It is April 7th and you receive your March financials from your accountant. The first thing you do is compare your March 2020 numbers to March 2019 numbers. But March 2020 looks much better than March 2019. Revenue up, profit is up, etc. But is your business actually doing better?
Be careful, month to month comparisons can be very deceiving. Why is this? Lets use the example above.
March 2019 – 23.5 business days
- 4 Mondays (tends to be busiest day for retail pharmacies)
- 5 Saturdays (tends to be slow day for retail pharmacies).
March 2020 – 24 business days
- 5 Mondays
- 4 Saturdays
Take Feb 2020 to March 2020
- 22 days in Feb, 24 in March
- 5 Mondays in March, 4 in Feb.
Do you see how this may impact sales in particular, they will look inflated. Other differences that occur is payroll, if one year march has 3 pay periods and the next it does not you see a difference in profit.
So what should you do instead. Look at financial and prescription data on a weekly or every other week basis. If you take a 14 day periods they are comparable. For example take the first 10 weeks of the year, compare to the first 10 weeks of the following year, start on the first Monday of the year for each. You get the same mondays, same saturdays, everything is comparable.
So the next time you try to compare months, stop, do week to week comparisons.
If you want to talk through this concept further reach out to us.
At IRx Consulting we are Accounting experts and offer a comprehensive Pharmacy Accounting and Management service with a suite of complimentary services including Data Dashboards, Payroll & Human Resources and Pharmacy Management consulting.
