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Your cash is sitting in the pharmacy
A veterinary practice carries more inventory than any other practice vertical. That inventory is cash, and most books never show it as such.
Why veterinary profit and cash diverge.
Veterinary cash flow is dominated by working capital tied up in inventory — pharmacy, prescription diet, vaccines, and retail product — combined with wellness plan payments collected monthly against care delivered on a different schedule, and equipment debt for imaging, dental, and surgical suites that consumes cash while showing only depreciation on the P&L.
Four places veterinary cash gets trapped.
- Pharmacy and diet inventoryFrequently the largest working capital position in the practice, and usually expensed at purchase rather than carried, making it invisible.
- Expired and obsolete stockProduct purchased, never sold, and written off. Cash spent with no revenue behind it.
- Wellness plan obligationsMonthly plan payments collected against a year of care owed. The unearned portion is not available cash.
- Equipment debt principalNot an expense, so absent from the P&L, but it leaves the account every month.
Carry inventory properly and the picture changes
When pharmacy and food are expensed at purchase, the P&L swings with buying patterns rather than with performance, and the balance sheet shows none of the cash committed to the shelf. A large vaccine or diet order makes a good month look mediocre and the following month look better than it was.
Carrying inventory as an asset and matching cost of goods to sales fixes both problems at once: the monthly profit becomes readable, and the working capital position becomes visible. Turns by category then tell you which parts of the shelf are earning their keep.
Plan for the seasonal shape
Most veterinary practices see a spring and summer increase driven by parasite prevention, wellness visits, and boarding-related care, followed by a slower late autumn and winter. The pattern is well established and still routinely causes strain, because the strong months' cash is committed before the slow months arrive.
A thirteen-week rolling forecast that includes planned inventory purchases makes the trough visible far enough ahead to time large orders and equipment decisions around it rather than into it.
Frequently asked.
Why is my veterinary practice profitable but short on cash?
Usually inventory. Pharmacy, diet, and product are often the largest working capital position in the practice, and if they are expensed at purchase rather than carried as inventory, that committed cash is invisible on your financial statements. Equipment loan principal, which is also absent from the P&L, is the other common explanation.
How should veterinary inventory be handled in the books?
Carried as an asset on the balance sheet, with cost of goods recognized as product is sold. Expensing at purchase makes monthly profit swing with buying patterns instead of performance, and hides how much cash is sitting on the shelf.
Are veterinary wellness plan payments available cash?
Only the earned portion. Monthly plan payments cover a year of scheduled preventive care, so the part representing services not yet delivered is an obligation. Reporting the unearned balance next to cash each month keeps the genuinely available figure visible.
Veterinary resource center.
Or read the cross-practice version: cash flow in practice accounting →
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