Critical Balance of Profit and Cash Flow for Pharmacy Owners

pharmacy profit and cash flow
pharmacy profit and cash flow

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Your pharmacy needs a balance of both cash flow and profits to thrive.

Winter Is Coming

This is even more critical now with the upcoming changes to DIR fees in 2024. These changes will strangulate cash flow for pharmacies for the first several months of 2024. I have been calling this the 2024 DIR Fee Apocalypse. No, I don’t think I am fearmongering. The potential damage to independent pharmacies is enormous. Many pharmacy owners may be unable to make it through the cash crunch created by this apocalypse.

The severity of the consequences is why we have dedicated the entire February Pharmacy Profit Summit to the specific strategies and tactics pharmacy owners can implement in their stores to be prepared for the upcoming super-storm.

The Basics of the 2024 DIR Fee Changes

Currently, DIR fees are applied retroactively long after the claim is transmitted. Sometimes, months later. These clawbacks often come as a surprise and at the worst times. Beginning on January 1, 2024, DIR fees must be applied at the point of sale. This is great news and will bring much-needed transparency.

There is a huge downside, though…

Your revenues will immediately drop significantly. Since DIR fees are a percentage range of revenue, you will be charged the highest point of the range when applied at the point of sale. Now, most pharmacies could probably handle this if that was the only impact. It would be tight adjusting to lower revenues immediately, but we could do it. The kicker here is there is more bad news.

Because DIR fees are retroactive now, you will be paying 2023 fees at the beginning of 2024. This means you have less revenue AND still have DIR fees being paid back. Essentially you are paying double DIR fees for the first several months of 2024. This is what will cause the apocalypse for many pharmacy owners.

Can your cash flow handle paying double DIR fees?

Focusing On Increasing Profits & Cash Flow

The way through this storm is to focus on increasing your pharmacy profit and improving cash flow. These two critical metrics are often conflated as being the same thing. That is not the case at all. Also, the strategies for improving profitability and far different than the tactics for increasing your cash flow.

Here are some resources to help you separate these two and improve them.

While talking about financial metrics is extremely important, it can also be really boring. To help you have a little fun while learning the difference between pharmacy cash flow and profit, I asked ChatGPT to create a poem to explain the differences. If you aren’t aware of ChatGPT, it is an open AI platform that has taken the world by storm. It has grown faster than any other software on the planet. It is crazy fun!

Here’s the poem on the differences between cash flow and profit.

Cash flow and profit, are two sides of the coin

For pharmacy owners, a crucial point to join

Cash flow is the cash that comes and goes

Profit is the money left after all the woes

Cash flow, the lifeblood of the store

It keeps the doors open, forevermore

It pays for inventory, salaries, and rent

And keeps the lights on; it’s what we represent

But profit, the true measure of success

It’s what keeps the pharmacy in the black, no less

It’s the reward for hard work and dedication

It’s the fruit of the labor, a sweet sensation

A steady cash flow, ensures bills are paid

But profit, determines if the business stays

If it’s not enough, the doors must close

And that’s a fate, no one wants to know

So as a pharmacy owner, keep a watchful eye

On cash flow and profit, as both you will rely

For attention, importance, and control

But balance them well, and your business will roll

To success and prosperity, for years to come

Cash flow and profit, are a delicate sum.

It’s a game of numbers, a delicate dance

But with patience and strategy, it won’t be left to chance

I think the AI did a pretty good job with that poem!

If you want the most effective strategies for building your cash in 2023 and beyond, consider attending the Pharmacy Profit Summit on February 17 & 18 in Orlando, Florida. Reach out to DiversifyRx at any time at

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    About DiversifyRx

    DiversifyRx is dedicated to helping pharmacy owners kick ass and create profitable, thriving pharmacies. We strongly believe the key to success is diversifying your revenue streams and maximizing each opportunity that is right for you. DiversifyRx was created by a pharmacy owner for pharmacy owners. We offer tons of free information and our Pharmacy Badass University membership. This site contains affiliate links to products or services. We may receive a commission for purchases made through these links.

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