Today's Veterinary Business

APR 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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51 April/May 2018 • TODAYSVETERINARYBUSINESS.COM added to your inventory. If the new item can replace your current one, there is no reason to carry both. Perform a review based on best medical practices and carry only the products that support that philosophy. Other products can be made available through your online pharmacy. You can still provide the products your clients may demand and not carry them on your shelves. This applies to diets as well. Once the cleanup and con- solidation are complete, the next step is to physically count what you have on hand. Update your software with the correct inventory totals as they will be your starting points going forward. All items received must now be entered into the practice management software. As items are dispensed, sold or used in house, they will be tracked within the software. You will now have a reliable accounting of product movement. Getting Technical columnist Sandy Walsh is a practice management con- sultant, speaker, writer and instructor for Patterson Veterinary University. Accurate reports are essential in inventory management. It is truly a garbage in, garbage out scenario from this point on. What Should You Charge? Factoring in all costs when pricing your inventory is important. You need to consider both the soft and hard costs. Personnel time, storage and other ancillary expenses must be taken into account. Appropriate markups will address these costs. Here are benchmarks that will help you determine an appropriate pricing strategy: National Average Markups Meds dispensed 150% Meds administered 150% Flea/heartworm 100% Chronic conditions 100% OTC items 120% Oncology 150% Rx diets 45% Non-Rx diets 38% Consider other costs as well. Dispensing fees are generally add- ed to anything transferred from its original container and counted, measured or reconstituted. This fee covers the nurse's time, vial, label and printer costs, pharmacy fees and licenses. The national average is $7 to $9. A labeling fee should be added to any prescription item dispensed in the original package. This fee would be appropriate for products such as prescription shampoos, heartworm and flea control products, and certain NSAIDs. The typical fee is 25 to 30 percent of your dispensing fee. Your safety net would be the mini- mum prescription charge, which is the lowest fee for which a prescrip- tion will be sold. The average is $12 to $13. Money Talks A budget is important when es- tablishing inventory management goals. To get started, compare your historical inventory expenses against the benchmarks available to you. Project your income and your expenses. Keep in mind that many expense problems are the result of income problems. Correct- ing income issues should be your focus in order to bring a new level of financial health to the practice. Look at your inventory expense as a percentage of income or revenue. Attention to turnover rates, lead time and reorder points will help control overstock while insur- ing that items are available when needed. The ideal turnover rate for most inventory items is 12 times a year, or once a month. With good inventory management processes, you should be able to order week- ly the items most used. Ordering more frequently is not cost effective as it results in increased staff time. Consider a large monthly order for the "must haves" that you are cer- tain to use within the month. With good inventory management, you will sell or use the items before you have to pay for them. The potential for shrinkage is an issue when inventory is stocked in-house. Inventory protection is important. Factors that contribute to shrinkage include items that become damaged or outdated or grow legs. Store your items ap- propriately and closely monitor expiration dates. Establish a first-in, first-out inventory rotation policy. Theft is a common shrink- age factor and is something that happens at most practices. Security measures will minimize this scenar- io. Limit access and lock up your expensive inventory items, such as heartworm and flea products. Proper inventory control systems are essential for every practice in order to manage your income and expenses. They will bring positive financial results to your practice. Inventory protection is important. Factors that contribute to shrinkage include items that become damaged or outdated or grow legs. Store your items appropriately and closely monitor expiration dates. Establish a first-in, first-out inventory rotation policy.

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