The process of selling a pharmacy can be complex and typically requires a team effort involving owners, brokers, lawyers, accountants, bookkeepers, and other stakeholders. Proper planning and coordination can help ensure a smooth and timely settlement. Below are key tasks that should be completed in the lead-up to settlement:
1. Keep Management Reports Up to Date
It is essential to have accurate and up-to-date management reports to provide the owners and potential buyers with a clear understanding of the pharmacy’s financial position and historical performance. This includes ensuring that all transactions are properly categorised, all reconciliations are current, and no outstanding items remain unaccounted for. Clean, well-prepared reports build buyer confidence and support smoother due diligence.
2. Review Stock on Hand
Inventory often represents a significant portion of the total transaction value. To ensure accuracy, a physical stocktake should be conducted by an independent third party within a few days of settlement. A clear and verified stock report helps avoid disputes and minimises the need for settlement adjustments. Ensure expired or obsolete stock is removed or excluded from valuation.
3. Review Wages and Employee Entitlements
Most pharmacy sales involve the continued employment of existing staff. Buyers will want to understand current wage obligations and any outstanding entitlements. Vendors should ensure the following is prepared and accurate:
A full list of current employees, roles, and pay rates
Up-to-date wages, superannuation, and tax withholdings
Accurate employee leave balances (annual, sick, and long service leave)
Pro-rata employee entitlements are typically adjusted at settlement. Having this information ready ensures transparency and helps avoid post-sale disputes.
4. Review Debtors and Creditors
Understanding the business’s cash flow at the time of sale is critical. Buyers will want clarity on what is owed to the pharmacy and what the pharmacy owes to others. During this process:
Write off any confirmed bad debts
Identify and settle creditors that may need to release Personal Property Security Register (PPSR) documentation
Depending on the sale agreement, some vendors retain responsibility for debtors and creditors up to the settlement date. These arrangements should be clearly documented to prevent future misunderstandings or legal issues.
5. Review the Fixed Asset Register
Beyond inventory, pharmacies typically include business assets such as dispensary equipment, POS systems, computers, fridges, shelving, and more in the sale. It's important to review the fixed asset register and remove any assets that have been disposed of or are no longer in use. This ensures that the asset values reflected in the sale are current and accurate.
6. Review Prepayments
Pharmacies often prepay operational expenses such as subscriptions, licenses, insurance, and memberships. If the buyer is taking over these services, the value of any prepayments should be adjusted at settlement. If not, vendors should notify suppliers to cancel services effective from the settlement date to avoid unnecessary charges.
These are just a few of the key considerations when preparing for a pharmacy sale. Ensuring that financial records, staff obligations, and asset details are accurate and up to date plays a vital role in achieving a smooth settlement.