These Top 7 KPIs are Dr. Faasts recommendations that every independent pharmacy owner should be monitoring:
- Expense Ratio:
- Goal: Less than 19%
- To calculate take the total dollar amout of expenses divided by the total dollar amout of revenues. Then multiply by 100 to get a percentage.
- Payroll Ratio:
- Goal: Less than 13%
- To calculate take all of your payroll expenses (pay, taxes, insurance) for all employees and divide this number by your total revenue dollars. Multiply by 100 to get your percentage.
- Inventory Ratio:
- Goal: Greater than 20
- Your accountant should be calculating this number for you each month. If you are your accountant, this is how you will do it. Start with your COGS amount for the past month, then multiply by 12. Or you can start with an annualized COGS amount. Take this first number and divide it by the current value of your inventory. The resulting number will be your inventory turns.
- PBM Revenue Ratio:
- Goal: Less than 85%
- To calculate take all your revenues from PBMs (including patient copays) and divide that number by your total pharmacy revenues from all areas. Once you multiply by 100, you will have your percentage.
- Monthly New Patients:
- Goal: Varies, often higher is betters
- To monitor this number, you will need to run a report from your pharmacy management software (PMS). Many have this report pre-built in. If you are not sure, just send a message to your support team, and they should be able to tell you the steps.
- Number of Days of Cash On Hand:
- Goal: Greater than 15
- Your bookkeeper or accountant should be giving you this number monthly as well. It is a multi-step calculation. First, you need to calculate your average daily expense rate. Take your expenses for the month and divide by the number of days in the month (or you can use a standard 30 days). The second step is to take your cash balance (the amount of readily available cash in your bank) and divide it by your daily expense rate. The resulting number will tell you how many days of expenses you can pay with your current amount of cash. What this number helps you to understand is how your cash flow is doing.
- Net Profit Dollars & Percentage:
- Goal: Higher is definitely better, 4% minimum
- To calculate your net profit percentage, you take your net profit dollars and divide them by your total revenue dollars. Multiplying by 100 will give you your net profit percentage. Ideally, you will see a minimum amount of 4%. This ratio means that for every $1 million in revenue, you will have $40,000 in net profit.
Read the Top 7 Pharmacy KPIs Blog by Dr. Faast with detailed explanations, directions, and strategies for each KPI
