Grading Your Pharmacy’s Performance
Posted on Jul 24, 2024
If you’re primarily focused on your overall sales, reimbursement rates and acquisition costs to gauge your pharmacy’s performance, you’re only getting part of the picture. Instead, it’s important to regularly review a variety of metrics to ensure all aspects of your store are operating optimally. Here are some examples of metrics that can help you fully and accurately grade your pharmacy’s performance:
Metrics to Determine Your Current Profitability
Gross Profit Margin (dollars) and Profit Margin Rate (percentage), which are the most used metrics to measure a pharmacy’s financial health. When your gross profit margin is low, you will likely have a difficult time covering your operational expenses. Alternatively, when it’s high, you’ll have room to invest in and expand your pharmacy.
Rx Inventory Turnover, which is a metric used to measure the annual cost of goods sold against the value of your Rx inventory. This is important to know because inventory is the biggest operational cost for pharmacies. When left unchecked, your profitability may be impacted by sending money on inventory that’s just collecting dust on your shelves.
Non-Rx Gross Profit Percentage, which indicates how much of your gross profit is from other areas, like cash-pay services and OTC items. This metric is important because it enables you to monitor and grow sales for things that don’t rely on reimbursement from an insurance payor.
Metrics to Measure Sales Growth
Revenue Growth Percentage, which is the simplest way to determine whether your business is growing, flat, or declining. Simply take last year’s revenue (in this case 2023) and subtract from it the previous year’s revenue (2022). Then, divide it by the 2022 revenue to get a percentage. Once you know where your pharmacy stands, you can take action to foster continued growth – or get yourself out of a rut, if needed.
Average Prescriptions Filled Per Day, as prescription sales account for upwards of 90% of an independent pharmacy’s total sales. However, how much you’re making on each prescription can fluctuate. That’s why it’s important to make sure your daily prescription volume is increasing, so you can offset declining reimbursements from payers.
Return-to-Stock Information, including the total number of return-to-stock prescriptions, average number of return-to-stocks per day and the total loss return-to-stock sales. These metrics help you to assess the missed revenue each year, month or day, so you can come up with a plan to prevent return-to-stock losses moving forward.
Metrics to Gauge Productivity
Payroll Expenses as a Percentage of Sales, because after your inventory, staffing is often the next biggest operational expense for pharmacies. This includes things like staff salaries and bonuses as well as any health benefits you may offer. This metric enables you to determine if you’re over or understaffed and if you’re utilizing your employees in a cost-efficient way.
Number of Clinical Interventions, which is the most common metric used to measure a pharmacist’s workload. It enables you to track how often a pharmacist is involved in patient care, such as providing medication reviews and counseling. This is another great way to determine if you’re utilizing your pharmacists to their fullest potential.
Metrics to Track Your Assets and Cashflow
Accounts Receivable Information, which includes your aged & past due A/R accounts, and the average amount of time it takes to turnover A/R accounts. Understanding these metrics and establishing a process to effectively manage your A/R accounts ensures you’re not putting your pharmacy in jeopardy by not collecting the money you’re owed in a timely manner.
Days Cash on Hand, which helps you determine how much breathing room you have in your pharmacy’s operational budget. Regularly assessing this metric ensures that you will have the money to pay for your business expenses on an ongoing basis, that you can navigate any unforeseen situations and have funds left to invest in your pharmacy as well.
Inventory Turnover, which is the number of times your inventory has been sold and replaced over the course of a year. Knowing this metric will allow you to make better purchasing decisions moving forward and free up additional cash, by reducing the amount of inventory sitting on your shelf and preventing product losses.
With BestRx it’s easy to track your pharmacy’s performance. Our robust pharmacy software is packed with customizable operational reporting, from inventory and sales information to employee payroll and shift activity. Plus, you can use our Scheduled Reports feature to have them generated at the frequency of your choosing and delivered to your inbox automatically. Request a free demo to learn more!