Positive, productive and effective workplaces don't just happen; they are formed with care, commitment, concentration and creativity. Most importantly, they require that an environment of respect be established at the practice. As a leader, you are critical in providing support and direction in achieving the positive work environment. The process starts with agreeing together as a team on the basic guidelines to work by. These guidelines are intended to draw the team together and ensure their success and productivity. Among the guidelines you might consider are...

Many expenses are reported on our financial statements but you only need to concentrate on two-Do you know which two they are? The correct answer is inventory and support staff costs.

Our inventory expense to gross should run between 14-16% of gross income. If this expense is too high, look at the shelf life of your inventory. How long do products sit on your shelves? It should be between one and three months with the exception of such items as food that can be turned over every week or two and necessities that you can only purchase in large quantities.

For general inventory, set your re-order point at one month's supply and, once you reach that number, purchase a quantity equal to that. That way, even if it comes in the next day, you would only have two months worth of inventory on your shelf. As an example, if your practice uses an average of 12 packages of suture each month, set your re-order point at 11. When inventory count reaches 11 you should purchase the re-order quantity (one month's supply or 12 packages). Even if it came in the next day, you would have 23 on hand (or a two month supply).

Another reason why your inventory expense may be too high is duplicity of product. Is your practice stocking two or three ear cleaners-all of which do the same thing? Does one of your doctors have a special "pet" product that they like to have on hand but never use? All of these things add to the cost of inventory and will affect your practice's profitability.

Other reasons why your inventory to gross expense might be too high is that you are not marking-up your inventory correctly; it is being used and not charged for (poor internal controls); or your inventory is walking out the back door. A client recently called me to say that they discovered one of their employees was selling flea control and heartworm products on E-Bay! Guess where these products came from? No kidding, it is a bigger problem than most practice owners or managers realize.

If you have an effective inventory control system in place, you not only assure that your practice has the products you need when you need them, you will also help to improve upon your practice's profitability. Next month we will discuss the other expense area that you need to monitor-payroll expense-and show you how you can keep this cost in line within your practice.

Your lobby is the first physical impression your client has of your hospital and it must reflect the hospital's message, and carry the message of any marketing programs you've created.

If you're running a Senior Care marketing program, have a bulletin board with stories about animals who have been through the program and how they've been helped. Have pictures of older pets in the lobby and brochures about your senior program. Make a call to action, "Ask us about our senior program and how it will improve the quality of your pet's life." Have information about products and services that will make things easier for the older pet - flyers about making ramps to ease stairs for arthritic patients, or information on physical therapy and acupuncture are great examples. If the client doesn't know you offer it, they can't purchase it.

Make it easy for them to get the help they need by getting the word out in your lobby.

Have You Recently Thought About A Sales Tax Check-up?
Sales tax in many practices is something thought about during the set up of your veterinary computer software program and then never revisited. Since most states treat the taxability of your services and products sold differently, check with your state's sales tax law to determine what the law is and how it relates to your practice. Each state's tax department has their own web site and many times you can find the sales tax law related to veterinarians right on the site. Also, check with your state VMA. Many times they have news of issues and law changes related to veterinary medicine in your state. In many states, veterinary services are not taxable but other ancillary services you offer may be.

Product sales are not as easily defined. Sales of product normally fall into 3 categories. They are prescription items, non-prescription items and food. Each state addresses taxability of these items differently. The rule of thumb is that what ever you charge tax for; you should then not pay tax to your vendor. It is important to review vendor bills for items you sell to make sure your vendor is not charging you tax. For any item held for resale, the vendor should be given a resale certificate. This way they do not have to charge you tax. If you have mistakenly paid tax to the vendor, call them. Once the resale certificate is in hand, they will stop and usually refund you tax that was incorrectly assessed for up to 36 months.

Use tax should be paid with the filing of your sales tax return on items you may purchase from an out of state vendor who is not obligated to charge you tax but if the item was purchased within the state would have been taxable. Remember, not all out of state vendors are required to charge you tax. These items can range from office supplies to medical equipment. You must report these on your returns. This is where most state sales tax auditors find the money you might owe from an audit. All practices have out of state purchases subject to use tax. Next time you sign your sales tax return, look for the line that reports use tax purchases. If it has zero on it, you most likely have a problem. If you leave it blank, measure your audit risk tolerance for writing a check later with penalties and interest. My advice is to scan all invoices for sales tax when they are being paid. If you find an invoice where use tax is due, make a copy, put it in a use tax folder and pull all the accumulated invoices when preparing your sales tax return.

Have you Condensed your QuickBooks File Lately?
If you have never condensed, your QuickBooks file is getting larger in size and may not function as quickly. Every year once your QuickBooks records match your accountants you should proceed with Archiving and Condensing Procedures. This procedure will eliminate transaction detail but will create a QuickBooks file that could still be accessed to obtain information.

To archive and condense a year within QuickBooks you should do the following:

• Open your QuickBooks file
• Click on File
• Click on Archive & Condense Data
• Choose a Condense Option Screen will appear
• Click on Condense Transactions as of a specific date
• Remove closed transactions on or before 12/31/01 (assumes you are a December year end and the 2004 year is complete)
• Click on Next
• Select Additional Criteria for Remaining Transactions Screen will appear
• Do not click on any options
• Click Next
• Select Unused List Items to Remove Screen will appear
• Do not click on any options
• Click Next
• Proceed with Condense Screen will appear
• Click on Begin Condense
• A message may appear indicating that your data file is on a network drive
• If this message appears, click Yes
• A QuickBooks Information Screen will appear which will instruct you to backup your data
• Click OK
• Backup file to a CD-ROM. Include today's date in the name the file, i.e. Your Animal Hospital 06-15-05.
• A screen will appear indicating that QuickBooks has successfully condensed your old transactions. The screen will indicate to you where the archived data has been copied to. Please note the file location and name for future reference.
• Click OK
• Your data has now been successfully archived and condensed.

If you have suggestions for Terminology, please submit them to us for publication.

Old Term	New Term
Cost	Fee
DA2PP or FVRCP	Comprehensive physical exam
Expensive	Comprehensive