Beyond profit and loss

Why veterinary clinics need to watch cash flow

Originally published in OVMA Focus Magazine November/December 2025

BY GREG TONER

Most veterinary practice owners are comfortable looking at a profit and loss (P&L) statement to see how their business is performing. On the surface, it seems straightforward: if revenue is higher than expenses, the practice is profitable. But profitability on paper doesn’t always mean cash in the bank. That’s where the cash flow statement comes in. This is a financial report that tells a deeper story about the health of your practice.

What is a cash flow statement?

The cash flow statement tracks how actual money moves into and out of your business over a given period. It’s typically divided into three sections:

1. OPERATING ACTIVITIES: Cash from the day-to-day running of the clinic, including client payments, payroll, rent, utilities, drugs and supplies.

2. INVESTING ACTIVITIES: Cash used for or earned from buying and selling long-term assets such as medical equipment, vehicles or renovations.

3. FINANCING ACTIVITIES: Cash movements related to debt and equity such as loan proceeds, loan repayments, or owner contributions and withdrawals.

While the P&L shows whether you’re “profitable,” the cash flow statement shows whether you have the liquidity to meet your obligations, pay staff and invest in growth.

Why cash flow matters in veterinary medicine

Veterinary practices often face unique challenges that make cash flow management critical. These include:

• CLIENT PAYMENTS

Even when invoices are issued promptly, payments can lag. If clients delay payment, cash can tighten unexpectedly.

• SEASONAL FLUCTUATIONS

Many clinics see peaks during parasite prevention season or dental health month, followed by quieter stretches. Without planning, these fluctuations can leave the practice cash-strapped between busy periods. Practice owners need to save the excess revenue from peak months to carry their businesses through slower times of the year.

• BIG EQUIPMENT PURCHASES

Practices rely heavily on expensive technology. Upgrading to perform laparoscopic surgery or buying a new digital X-ray machine can be great for you and your staff to provide better care, but it also creates a sudden cash drain. To smooth out the cash flow from these bigger purchases, practice owners should consider financing these purchases with new debt or leasing the equipment.

• DEBT SERVICING

Speaking of debt, many clinic owners carry loans from acquiring their practice, expanding facilities or purchasing equipment. Principal repayments don’t appear as expenses on a P&L, but they will still use part of the cash that your practice generates.

• DELAYED BILLING

Most drug distribution companies offer delayed billing at certain times of the year. It’s great to have product to sell before you’ve paid for it, but it’s important to have the discipline to set the funds aside to cover the payment when the delayed bill is due.

• HARMONIZED SALES TAX

One of the biggest issues that a practice can encounter is spending the harmonized sales tax (HST) it collects. HST collected isn’t on your P&L as income. It accumulates in the practice’s bank account, and it’s added as an offsetting liability to the balance sheet until it is paid off.

Isn’t a cash-basis P&L the same thing?

This is a common misconception. If your practice uses cash-based bookkeeping, your P&L does record revenue when it’s received and expenses when paid. In simple situations, such as a small clinic with no loans, no large purchases and minimal owner withdrawals, the cash-based P&L and the cash flow statement may look nearly identical. But as soon as you add debt, capital investments or owner activity, the two reports diverge. Here’s why:

• A bank loan received won’t appear as income on your P&L.

• Principal repayments won’t appear as expenses (only the interest portion does).

• Large equipment purchases won’t appear as expenses either—they’re treated as assets.

This means your P&L might show a strong profit, while your bank balance is shrinking. The cash flow statement exposes these gaps, showing where the money really went.

Capital expenses

Capital expenses are one of the most significant reasons why cash flow statements matter. Consider a scenario with revenue of $120,000, operating expenses of $80,000 and a capital purchase of a $50,000 digital X-ray machine. On the cash-basis P&L, your clinic shows a profit of $40,000 ($120,000 minus $80,000). That looks like a good month. But the cash flow statement tells a different story, with operating cash flow of $40,000, investing cash flow of -$50,000 and net cash flow of -$10,000. In reality, your practice spent $10,000 more than it brought in. Without seeing this picture, you might mistakenly assume you had funds available for distributions or new hires.

For veterinary practice owners, the cash flow statement answers practical, day-to-day business questions such as:

• Can I afford to hire another associate or technician?

• Do I have enough of a buffer to replace an X-ray machine?

• Is it safe to take a dividend this quarter?

• If revenue dips for two months, will I still be able to cover payroll and rent?

These are the kinds of decisions that make or break the financial stability of a clinic. A healthy P&L alone doesn’t provide enough information to answer them.

Making cash flow work for you

Monitoring cash flow doesn’t have to be complicated. Many bookkeeping tools integrate with accounting systems to produce reports automatically. A few practical steps include reviewing cash flow monthly, building reserves during peak months and planning for capital purchases.

For veterinarians, the P&L shows profitability, but the cash flow statement shows sustainability. Cash pays staff, keeps the lights on and funds growth. Ignoring cash flow can lead to nasty surprises, even in a profitable practice.

By incorporating cash flow review into your regular financial routine, you gain a more accurate picture of your practice’s financial health. This clarity allows you to make better business decisions, reduce stress and focus on what really matters: providing excellent care to patients and clients.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org

Three types of veterinarians who should start a practice

Originally published in OVMA Focus Magazine September/October 2025

BY GREG TONER

In university, a mentor gave me some advice that I’ve shared freely since then: there’s no perfect time to have a baby or start a business. After living through having babies and starting a business, I’ve learned that she was right. Timing is far less important than acting. And you’ll inevitably figure out how to make it work.

I work with a lot of veterinarians, and I talk to five to 10 veterinarians from across Canada every day. Most are practice owners, but some are considering practice ownership and others have no interest in ownership.

I talk to many practice owners about their bad days, but there are generally more good days than bad. I generally find that there are three things that drive happiness in practice ownership for veterinarians, and it closely aligns with the three types of veterinarians who I think should seriously consider starting a practice.

1. The specialist

The specialist craves professional autonomy and clinical freedom. They love being able to provide the best possible care, and they take great joy in seeing complex cases and sharing that knowledge and expertise with others. Their practice is seen by other veterinarians as a resource they can lean on when things get hard. They love being the person the industry can turn to when the medicine gets complex. The specialist’s practice is spotless and operates with surgical precision. Although there’s less case volume than other practices, the specialty service their clients seek is highly valued.

2. The entrepreneur

The entrepreneur loves the business of veterinary medicine. They’re a veterinarian first and can jump into any part of their practice, and they take great satisfaction in building something bigger than themselves. As one part of their practice starts running consistently and operating profitably, they move on to the next step to keep growing. The entrepreneur’s practice is humming, everyone is in the right place, doing the right thing, and doing it on time. Their practice runs efficiently and provides predictable experiences for both their staff and clients.

3. The caretaker

The caretaker takes great pleasure in being a key member of their community. They have an enormous heart, and they take pride in looking after the pets in their community and being relied on to help when they’re in need. They provide a great place to work for their staff and view them as an extension of their family.

The caretaker’s practice is a warm place with friendly staff. Their approach to making their staff feel valued translates to staff making all their clients feel valued. This veterinarian has been an anchor to their community for over two decades and will continue to practice there as long as they can.

Practice ownership is just starting to evolve. Fewer clinics have chaotic schedules, and work is much more predictable for practice owners and their staff. The common thread for how the specialist, the entrepreneur and the caretaker approach practicing veterinary medicine is that the care for animals entering their practice is their north star - they want to make sure that they and their practice are the best that they can be.

Do you see some of yourself in one of these personas? Maybe practice ownership is for you. There will be hard days, but it will drive a sense of fulfillment that makes it all worth it.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org

The most practical way to improve practice efficiency

Originally published in OVMA Focus Magazine July/August 2025

BY GREG TONER

At a high level, there are three ways to maintain the viability of a veterinary practice when faced with increasing costs: raise your prices, see more clients or be more efficient.

Over the last year, pet owners have become increasingly price sensitive, so raising prices is a challenge. Seeing more clients isn’t always feasible— at the time of writing, we’re seeing a softening of demand for veterinary care in many markets across Canada.

So, what’s left? Be more efficient. How? With better standard operating procedures (SOPs) and actively work to make them better.

SOPs provide a roadmap for consistency, efficiency and quality, serving as the backbone for any successful practice. They outline the best-known methods to accomplish specific tasks, ensuring that all staff are aligned in their approach, and they work seamlessly together to support the rest of the team in providing care to the pets and pet owners that you’re serving.

SOPs bring consistency to practice operations. When everyone in the organization follows the same processes, the output is more predictable and reliable. This means that the practice owner, manager or veterinarians won’t get pulled into every case or issue with a mild case of ambiguity. Without standard procedures, performance can be highly variable, leading to mistakes, inefficiencies and customer dissatisfaction.

They also streamline workflows by eliminating guesswork. Employees know exactly what steps to follow, which reduces the time spent figuring out how to complete a task. This improved clarity increases productivity and allows practices to operate more efficiently. Additionally, when processes are standardized, it becomes easier to identify and eliminate bottlenecks, further boosting overall performance. Organizations that prioritize efficient procedures often find they can do more with fewer resources, improving their bottom line.

Standard operating procedures are valuable when it comes to training new employees. Clear, well-documented SOPs enable faster onboarding because new hires can quickly understand what’s expected of them. Rather than relying on ad-hoc explanations from colleagues, which may vary greatly, new employees have a consistent, reliable source of information to guide their actions. This helps reduce the learning curve and ensures that new team members integrate into the organization smoothly and effectively.

They also lay the foundation for continuous improvement initiatives. By documenting the current best way of doing things, businesses have a benchmark to measure against when seeking enhancements. SOPs can be reviewed and updated regularly based on new learnings, feedback and changing environments. This systematic approach to refinement ensures that the organization evolves intelligently rather than chaotically.

There are many headwinds in the veterinary industry, and practices need to adapt to remain viable businesses. The most feasible way to do that in the current climate is to improve efficiency. Review your SOPs, update those that are out of date, and make sure your whole team is on board. It might be uncomfortable at first, but when everyone knows what they’re supposed to do and what they can expect from the rest of the team, practices run smoother.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org

A better chart of accounts

Originally published in OVMA Focus Magazine March/April 2025

BY GREG TONER AND EMILY STEEVES

One of my friends, Peter, is an engineer, and he’s very detailed-oriented. Recently, he was shopping for a new car and put together one of the largest spreadsheets that I’ve ever seen. He used it to compare all the crossover SUVs that he and his wife were considering, evaluating more than 50 different factors for each car. It was impressive, but it was also easy to feel overwhelmed when looking at it, and it was hard for anyone but him to understand.

Peter’s spreadsheet is a little like a profit and loss statement assembled using the AAHA/VMG Chart of Accounts. Just as Peter’s spreadsheet has an overwhelming number of rows, the AAHA/VMG Chart of Accounts has an overwhelming (and arguably unnecessary) number of accounts, and an excessive level of granularity. While the chart is intended to cover a wide array of transactions and financial categories, the reality is that many veterinary practices find it unnecessarily complicated, creating confusion and inefficiencies in day-to-day financial management.

With so many accounts, consistency both within a practice and across practices is challenging, as revenue types may not be consistently categorized, making monthover-month and year-over-year comparisons difficult.

Overwhelming number of accounts

One of the most significant issues with the AAHA/VMG Chart of Accounts is the sheer number of accounts it contains. At first glance, the chart seems comprehensive and well organized, but when it’s put into practice, the number of categories can be overwhelming. For a typical veterinary practice, navigating many accounts can be cumbersome and time-consuming, as it forces business owners, bookkeepers and accountants to deal with excessive subcategories for relatively simple transactions.

While it’s useful to track major categories of expenses, the extreme level of granularity isn’t necessary for all practices. A small practice will find it more effective to group related expenses into broader categories without the need to separately account for every individual item. This high level of detail leads to increased administrative work, especially when some of these subcategories may only involve a handful of transactions over the course of a year (or none for the average practice in Ontario: How many have an MRI on site?). Additionally, the AHHA/VMG Chart of Accounts doesn’t mirror the system for categorization that the main veterinary supply distribution providers use, further creating additional administrative processes required to reflect the granularity in the AHHA/VMG Chart of Accounts.

Categories such as labour costs often demand intricate breakdowns of different types of staff compensation into 19 different accounts for compensation and five different categories for employee benefits. While these distinctions may be useful for larger practices with numerous employees, smaller practices may find that tracking every aspect of labour costs in such detail is excessive.

Instead, a more streamlined system could give practice owners the flexibility to track major categories without becoming bogged down by excessive detail that doesn’t add significant value to the overall financial picture.

Consistent classification is a challenge and leads to poor quality data for analysis and decision making.

Increased risk of error and inaccuracy

The high level of detail in the AAHA/VMG Chart of Accounts, while theoretically meant to provide a thorough financial picture, can increase the risk of errors and inaccuracies in bookkeeping. When there are so many accounts to manage, it becomes easier for mistakes to happen and expenses to be applied to the wrong accounts, especially if staff members aren’t trained to categorize each transaction correctly. Furthermore, the time spent maintaining many accounts diverts attention from more strategic financial management tasks.

For instance, a bookkeeper might inadvertently record a supply purchase under the wrong subaccount or forget to parse out the different segments of an expense, especially if they’re dealing with hundreds of accounts in the chart. As the number of accounts increases, so does the complexity of maintaining and reconciling them. This administrative overhead can be a significant drain on resources, particularly for smaller practices that cannot afford to dedicate substantial time or personnel to bookkeeping. For practices using third-party bookkeeping and accounting, the substantial level of additional adjustments, and admin time required to comply with the AHHA/VMG Chart of Accounts results in higher bookkeeping and accounting costs.

Inefficiencies in financial reporting

Why do practices maintain accounting records? The base use is to support sales tax and income tax filings. These two filings need very little detail and generally result in many of the AAHA/VMG accounts being rolled up to fit into the limited fields for reporting income and expenses. Even the simplest chart of accounts will support sales tax and income tax filings for Canadian practices.

The second major reason a practice maintains accounting records is to track and optimize performance. Tracking and optimizing performance can take various forms based on a practice’s lifecycle, but at any stage, a practice needs consistently categorized expenses and timely information.

The number of accounts in the AAHA/VMG Chart of Accounts makes bookkeeping a more time-consuming process and increases the risk of incorrect or inconsistent account classification. It doesn’t work for most owner-managed veterinary practices, as it forces them to dedicate more resources to bookkeeping that could be diverted elsewhere to help grow their practice. Even with those additional resources, it increases the risk that the records produced aren’t necessarily comparable to last month’s or last year’s.

These issues are what led to the development of the OVMA/ VetCPA Chart of Accounts, which balances detail and unnecessary complexity and is suitable for a privately owned practice. The goal is to build a system that allows practices to generate monthly accounting records quickly and efficiently, with limited chances for inconsistencies month-overmonth or year-over-year, so the records can be reliably used to highlight opportunities and threats in a practice so they can be managed appropriately.

A limited chart of accounts also increases the reliability of industry-wide reporting, such as the OVMA Economic Survey. Peter’s spreadsheet was useful for him, but the funny thing was that all the crossover SUVs he was considering had roughly the same warranty, horsepower, cargo volume, seating space, features and reviews, and were priced within $5,000 of each other. He ended up picking a model with a dealership that was closest to his home. Through the process, he got caught up in the overwhelming amount of details, and it wasn’t until the last minute that he realized the most important factor for him, assuming the other factors were relatively even, was that the dealership was close by for services.

You can find the OVMA/VetCPA chart of accounts HERE.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Emily Steeves is the bookkeeping manager at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org