Community pharmacy income is reimbursement (Drug Tariff prices) plus remuneration (fees and service payments) under the Community Pharmacy Contractual Framework. It is not shop takings, and a generalist accountant who treats it as retail income will misstate your profit, your working capital, and your tax position. The FP34 payment cycle means prescriptions submitted one month are paid roughly two months later, with an advance on account, and Drug Tariff and Category M clawback means your gross margin is set centrally and adjusted retrospectively. We reconcile the NHSBSA schedules to your ledger monthly, track margin variance against the Tariff, and model the working-capital gap the payment lag creates.
Prescriptions dispensed in month one are submitted at the end of that month and the balancing payment arrives roughly two months later. An advance on account partially bridges the gap, but the working-capital shortfall is real and must be modelled correctly, particularly for pharmacies with high item volumes or those planning a change in dispensing scale.
NHS reimbursement follows the Drug Tariff, and remuneration follows the CPCF fee schedule. Neither is the same as taking money across the counter. A pharmacy income statement that lumps NHS income with OTC retail, or that does not separately account for service income, is wrong at the source. This leads to incorrect tax computations, incorrect VAT returns, and a management view that does not reflect the business.
The Drug Tariff sets reimbursement prices, and Category M clawback adjusts those prices retrospectively based on the actual cost of drugs to dispensing contractors. This means your gross margin on NHS dispensing is not fixed when you dispense; it is adjusted later. Monthly margin variance analysis against the Tariff is the only way to catch under-recovery early rather than at year-end.
Income under Pharmacy First and similar advanced services is a growing and separately structured revenue line, with its own fee payments and thresholds. Lumping it with dispensing reimbursement obscures both the profitability of the service line and the correct income attribution for management and tax purposes.
We reconcile your NHSBSA payment schedules to your accounting ledger each month, post the advance-on-account and balancing-payment entries correctly, and flag any variances between the schedule and the payment received. If something does not reconcile, we find it in the month, not at year-end.
We track your gross margin on NHS dispensing against the Tariff each month, identify Category M and price-adjustment impacts, and produce a margin-variance report designed for a pharmacy operator, not just an accountant. This is the monthly job your books should be doing but almost certainly are not if you are with a generalist.
We model the cash-flow gap created by the FP34 lag using our FP34 cash-flow estimator, so you can plan working capital rather than discover a shortfall. We separately account for Pharmacy First and other service income, ensuring the income attribution is correct for both management reporting and tax. Use our cash-flow estimator to see the numbers before you speak to us.
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