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Expert view: Tips for surviving the category M clawback

How can you make it through the double whammy of a clawback and cuts?

You spent five years training to become a pharmacist. You took the risk of buying your own business with high hopes that once the insurance, corporation tax, rent, maintenance, wages, pensions, fixtures, fittings and stock were paid for, you would be making a healthy profit.

If achieving this seemed difficult when the Department of Health (DH) made its announcement last year of a £170 million funding drop in England, then it dwindled to little more than a pipe dream when the DH added a £48m category M clawback into the mix.

After crunching the numbers, Umesh Modi, partner at accountancy firm Silver Levine, told C+D that as a result the average English pharmacy will be down by a whopping £19,000 from June 2016 to March 2017 – a substantial sum for any business.

But while Mr Modi acknowledges that the next few months will be a “tough time” for independents in particular, he is adamant that all is not lost.

Instead, he shares his tips for how contractors can mitigate the funding drop and survive the clawback.

1. Resist redundancies

Making redundancies may be the knee-jerk reaction to loss of income, but this could end up being more costly than you magine, Mr Modi warns. He believes that trying to run a pharmacy on fewer staff could be “counter-productive”. A pharmacy operating on a skeleton crew may not be able to offer as many services, leaving patients with little choice but to take their business elsewhere.

2. Safeguard your services

Focusing on services can provide the boost to your bottom line needed to sail these troubled waters. Mr Modi recommends making sure you offer a travel clinic during the summer months as a way to increase revenue to “compensate for the loss that is coming”.

He also points out that many pharmacies do not achieve their full quota of medicines use reviews (MURs), losing out on the substantial amount of cash this can generate.

3. Check your FP34

Combing through your FP34 schedule to check for any underpayments could unearth some extra cash, says Mr Modi. He suggests checking your schedule using a tool on the National Pharmacy Association site if you are in any doubt. “[The NHS Business Services Authority] does make mistakes in calculating the payments,” he says.

4. Better buying

One of a pharmacy’s biggest expenditures is purchasing drugs, so Mr Modi recommends making sure you are getting the best possible price for them. “Shop around and try and get better deals,” he advises.

5. Submit monthly VATs

Efficient cash flow is going to prove invaluable in the coming months, because money is going to be tight. To make sure this isn’t an issue, Mr Modi advises submitting your VAT returns on a monthly – rather than a quarterly – basis.  

6. Talk to your banker

While you might be understandably reluctant to speak to your bank when you have money worries, it can be a useful resource in times of financial hardship. Mr Modi advises keeping your bank manager informed about the situation so you can organise an overdraft in advance of October 2015, just in case you need to dip into it.

Read how three contractors predict the clawback and cuts will affect their business

How do you think the cuts and clawback will affect your pharmacy?

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