deduct all $100,000 at once. \u201cIt comes down to: Do you want to pay the IRS or buy new equipment?\u201d<\/span><\/p>\n

ROI and Fee Adjustment<\/h2>\n

Financial factors when considering an upgrade include assessing return on investment (ROI) and how to adjust pricing and service, if at all. <\/span><\/p>\n

\u201cConsider the difference in cost and productivity,\u201d said Brogdon. She suggested considering the following questions:<\/span><\/p>\n