In answer to the question “Who cares if your practice does well?” it’s easy to just think “the owners!”; however, considering who else is interested in how well the business is performing financially can be a really useful exercise for veterinary leaders and managers.
Financial stakeholders are those who have an interest in how well an organisation performs financially – especially how that financial performance might impact them. The different financial documents produced and used in practice (balance sheets, profit and loss accounts, cash flow statements, etc) are compiled and analysed with different stakeholders in mind, according to their different needs and expectations.
Stakeholders do not necessarily need to be part of the business – they could be your competitors, neighbours, clients or the local community
Stakeholders do not necessarily need to be part of the business – they could be your competitors, neighbours, clients or the local community. Depending on your business structure there may also be other groups that have a financial interest in the business. For example, if your practice is a charity or not-for-profit, you will also have charitable donors who will want to know that their contributions are being used wisely and that the practice’s money is being managed well. Your organisation may also have trustees, a board, a council or a set of partners. Let’s look at the different stakeholder groups.
Internal stakeholders
Internal stakeholders are the people and groups who are part of the practice, such as its owners or employees. So what questions might they have about how the practice is doing financially?
A practice runs on its staff, so the employees of any organisation will want to be reassured that their jobs are secure and that they will be paid fairly and when expected. They will want to know what employee benefits they may be able to expect and whether it is realistic to ask for additional funding – for example, for a salary increase or a CPD course. Therefore, the financial health of the practice is of fundamental importance to all its employees.
A practice runs on its staff, so the employees of any organisation will want to be reassured that their jobs are secure and that they will be paid fairly and when expected
The practice leadership team may also be employees with the same concerns as the general staff above, but those with management responsibilities will also have additional questions about the practice’s financial health. Managers will analyse financial documents more closely in order to establish whether the practice can afford to take on additional staff, buy a new piece of equipment or renovate the building. Cash flow will be analysed and predicted in order to make plans for the practice’s future. Managers will also be making calculations based on financial performance and future predictions to ensure an adequate level of income by setting appropriate fees to be charged to clients.
Owners and shareholders of the practice will ultimately have the most interest in how well it does financially. They will want to be reassured that the business is secure and will (continue to) provide a return on investment.
External stakeholders
External stakeholders are people and groups outside the practice who also have an interest in its business performance. Again, there are several groups which fall under this heading.
Close to home
An obvious category of external stakeholders is the practice’s clients. They will care about business performance in terms of access to services – if the business goes under, they won’t have a vet to go to! They will also want to feel that they are getting value for money – that they are receiving the level of care expected for a fair price.
Your suppliers will also want to know that you’re a secure business. Can you reassure them that you can pay your bills and will continue to buy from them? Similarly, lenders will want to know that any loans issued to the practice will be repaid and will use the practice’s financial statements to determine what terms or interest rates should be offered to you.
Further afield
Looking slightly further afield, who are your competitors and what interest might they have in how well you’re doing financially? These external stakeholders will be interested in whether you are likely to stay in business, keep branches open or potentially expand into new areas. They will also be interested in where you pitch your services in terms of price: are you offering “gold-standard” top-of-the-range options, do you aim for a different demographic and price pragmatically or are you somewhere in-between?
The local community will be interested in whether the practice will continue to be a viable business and will, therefore, provide local jobs and contribute to the local economy
Finally, various groups will be interested in the financial contribution your practice makes more generally. Government agencies, both on local and national levels (such as HM Revenue & Customs), will want to know if the practice can pay its taxes.
The local community will be interested in whether the practice will continue to be a viable business and will, therefore, provide local jobs and contribute to the local economy. What about the veterinary community? As a whole, the veterinary sector relies on the successful running of individual practices to, for example, provide stable employment for veterinary staff, support new graduates and host EMS students. The veterinary community is, therefore, a stakeholder and so will want to be reassured that this will be able to continue.
Conclusion
Your challenge this month is to consider who your practice’s financial stakeholders are, what information they might need about the practice’s finances and how effective the practice currently is at keeping the relevant people and groups appropriately informed about the business and its future.
