Most veterinarians will work with an attorney, a banker and a certified public accountant (CPA) at some point in their professional careers. These people are often key business resources for a successful practice. But are you getting the most out of these resources?
Do you know the right questions to ask your current service providers to ensure you are getting all of the service you deserve? If you don’t have a relationship with one of these professionals, how do you go about finding the right one to help your practice be healthy, profitable and protected?
Veterinarians promote preventive medicine for their patients with the idea that it’s better, and in the long run almost always less expensive, to keep an animal healthy than it is to treat a sick one. The relationship between a veterinarian and his or her lawyer should be similarly proactive. Legal problems are easier to prevent than to solve, and the advice of an attorney before legal complications arise can be invaluable.
Shopping for an attorney who has experience working with equine practitioners should be straightforward in areas with a concentration of equine clinics. Recommendations from colleagues are a good starting point, with the caveat that a bad comment against a particular attorney might be an overreaction to a lawsuit gone wrong or some other unpleasant experience with an otherwise good lawyer.
Finding a good attorney in locales without an abundance of equine veterinarians is more problematic. Many state and local bar associations offer lawyer referral services that match potential clients with attorneys, and most referral services require evidence of some expertise in areas of law that are advertised.
Initial consultations often are free, or for a reduced rate, and are a good way for a veterinarian to conduct a preliminary interview with a lawyer.
For veterinarians facing a malpractice lawsuit or other litigation, the professional liability insurance carrier may provide counsel as part of the coverage. In that unfortunate situation, the choice of an attorney is out of the veterinarian’s hands. The specific requirements of the policy, including a notice requirement for potential claims, should be discussed with the agent or carrier prior to a claim.
It’s important to keep in mind that many of the jobs an attorney will perform for a practitioner or clinic—such as business formation, drafting contracts, negotiating employment agreements, advising about disgruntled clients and estate planning—are not “veterinarian-specific.” It might be necessary to educate your lawyer about how your practice functions, but a lack of experience in the veterinary field should not always be a deal breaker when looking for an attorney.
Some basic questions to ask during the initial consultation include:
How are your (the attorney’s) services billed and what are the fees?
Hourly billing is most common, but some attorneys will offer flat-fee billing in which the client knows at the start of the representation how much drafting a contract (or some other service) will cost. A potential problem with hourly billing, especially if an attorney lacks experience representing veterinarians, is that the client may wind up paying for the attorney’s time spent educating himself about the issues of the representation.
Is a retainer required? If so, how much?
Many attorneys require clients to pay a retainer prior to the start of representation. The money is placed in an escrow account, and fees for services and expenses are withdrawn as the work is performed. Retainers help protect the attorney against a client who won’t, or can’t, pay the bills, but the amount should be reasonable.
Which services will be billed?
Attorneys typically charge for telephone calls (with a minimum charge, no matter how short the call is), drafting letters, office consultations, research, court appearances, depositions and related legal services, along with postage, copies and other expenses. Knowing what to expect when the bills arrive helps eliminate surprises. Calling your attorney just to chat might prove expensive.
What are the options for communication with you (the attorney)? Will you be available outside normal business hours?
Telephone calls and letters are stanard, but email is becoming more common. If the veterinarian wants to use email, an attorney may require an acknowledgment that email communications may present confidentiality issues.
Do you (the attorney) have experience with other veterinarians and related businesses as clients, and are they possible conflicts of interest?
An attorney who represents most of the horse owners in the community might not be able to represent an equine veterinarian in a billing dispute, for example.
Most attorney-client relationships work out as expected, but some do not, and it can be difficult to know when to look for new counsel. One of the most common reasons for client complaints to state bar associations is a lack of communication. If your attorney fails to return telephone calls or emails in a timely manner, or doesn’t keep you informed about the progress of work being done, it might be a sign to start looking for a new lawyer.
We went to Michael Smith, assistant vice president of Financial Services for Farm Credit Mid-America in Lexington, Kentucky, for tips on the banking side of business. Farm Credit is a national cooperative financial group that specializes in working with agricultural customers. There are different Farm Credit groups servicing various parts of the United States.
The Farm Credit System is a nationwide network of borrower-owned lending institutions and specialized service organizations. According to its website (www.farmcreditnetwork.com), Farm Credit provides more than $191 billion in loans, leases and related services to farmers, ranchers, rural homeowners, aquatic producers, timber harvesters, agribusinesses, and agricultural and rural utility cooperatives.
In discussing which qualities a veterinarian should look for in a banking partner, Smith said it depends on what he or she wants. If the veterinarian is just looking for a depository institution to handle his or her deposits and checking, then Farm Credit isn’t for that person. They don’t handle those duties.
Smith said that if an equine veterinarian is looking for a financial partner that understands his/her needs and business fluctuations of his customers (horse and farm owners), then a place like Farm Credit would be a great fit.
“Having experience in agriculture and the horse industry will make understanding the veterinarian’s business easier,” said Smith. “It also depends on the vet’s area of expertise. If his job is somewhat seasonal—if he’s a reproductive vet and that’s his major source of income—then you want to align payments with his income stream.”
That’s just one example of a banker needing to understand the industry of his clients and their customers. “And,” continued Smith, “if the banker says he understands the equine industry, what portion of the equine industry does he understand? Saddlebreds, Thoroughbreds, Quarter Horses … they all have different ways and those industries operate differently. If you are trying to compare a Saddlebred operation to a Thoroughbred operation, they are not the same.”
Smith said that no matter which financial institution you decide to use, you want to make sure it is FDIC insured. The FDIC (Federal Deposit Insurance Corporation) insures each depositor to at least $250,000 per insured bank.
Here are some questions that Smith suggested asking your financial institution representative:
Are we going to be partners or am I just going to be a customer?
“With veterinarians, you have to be a partner and understand their business,” stressed Smith. “If there is a downturn in industry and you have problems paying your bills, that banker needs to understand your industry.
“When the industry goes bad and you (the vet) aren’t getting paid, it’s important,” he continued. “Your banker needs to know how to help you file a lien or find other ways to get paid at the end of the day.
“You need to have a partnership with your banker rather than just a customer relationship. There are things we do in the banking world every day to get money paid that we put to use and assist that vet in collecting that money.”
What experience do you have in this industry?
Smith said you should ask about a financial institution’s history with agriculture.
“The reason I say that is when the market is rolling (the economy is good), then everyone (financial institutions) wants to jump in and play,” said Smith. “We just lived through an institution leaving the horse industry, and not only did we have people looking for a lender for their real estate, they couldn’t find one. Lots of banks didn’t play along. Their line was: ‘Pay us or we’ll start selling stuff until you pay us.’ So know that the financial institution you are dealing with is a long-term player rather than (just lending) when the industry is hot.”
How do you structure loans?
“Make sure the financial institution is structuring your loans correctly and giving good advice,” said Smith. “One of the problems that we see is that vets want to buy a truck and equipment and so forth, so they say they want to get a line of credit. That’s not the best way to structure the debt. You need a banker who knows about those purchases and how to structure a debt. How long does the truck last you? Vets put on a lot of miles on a vehicle, so if it’s going to last three years and you have a five-year loan, it puts you behind the eight ball before you even start.”
Smith said a line of credit isn’t a bad thing. “But there needs to be an end to it,” he explained. “If you need $100,000 of equipment, we need to know the needs and the life of that equipment. I might send you out there with line of credit to buy, but once you buy, come back and let’s set this loan up based on terms that work for that equipment or purchase.”
Often a veterinarian won’t know the exact cost of the equipment, so a line of credit works well in that situation. The vet might shop with three or four different companies before deciding.
“But that line of credit needs to be managed properly,” stated Smith. “You don’t want capital assets to not be paid down and back ready for use again.”
Smith said equine veterinarians probably need a line of credit, but they don’t need a huge line of credit. He said at the end of the day the vet still has payroll and bills to pay. “So you need to have funds available to keep your bills paid up and your business moving while you are waiting on receivables to be paid,” said Smith. “But you also need a stopping point so you don’t get yourself in such a hole that you can’t get out.”
Do you (the banker) offer retirement and financial counseling?
“Your banker might not be the best guy to take you down that path,” noted Smith. “In some cases you need to find an expert that is a financial planner. Your banker usually isn’t that guy.”
Smith added that some banks, such as Chase, have personal financial planning and services, such as stocks and retirement. “Chase has done a good job with it,” said Smith. “And they are very good with their customers and recommending that places like Farm Credit might be a better place for a farm loan.”
Farm Credit doesn’t offer financial counseling. “The only counseling you will get is from your loan officer,” said Smith. “You need to have faith in the person sitting across the desk from you. We do our best to be as knowledgeable about the industry as possible.”
How tough is it to get a loan?
“This is a tough question to answer,” admitted Smith. “There are many variances in there. A new vet who just got out of school will have a hard time getting a loan with us because of [his or her] negative net worth position because of school loans. That’s the biggest problem; not just vets, but doctors and dentists, too. They spend a lot of time in school and have a huge (student loan) debt, and they have no asset other than themselves. And that’s not a tangible asset as far as the lender is concerned. There’s nothing to hang your hat on as far as collateral.
“For established vets, it is a much easier situation (to get a loan) assuming that they are not leveraged to the hilt,” said Smith. “It’s not a huge deal.”
Smith said in the past, new veterinary graduates looking for loans to go into business usually needed a co-signer for a loan.
“Banks will ask what you are doing; are you going out on your own or are you signing up with Hagyard’s or Rood and Riddle (a large clinic)? Those two big vet clinics will have ties to local banks and they’re going to get those deposits, so those banks might be better choices.”
When is it time to change banks?
When asked about signs that is it time to change financial institutions, Smith said it’s pretty simple: “When you don’t feel like you are getting the services you need or answers you need, then that’s the point to switch. You also have to do a lot of self-reflection: Are you not getting the answers you want because there’s a problem you haven’t solved, or because they are not willing to work with you?
“At some point, it becomes your responsibility for the (financial) problems,” he added. “If you have a good banker, then they have spelled that out and outlined what you need to do to make that situation better.”
Smith said one veterinary client wanted to go out on his own after working at a clinic, but his earnings weren’t as good as a solo practitioner. “There are growing pains with having your own business, and until you start earning money, then there’s not much we can do as far as lending,” he noted.
How proactive should a financial institution partner be? “I like to think we are very proactive,” Smith said. “Discuss decisions you have made and talk about how and when and why things will work with your banker. We talk vets through the cash flows of the business, and at the end of the day we both understand.
“I don’t like to chase money down,” he added. “So I’m going to question you pretty hard to understand how your business will work. It will be good for you to have to walk through all that, and good for me as a banker.”
Smith said the most important thing everyone needs to understand is that if you want your banker to be your partner, then it’s just like marriage: “You have to be honest with yourself and your banker. If you want him to help you manage your needs, he needs to understand everything that is going on in your operation. If you aren’t honest, then we can’t help.”
Smith said that lack of honesty is the biggest problem with businesses and banks. “We don’t get the full story, and that makes it so much harder to do a good job.”
Certified Public Accountant
To get information about how a certified public accountant (CPA) can play a key role in your veterinary practice, we turned to Dean Dorton Allen Ford’s Equine Industry Team Leader Jen Shah. She is based in the accounting firm’s Lexington, Kentucky, office, and she handles many equine clients.
Shah began by saying, “When horses are a passion and a way of life, it’s sometimes easy to forget that they’re still a business. At Dean Dorton Allen Ford, we share your passion, and we understand the business of the horse—not just its accounting and tax rules. We help you take better care of your horse business, so you have more time to take care of your horses.”
Shah said the firm has been providing accounting, tax and business consulting services to the equine industry since 1979. She noted that even though the firm is based in central Kentucky, “Clients from other parts of the country, and even outside of the United States, value our special knowledge of the equine industry. Each year, we publish the Thoroughbred Business Year in Review, an analysis of the industry that our clients see as a valuable resource.”
Why does an equine veterinarian need a CPA?
“Whether you are a sole practitioner or a multi-member veterinarian clinic or hospital, CPAs can provide a wide range of services that can be customized to fit the needs of your business,” said Shah. “From setting up and administrating accounting systems, maintaining payroll, preparing tax returns and consulting on various tax, business and financial matters, CPAs are a necessary resource that all businesses should utilize.”
We know that many equine veterinarians work in rural areas, so how can one find a CPA in those situations?
“Finding a qualified and trusted CPA in a rural area is very similar to finding the best equine veterinarian; the best way is usually by word of mouth,” noted Shah. “Ask your lawyer, your banker, insurance agent and colleagues in your field of business for recommendations. Also, use your contacts in professional organizations, such as the American Association of Equine Practitioners.”
Equine practice is different from many other horse industry businesses. Because of that, Shah said an equine veterinarian should look for a CPA who can provide a comprehensive set of services, “including accounting, tax and business financial management services. These services can be tailored to meet the equine veterinarian’s needs.”
Shah noted that large animal veterinary practices do have unique accounting and tax needs, so a CPA with experience serving veterinary practices is recommended.
“Furthermore, a CPA should be a trusted advisor,” she stated. “An equine veterinarian should choose a CPA with whom they are comfortable consulting and discussing complex business and financial matters.”
Finding a CPA who has experience in the equine industry, and specifically with equine veterinary practice, is important in many ways, noted Shah. “From applying the appropriate tax and financial accounting rules to drug inventories, helping develop or improve invoicing systems for client-site services, to understanding special medical and equine terminology, a CPA knowledgeable of large animal veterinarian practices will be better equipped to help equine veterinarians to identify potential issues and implement new business and financial strategies.”
What are five questions an equine veterinarian should ask a CPA before deciding to use that person’s or firm’s services?
- What are your credentials?
- Do you have experience working with other veterinary practices?
- What services do you offer?
- Can you help me with (insert specific need)?
- How are your fees calculated?
What problems can a CPA help solve for the equine veterinarian?
“From setting up new accounting systems to succession planning, CPAs can offer a variety of business, accounting, tax and consulting services, which can be tailored to meet the needs of any business,” stated Shah. “CPAs will also work very closely with the equine veterinarian’s other trusted advisors, such as their banker, insurance agent, investment advisor/certified financial planner and lawyer.”
Shah said Dean Dorton Allen Ford is a full-service business advisor, tax, assurance and consulting firm. “Our role is to provide business advisory and accounting services that help our client succeed. We often work with our client’s other trusted advisors, which may include a certified financial planner, to meet the needs of the client.”
When should an equine veterinarian consider switching CPAs?
Shah said that making that change is a personal decision: “Sometimes the needs of the practice outgrow the capabilities of the provider, and sometimes there are other reasons, such as level of service.”
How proactive is your accounting firm in assisting clients in making good financial business decisions?
“Dean Dorton Allen Ford brings a fresh perspective and a business mentality to every client relationship,” she said. “While we deliver the highest level of technical quality and accounting skills, we also learn your business, observe your operations, compare them to best practices, and actively look for ways to help you be more successful. We listen. We strive to develop a deep understanding of your operation and your needs.
We are interested in driving value and supporting a client’s long-term success.”
Your attorney, banker and CPA are important partners in the success of your business. Make sure that you have business partners who understand the veterinary industry, and who can advise you properly.
About Dean Dorton Allen Ford
Dean Dorton Allen Ford is a leading Kentucky-based accounting firm that perfectly blends innovative business thinking, attentive personal service and an unyielding commitment to accuracy, quality and timeliness, according to the firm’s Equine Industry Team Leader Jen Shah. “Our firm culture focuses on developing leaders who are the most wellequipped to help our clients succeed,” Shah said. “This culture includes acting as innovative business advisors and problem solvers, bringing a fresh perspective to your organization.” Shah said since Dean Dorton Allen Ford is a leading regional firm, “We have the breadth of expertise and resources to provide an attractive alternative for large and middle-market About Dean Dorton Allen Ford organizations caught between the high cost of big CPA firms and the limitations of smaller firms.” You can contact Dean Dorton Allen Ford in its Lexington, Kentucky, office at 859-255-2341, or visit its website at www.ddafcpa.com. Equine Team Leaders are Jen Shah, Melissa Hicks, Leigh McKee and Doug Dean.
About Farm Credit Mid-America
Farm Credit Mid-America is a cooperative formed through Federal Land Bank Association and Production Credit Association in the 1980s. The Farm Credit system has been around since the 1920s, noted Michael Smith, assistant vice president of Financial Services at Farm Credit Mid-America in Lexington, Kentucky. Farm Credit Mid-America handles business in Kentucky, Indiana, Ohio and Tennessee. It is a $20+ billion organization. In other parts of the country, look for Farm Credit with a little different suffix. All have different sizes and strengths. All are operated under the Farm Credit charter and regulated by the Federal government. All are cooperatives, but they are different in the small ways of doing business. Because Farm Credit financial institutions are cooperatives, you are required to purchase stock in that organization in order to take out a loan (about 2% of loan amount is normal). Farm Credit Mid-America has a $1,000 maximum, which is part of the closing costs. That fee is refundable at the end of the loan when your stock purchase is refunded. “We can do any type of loans, from an operating line of credit to manage daily expenses, to building a clinic, to purchasing equipment,” said Smith. “We can do leases for equipment that will be different from the terms offered by the companies from whom you purchase that equipment. We might give [clients] a different set of options that the vendor might not offer,” he added.