Know Your Financial Blind Spots
It’s not a comfortable experience—you’re reviewing your med spa’s recent numbers or bank account and notice a major decrease in med spa cash flow. But how did this happen?
Maybe you’ve been operating a financially efficient med spa by reducing employee turnover, minimizing appointment cancellations, and cleaning up your processes.
Hopefully you’ve been gathering med data from your EMR system to understand things like which service categories are most profitable, the revenue per hour and per provider, and the number of patients per hour and per day.
Perhaps you’ve even worked to increase your med spa cash flow by looking at key financial statements like the profit and loss statement (P&L), balance sheet, and cash flow statement.
Still, there can be unexpected financial blind spots that are sucking your cash flow. Don’t be alarmed—cash flow can fluctuate based on a number of things. But if there’s a steady decline or you just don’t have enough of what you need, it’s worth taking a look at these three factors.
Factors that Can Cause a Dip in Med Spa Cash Flow
In a recent Maven Minute, Jessica Nunn shared the three most common, but surprising, factors that can reduce med spa cash flow. Consider the items below and how they might be impacting your med spa’s financials.
Supplies and Inventory
Losing money on supplies and inventory is a sneaky way to make a big dent in the bottom line. Whether you’re wasting supplies or ordering too much—it’s money flying out the window.
Forbes offers tips on how to minimize inventory waste:
- Do a full inventory count. This will help you set minimal inventory levels and know what you’re starting with.
- Put an employee in charge of inventory. Instead of assuming everyone is doing their part to track inventory—which is tricky when there’s so many hands in the pot—you can designate one person to manage the stockroom. They can keep track of what goes in and out, replenish when stock gets low, and receive deliveries.
- Identify any core issues. Is your seasonal forecasting off? Do you need better suppliers? Do you know what inventory you need for which services? If you feel that inventory should be running smoothly but it’s just not, there might be a glitch in the whole system.
- Use the First-In, First-Out (FIFO) method. Basically, you should use the oldest supplies first and work your way up to newer supplies.
- Use inventory management software. If you’re willing to invest, software can save a lot of manual hours when it comes to tracking inventory levels and alert you when it’s time to place a new order.
If you can get your med spa’s supplies and inventory under control, you might notice that money’s no longer mysteriously draining out of your business.
The truth is that, even though vacations are good for mental health and employee satisfaction, they’re hard on cash flow. This is especially relevant for businesses like med spas, where collections rely directly on provider services. And if a provider’s out, they’re not bringing in any collections.
Here a few suggestions on how you can balance employee vacation time with revenue:
- Try to stagger provider time off, when possible. By communicating clearly with providers and establishing a time off calendar in advance, you could ensure that you’re not down more than one provider for a given week.
- Build in extra cash flow to account for all of a provider’s yearly vacation days. If you offer two weeks PTO as part of your benefits plan, then you’re responsible for preparing for a slight decline in revenue and padding your cash flow for those two weeks.
- Schedule patient visits with an alternate provider. If your other providers have the bandwidth, you might be able to spread out appointment bookings among the rest of the team while one provider is out.
There’s a season for everything in business. Just like Spirit Halloween stores pop up in the fall and home construction companies are busy building pools in the spring, med spas also have a seasonal rhythm.
Summer is known to be a slow season for med spas. People are on vacation, there are fewer social engagements and holiday parties, and schedules are unpredictable. If you know that summer (or any other season) is going to be slow for your med spa, you can plan ahead.
Consider promoting gift certificates that can be used year-round. Offer summer sales and buy-one, get-one-discounted services. You could even create a marketing campaign around summer-specific services, like waxing or sunless tanning. Finally, you can plan to have a little extra cash flow on hand before the season begins—that way, you’re not panicking by the time August comes around!
Stay on Top of Med Spa Finances With Maven
If you found the information in this blog helpful, you’ll love what a partnership with Maven can do for your business. We help med spas and other small businesses uncover financial problems and become more profitable. Are you ready for a free financial analysis? Contact us today!