Pharmacies are taxed like any other business that sells products; however, they have a unique set of taxation and financial challenges.
An accountant is useful for overcoming these challenges, which include complex NHS calculations, cashflow shortages and credit limits.
Most pharmacists will struggle for cash at some point in the year without consistent management. An accountant can help streamline cashflow and provide a watching eye on incomings and outgoings, to ensure business viability.
Here are other areas where an accountant for pharmacists is valuable:
NHS calculations and payments
The main source of income for most pharmacists is the NHS, with NHS prescriptions accounting for around 70% of income in most cases.
Complex NHS formulas are used to determine profit. Also, the NHS typically pays pharmacists 60 days after receiving an invoice, which is a long time to operate without cash. This is where an accountant can help.
An accountant can deal with complex NHS formulas on your behalf and free up cashflow, so there is less financial stress between payments.
Pharmacists are paid on the first of the month by the NHS. Payment is never brought forward. This creates consistency in payment; however, it also leaves a cashflow gap that can be difficult to fill with non-prescription sales.
Most pharmacies are run well but we have found that the financial and accounting side of pharmacies is often lacking in refinement.
Cashflow shortages are an area where accountants provide a lot of value because they can identify problems early and come up with new ways to infuse capital. This can help you pay overheads and expenses with less financial stress.
Tax, PAYE and VAT
Your accountant will take care of your tax filing for you and handle your PAYE scheme, usually as part of a single service with one invoice.
Over the counter, medicines are subject to 20% VAT but private prescriptions and FP-10 prescriptions (those issued by GPs, nurses and pharmacists) are exempt from VAT. However, sales still need to be properly logged and accounted for.
By using an accountant for pharmacists, you can make sure your tax, PAYE and VAT records are properly kept and filed, to ensure you meet your legal obligations.
It makes sense to use an accountant if you are currently managing your own tax and accounting affairs. Not only will you free up your time, but you could also save money through the tax and cash-saving opportunities your accountant identifies.
Sterling Finance has been providing services to the Pharmacists since 1999 and we proud ourselves on the knowledge and experience gained through the process.