1099-MISC Form

The form a company issues to its independent contractors, citing all money paid to the individual on an un-taxed basis. It is then the responsibility of the independent contractor to file and pay all appropriate Federal, State and local taxes.

Acid-Test Ratio

Sum of cash, receivables, and marketable securities divided by current liabilities. The acid test provides a quick measure of the practice’s ability to pay its near-term liabilities out of liquid assets.

Accounts Payable

Amounts owed to suppliers that are payable in the future.

Accounts Receivable

Money owned to a practice for services rendered or products sold that is not paid at the time of service or when the product is dispensed.

Accounts Receivable Turnover

The relationship between sales made through credit and accounts receivable, computed by dividing sales on account by average net accounts receivable. The higher the A/R turnover number, the quicker collections occur (and the higher the probability of successful collection).

Adjusted Gross Income (AGI)

The total of an individual's income (wages, salaries, interest, dividends, etc.) on a tax return after all allowable deductions have been subtracted

Advertising

Paid communication using various forms of media to influence or persuade an audience

Amortization

A periodic expense attributed to the decline in usefulness of an intangible asset over its estimated useful life.

Annual Percentage Rate (APR)

A percentage calculation that reflects the total cost of a loan (interest plus all fees) on an annual basis.

Assets

Things of value on a balance sheet, such as cash, equipment, inventory, buildings, etc.

Average Client Transaction (ACT)

Revenue per client visit, calculated by dividing the income by the number of clients or patients seen. Also called per-patient transaction.

Average Patient Charge (APC)

This is the total practice revenue divided by the number of patients seen. It is an economic indicator of services provided based on the patients seen rather than the invoices written. 

Average Transaction Charge (ATC)

The total revenue for a time period divided by the total number of transactions during that period.

Average Transaction Fee (ATF)

This is an economic measure of the average dollar amount of services provided on each invoice in a practice.  It is the total practice revenue divided by the total number of invoices.  

Balance Sheet

A financial report detailing a practice’s assets, liabilities, and owner’s equity (Net Assets in a nonprofit) at a specific point in time.

Benchmarking

This is a process by which a practice compares itself to others (especially those known for outstanding performance) in an attempt to improve performance.

Book Value

The dollar amount at which assets and liabilities are recorded in financial statements.

Bottom line

A colloquial term for profits after all expenses and taxes have been considered.

Brand

An identifying symbol, words, or mark that distinguishes a product or company from its competitors. The brand value reflects how a product's name, or company name, is perceived by the marketplace.

Brand Identity

A unique set of associations that the brand strategist aspires to create or maintain

Brand Promise

The spoken or unspoken expression of the continuing, important and specific benefits clients connect with a firm, service or product.

Breakeven Point

The point at which the initial money spent is recovered through cash inflows. The level of sales that will just cover all costs, both fixed and variable.

Budget

An estimate of income and expenses for a specified period.

Burnout

Physical or emotional exhaustion, especially as a result of long-term stress or dissipation. An expression used to describe what might be better defined as depression for those who are simply disenchanted with practice or extreme exhaustion for those who have not taken reasonable time off.

Business Assessment Report Kard (BARK^sm)

A strategic planning process designed to evaluate veterinary practices

Business Plan

A written document that details a proposed or existing venture. It seeks to define the objective, vision, current status, expected needs, strategies, defined markets, and projected results of the business.

CAN-SPAM Act

The Controlling the Assault of Non-Solicited Pornography and Marketing Act requires unsolicited commercial e-mail messages to be labeled and to include opt-out instructions and the sender's physical address. It prohibits the use of deceptive subject lines and false headers in such messages.  

Capital

The rights (equity) of the owners in a business enterprise.

Capital Asset

An asset that has utility over more than one accounting period, such as a surgical table.

Capital Budgeting

This involves the analysis of all the financial plans associated with the acquisition of all capital assets for a business.

Capital Gains

The increase in value of a property above investment costs. The difference between an asset's purchase price and selling price, when the selling price is greater

Capital Lease

A lease which includes contract provisions that result in treating the leased asset as a purchased asset. It generally covers the economically useful life of the property in question which is typically longer than the period of time an operating lease covers.

Capital Reinvestment

The periodic capital outlay required to maintain operations at existing levels; also referred to as sustaining capital reinvestment

Capitalization rate

The rate of return needed to attract capital to the practice.  This is essentially the rate of return a buyer would expect for investing in the practice.  The rate is a reflection of the risks associated with the business with emphasis on the practice’s ability to maintain its net income.

Cash flow statement

A financial report on the sources of cash (like profit, increased debt, and collections on client accounts) and uses of cash (like reducing debt or buying more drug and supply inventory) during a period of time

Cash Payback (CP)

The amount of time necessary between the capital expenditure and the complete recovery in cash (net after expenses) of the amount invested.

Cash Payback Period

 The estimated period of time that will elapse between the date of a capital expenditure and the complete recovery of the amount invested.

Catchment Area

Also known as Trade Area. The area from which a business draws its clientele.

Chart of Accounts

A systematic listing of all account names and numbers used by a company.

Charitable Corporation

A corporation that has been organized under state law as a nonprofit corporation and meets the criteria under Internal Revenue Code Section 501(c)(3) to have its income exempted from federal income taxes and its donations tax deductible by the donors.

Client

An individual or group who engages in a professional working relationship with a veterinarian or veterinary practice for the delivery of veterinary services

Client satisfaction

Meeting and/or exceeding client expectations by the customer’s standards or perception.

Client service

Refers to meeting the needs of individuals with whom the doctor or practice hopes to maintain a long-standing relationship. 

Commodity

An item that is considered interchangeable, and whose price is a reflection of supply and demand.

Compassion fatigue

A progressive loss of idealism, energy, and purpose experienced by people in the helping professions

Compensation

All income due to employees for their work during a given period. In addition to wages, salaries, bonuses, and stock options, compensation includes fringe benefits and employers' share of contributions to social insurance programs, such as Social Security.

Compensatory Time

 Time off given to an employee to compensate for extra time worked in a single workweek.

Compliance

The measure of whether pets actually receive the care that has been recommended by their veterinarians.

Community Relations

Continuing, planned and active participation with and within a community to maintain and enhance its environment to the benefit of both an organization and the community.

Conflict Resolution

A process of resolving a dispute or disagreement

Consumer report

A report of a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living

Continuous quality improvement (CQI)

An  ongoing process of seeking small improvements in processes that have an overall effect of improving efficiency and productivity while reducing waste within an organization

Cost Driver

A quantifiable measure that is used to assign costs to activities; reflects the consumption of costs by activities, such as labor, supplies, equipment and associated depreciation, etc.

Cost Object

Any activity for which a separate measurement of costs is desired, such as services, service lines, products, product lines, processes and responsibility centers (surgery, pharmacy, etc.).

Cost of Goods Sold (COGS)

The expense incurred to purchase merchandise sold during a period. 

Cost of Professional Services (COPS)

The direct costs associated with producing a product or service. It reflects the direct costs of patient care and product retailing, including drug and pharmacy costs, professional and hospital supplies costs, laboratory supplies and reference laboratory fees, radiology and imaging supply costs, surgery and anesthesia supply costs, dietary product costs, mortuary costs, etc.. 

Costs, Fixed

Fixed costs are those that do not fluctuate with revenue.  For example, the rent paid to lease the building in which the veterinary practice is located is a fixed cost.  Even if no clients come in the door and no revenue is generated by the practice, the business still has to pay rent.

Costs, Semi-variable

Expenses that don’t fluctuate directly with revenue but still don’t stay fixed in the sense that rent does.  They encompass some fixed and some variable expense components. For example, telephone service is typically a semi-variable expense in that there is typically a base cost (fixed expense) and then an additional cost (variable expense) depending on the amount of telephone service features used (e.g., long distance costs).

Costs, Variable

Those costs that fluctuate directly with revenue.  For example, variable costs in a veterinary practice would include anesthesia, drugs and supplies.  If no patients are seen, none of these items is used and there is no procedure-associated cost (other than the original cost of the existing supplies). 

Credit Policy

Written guidelines to assist in deciding to extend credit to a customer. Formulating a standard credit policy helps to avoid extending credit to pet owners who are unable to pay their accounts. A good credit policy should help retain good relationships, without jeopardizing cash flow.

Credit Report

A listing of all the outstanding debt and history of payments on that debt. 

Credit Terms

Time limits set for customers' promise to pay for merchandise or services purchased from a practice.

Culture

The personality of the practice.  It tells the history and beliefs of the practice and sets the tone for giving the practice a competitive advantage.

Current Assets

Cash or another assets that may reasonably be expected to be realized in cash, sold, or consumed, within a year or less, through normal practice operations.

Current Liability

Amounts owed to outside parties that are due and must be paid within the next twelve months.

Current Ratio

Current assets divided by current liabilities. It indicates how much there is in assets, cash, and items of value, versus how much is owed on those assets.

Curriculum vitae

A special type of resume traditionally used within the academic community that includes earned degrees, teaching and research experience, publications, presentations, and related activities.

Customer

Someone who pays for goods or services

Customer service

 Refers to assistance to individuals who are purchasing a product or service.    

Demographics

Description of the vital statistics or objective and quantifiable characteristics of an audience or population. A few of the demographic designators include age, marital status, income, family size, occupation, and personal or household characteristics such as age, sex, income, or educational level.

Depreciation

A systematic allocation of the cost of a tangible asset (i.e. radiographic unit) over time. It is the monetary amount of estimated annual normal wear and tear on property improvements.

Direct expense (cost)

An expense (cost) that can be directly traced to a client, to a profit center, or to some specific entity.

Direct Labor

Direct labor or hard labor includes any actions that directly contribute to the delivery of patient care or customer service

Direct labor hours

The costs associated with providing staffing for a service.

Discount

A reduction in price for services and/or products.  This can be a partial or total reduction of fees.

Discount Plans

This is a service by which pet owners pay a fee to receive discounted services from participating veterinarians. It is not, by definition, insurance.

Doctor’s Manual

A Manual that helps ensure that all doctors in a multi-doctor practice are following the same basic protocols so as to avoid client confusion that will undermine client trust in the practice. In addition to outlining such routine protocols as vaccination guidelines, these manuals also include narrative on how to interpret the practice’s fee structure. For example, if a practice offers a Level One, Level Two and Level Three Nursing Care fee, the manual will outline the criteria used to define each level (this type of information may also be included in the Reception Manual)

Due Diligence

The process by which persons conduct inquiries for the purposes of timely, sufficient and accurate disclosure of all material statements/information or documents which may influence the outcome of the transaction.

Economic Life

The number of years over which cash is expected to be returned from an investment in property.

Economic Order Quantity

The most economical quantity of a product to order, factoring in both holding and ordering costs

Economic value-added

The monetary value of an entity at the end of a time period minus the monetary value of that same entity at the beginning of that time period. The after-tax earnings minus the opportunity cost of capital.

Economy of Scale

The reduction in cost per unit that results when operational efficiencies allow increased production. There is thus savings because as production increases, the cost of producing each additional unit decreases.

Economy of Scope

The reduction in costs of operations when a company enters two or more markets where the operations in one market can be used to make operations in another market more efficient.

Emotional Intelligence (EQ)

A kind of intelligence or skill that involves the ability to perceive, assess and positively influence one's own and other people's emotions.

Employee

The common law definition of "employee" is anyone who performs services subject to an employer’s will and control as to what shall be done and how.  Veterinary employees are workers contracted by practice owners to perform specified job tasks during delineated time periods, subject to the authority and control of their employers.

Employee Manuals

These are manuals explaining the terms and conditions employees must operate under while working for a given business.

Employer

A person or firm that employs workers and pays wages.

Endowment

A fund, usually in the form of an income-generating investment, established to provide long-term support for an organization.

Equity

The owner(s)’ claim on the practice’s assets (i.e., the portion of the practice’s assets that belongs to the owner, not the creditors).

Excess Earnings

The amount of earnings expected over and above the return on tangible assets; includes earnings as a result of intangible assets such as goodwill

Expense

A measured outflow of services and/or goods, matched to the revenue generated for that outflow.

Expense, Fixed

An expense that stays the same regardless of the amount of work the practice performs, such as rent.

Expense, Step

An expense that increases or decreases in distinctive amounts, rather than in a linear fashion. Any staff member with a guaranteed work schedule is a step expense

Expense, Variable

An expense that increases as the amount of work the practice performs increases. For example, the busier a practice becomes, the more drugs and supplies it requires

External marketing

Written or verbal communication that is aimed at attracting new clients.  Examples include exterior appearance of the hospital, yellow page ads, mailings, PR events, speaking engagements, signage, web site, and phone conversations.

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, both having the means to complete the transaction and neither acting under duress.

FICO Score

A score calculated using a computer model that compares the information in a credit report to what is on the credit report of thousands of other customers.  This assesses a number of factors such as past payment history, amount of outstanding debt, age of the credit, types of credit and changes in amount of outstanding credit.  The higher the credit score, the lower the credit risk.

Finance Charges

Money charged for payments that extend beyond an agreed upon time limit.  The amount charged is governed by the usury laws in the State within which you practice.  The amount of finance fee charged must be clearly reflected on the invoices rendered.

Frequency

In advertising, the number of times an individual is exposed to an advertisement

Full-time Equivalent

A method of comparing practices based on a full-time schedule of 40 hours a week. If a practice has two veterinarians, one working 50 hours a week and one working 20 hours a week, that practice has 1.75 full time equivalent veterinary positions [i.e., (50 + 20)/40]

Future Value

The monetary value of some defined investment at some point in the future, given a specified rate of return

General and Administrative Expenses

All executive, organizational, and clerical expenses associated with the general management and operation of a practice, rather than with delivery of patient care, ancillary services such as pet boarding and grooming, or product/pharmacy sales.

General Ledger

The collection of all Asset, Liability, Equity, Revenue, and expense accounts from which the financial statements are derived. 

General Liability

 Insurance that protects against accidents and injury that might happen on its premises, as well as exposures related to its products

Generally accepted accounting principles (GAAP)

 A philosophy that broadly includes the body of principles that governs the accounting for financial transactions underlying the preparation of a set of financial statements. GAAP are derived from such sources as the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA).

Going Concern Assumption

The assumption that the business will remain in operation for the foreseeable future (as opposed to a liquidation assumption)

Goodwill

An intangible asset resulting from a business’s reputation, name, location, products, services, customer base, etc.

Gross Income

Income resulting from all veterinary operations before any cost/expense deductions and excluding interest income, service charge income, rebates, sales tax collected, or any other income resulting from other than veterinary professional services and pharmacy/product retail income.

Gross Profit

A monetary amount, computed by subtracting total Cost of Professional Services from Gross Income.

Gross Profit Percentage

The ratio percentage resulting from Gross Profit divided by Gross Income.

Hazardous Waste

 Byproducts of society that can pose a substantial or potential hazard to human health or the environment when improperly managed. Possesses at lease one of four characteristics (ignitability, corrosivity, reactivity, or toxicity) or appears on EPA lists. It requires special handling for detoxification or safe disposal.

Health Insurance Portability and Accountability Act  (HIPAA)

The federal privacy standards that protect patients’ medical records and other health information provided to health plans, doctors, hospitals and other health care providers.

Holding costs

All of the costs associated with maintaining inventory on the premises.

Hospital Safety Manual (HSM)

A collection of all the safety rules, regulations, and policies of the facility. It should have the set training schedule for the staff, a written safety plan, Material Safety Data Sheets (MSDS), and evacuation plans for emergencies. It must be stored in an easily accessible location.

Human Resources

Also known as human capital, the skills that people can use to produce goods and services. The four main areas of human resources as a discipline include: Employment Practices; Organizational Development; Compensation and Benefits, and; Employee Relations.

I-9

Immigration Naturalization form to confirm employment eligibility in the United States.

Income Statement

Also known as a profit and loss statement, a report on financial performance that covers a period of time and reports income and expenses during that period.

Indemnity Insurance

A system of health insurance in which the insurance carrier reimburses the insured indiviudal for medical expenses after care has been provided.

Independent Contractor

An individual hired to do a specific job and paid a fee or a lump sum at its conclusion. Workers who are contracted by veterinary practice owners (called clients) to perform certain jobs independent of control by their clients.

Indirect Labor

Indirect labor or soft labor includes all work-related actions that do not directly result in patient care or customer service. This includes attending staff meetings, participating in continuing education, training new staff members, bookkeeping, inventory management, creating client education or marketing materials, computer maintenance, etc.

Industry Norms

Values derived from the analysis of a large number of practices. Most of the national groups that represent organized veterinary medicine publish some variety of industry norms.

Incremental Cash Flow (ICF)

The change in the practice’s net cash flow attributable to capital investment.

Informed Consent

Person's agreement to allow something to happen, such as a medical procedure that is based on full disclosure of the facts necessary to make an intelligent decision

Interest

The cost of borrowing money, assessed by the lender over time, usually expressed as a percentage of the principal amount of borrowing. The percentage is expressed as a rate over a time period, and can change (variable rate) or stay the same over the term of the loan (fixed rate).

Intellectual Capital

Value of know-how accumulated within the organization. 

Internal Accounting Controls

Processes in place to provide management reasonable assurance that no practice resources are being lost, that financial reporting is reasonably accurate and that profitability targets are achieved.

Internal marketing

In veterinary medicine, this usually refers to efforts to increase utilization of services by existing clients.  Internal marketing also refers to efforts by the practice to train and motivate staff to work together as a team to better meet client needs

Internal Rate of Return (IRR)

The calculated rate of return, given the cost and future value of an investment

Inurement

Inappropriate benefit of a private person or company from a charitable corporation.

Inventory

Extra merchandise or supplies the practice keeps on hand to meet the demands of customers. Goods ready to be sold.

Inventory Turnover

The relationship between expense of total items sold and inventory value, computed by dividing the cost of drugs and dispensed items by the average inventory value. The higher the number, the more often inventory turns over, resulting in less outdating, less damage, and less inventory on hand at any one time. 

Job Enlargement

The assignment of additional similar tasks that the employee is already trained to accomplish. For example, asking an employee who is trained to do call backs for one doctor to begin doing call backs for all of the doctors

Job Enrichment

Training an employee to be able to complete new tasks in addition to his/her regular responsibilities. Cross training technicians and receptionists so they are able to cover for each other is an example of job enrichment It is a method of making work more satisfying by expanding the tasks to increase not only their variety but also the employee’s responsibility and accountability.

Just-in-Time Inventory

Receiving product as it is needed, rather than storing product as inventory.

Key Performance Indicators

Statistics that can be generated from client transaction data that have predictive value for success, from a practice management standpoint

Labor Ratio

The ratio that defines the relationship between direct labor and indirect labor in the workplace. In veterinary medicine, the rule of thumb is a one-to-one (1: 1) ratio.  One hour of direct labor is expended, for each hour of indirect labor

Leadership

The art of guiding people in a manner that commands their respect, confidence and wholehearted cooperation.