Veterinary practices have some of the most complex SME accounting in Australia. Multiple revenue streams (consultations, surgery, diagnostics, retail), controlled drug inventory, high staffing costs, and expensive medical equipment all require careful financial management.
1. Revenue Streams to Track Separately
Set up separate revenue accounts in your chart of accounts:
- Consultation fees — standard consults, emergency consults, after-hours.
- Surgery and procedures — desexing, dental, orthopaedic, soft tissue.
- Diagnostics — pathology, radiology, ultrasound.
- Pharmacy and medications — dispensed drugs, flea/tick/worming products.
- Retail products — food, treats, accessories.
- Boarding and grooming (if applicable).
This breakdown reveals which services drive your profitability. Many vet practices find surgery and diagnostics generate 60%+ of profit while consultations are barely break-even.
2. Drug Inventory Management
Veterinary drugs represent a significant cost and compliance obligation:
- Track drug COGS separately from retail product COGS. Drug margins should be 40–60%.
- Controlled substances (Schedule 8 drugs) require a register — ensure your PMS (Practice Management System) records usage accurately.
- Expiry management: Write off expired drugs before EOFY for the tax deduction. Use first-in-first-out (FIFO) stock rotation.
- Sync your PMS with Xero: Systems like RxWorks, EzyVet, or Cornerstone can push sales and inventory data directly to your accounting software.
3. Staffing and Payroll Complexity
Vet practices typically employ a mix of veterinarians, vet nurses, receptionists, and practice managers — often across different awards:
- Veterinarians: Usually employed under an individual contract or the Health Professionals Award (depending on structure).
- Vet nurses: Covered by the Animal Care and Veterinary Services Award — check classification levels and penalty rates.
- After-hours and on-call: Penalty rates for evenings, weekends, and public holidays can be 150–250%. Budget for these in your payroll forecasts.
4. Equipment Depreciation
Vet practices invest heavily in medical equipment:
- X-ray machines, ultrasound, and surgical equipment — depreciate over 10–15 years using ATO effective life tables.
- Items under $20,000 (instruments, scales, monitoring equipment) — instant asset write-off.
- Leased equipment: Operating leases are expensed monthly; finance leases are treated as an asset with depreciation and interest components.
5. Key Benchmarks
| Metric | Healthy Range |
|---|---|
| Staff costs (% of revenue) | 40–50% |
| Drug/product COGS | 15–22% |
| Rent/occupancy | 5–10% |
| Net profit margin | 10–20% |
| Revenue per vet per year | $500k–$800k |
Key Takeaways
- Track revenue by stream — consultations, surgery, diagnostics, pharmacy, and retail.
- Manage drug inventory with FIFO rotation and write off expired stock before EOFY.
- Budget for after-hours penalty rates — they significantly impact payroll costs.
- Sync your Practice Management System with Xero for automated reconciliation.
- Target 10–20% net profit margin and $500k+ revenue per vet per year.