The Pharmaceutical Journal Vol 264 No 7102p951
June 24, 2000 Letters
From Mr R. N. Andrews
SIR,-With reference the article by Jane Blyth (PJ, May 20, p779) I can but agree with most of the comments made by John Jaquiss in his letter of response (PJ, June 3, p844). However, I make the following additional points in follow up to the further comments made by Ms Blyth.
Payment to creditors There is no indication that Ms Blyth has any understanding of the situation regarding clawback, whereby most of the discount given by the wholesaler is reclaimed by the government. To suggest that a pharmacist should forgo this discount in return for an extra few weeks' credit is somewhat naive - the Government will claw back regardless of whether the wholesaler discount has been taken or not. Hence, that is a very expensive form of raising extra credit.
Current schemes available Lloyds TSB is a valuable partner in the AAH/Statim loan scheme but it is not our sole partner. Our scheme is available through 12 lending institutions, including all the major UK banks. The customer has total flexibility when it comes to choosing which bank he or she will borrow from. The interest rates range from 0.75 per cent to 1.25 per cent over bank base rate.
Overdrafts The vast majority of pharmacists should not be paying more than 2.5 per cent over base (often much less) on an overdraft which is used purely for working capital purposes and which is in line with the size of the business.
The overdraft requirement can be most effectively minimised through effective stock control. Stock most certainly has a financial cost attached to it until it is sold. However, it is incorrect to state that a lower stockholding within the pharmacy is to the disadvantage of the wholesaler; in fact the contrary is true. We wish to encourage our customers to operate efficient and profitable businesses and with twice daily deliveries available to most pharmacies in the UK there is no need for a pharmacy to overstock.
Consequently most pharmacies should be able to operate comfortably with a stocking level of between 8 per cent and 11 per cent of their ex-VAT sales turnover. The higher the NHS element of total sales, the lower the stockholding requirement.
Money transmission On money transmission, all AAH customers are able to benefit from the special and exclusive deals in place with HSBC, the Royal Bank of Scotland, Fortis and Barclays. These deals could save the average pharmacy in the region of £500 per annum (equivalent to 0.25 per cent interest saving on an average loan of £200,000).
Independent pharmacy enjoys a unique position in the level of financial support available within the industry and an article on banking aimed at pharmacists cannot be complete without proper reference to the wholesalers' loan guarantee schemes. As Ms Blyth states, "serious disadvantage can be caused through a lack of understanding of the market place" and I urge any pharmacist who is contemplating pharmacy ownership to ensure that they fully investigate the options available to them.
R. N. Andrews
Director, Statim Finance Ltd, AAH Pharmaceuticals, Coventry, Warwickshire
Ms BLYTH replies: I am grateful to Mr Andrews for confirming the following:
Payment to creditors Clearly all pharmacists are aware of the clawback rules on discounts and would understand that deferring payment to creditors could have a cost to their business. However, my point was to illustrate that banks monitor capital, liquidity and profitability of a business and pharmacists should, therefore, apply their specialist knowledge of "industry" customs for optimum results, if the need arises.
Current account schemes By shopping around, pharmacists may to their surprise find that the schemes are not the same from each bank; indeed AAH's interest rates currently have a margin of 0.75 per cent to 1.25 per cent over base.
Overdrafts In relation to overdrafts there are two angles for consideration and Mr Andrews's point is one of those which is valid. However, as Mr Andrews himself indicates, smaller stock holdings are accommodated by twice daily deliveries from the wholesaler. That of course disadvantages the wholesaler in terms of its operating costs.
May I conclude that I welcome the confirmation by Unichem (PJ, June 3, p844) and AAH of the vital importance of fully investigating all the options available before taking financial decisions.
Citation: The Pharmaceutical Journal URI: 20001945