Tess: Do you know what your problem is?
Danny: I only have one?
-Oceans 11 (2001)
Oliver: Well, here’s another nice mess you’ve gotten me into! Sons of the Desert (1933)
Wendell: It’s a mess, ain’t it, sheriff?
Ed Tom Bell: If it ain’t, it’ll do ‘till the mess gets here.
- No Country for Old Men (2007)
Inventory control is like the weather, everybody talks about it, but nobody does anything about it. Your office may be, from what I estimate, one of about 80-90% of offices that have no real inventory control system. The majority of the rest have an “ordering system”, which tells them when to order and then helps them place the order. The ones that tell them when are usually tie-tag systems. Those that help them place the order allow them to go into the web portal of the vendor and place orders using barcodes. I have run into a very small number of offices that track inventory on a spreadsheet – a very labor-intensive way of doing things.
Inventory is an asset of your practice. There are only a handful of times that a dental practice will take it seriously as an asset (Valuing A Medical or Dental Practice, 2015):
- When selling the practice.
- In the case of divorce.
- When bringing in or separating from a partner.
- In case of death.
- When there is catastrophic damage: flood, fire, locusts, whatever.
- Borrowing against the assets.
Business people in every industry and company from GM to the guy driving the ice cream truck keep a balance sheet or financial statement. Really, the only way you can see your practice’s financial performance is to know, not just gross income then subtracting the bills, but to account for the assets of the practice (Franzone, 2014).
First of all, let me confess that accounting was my weakest subject when I was studying for my MBA. I strongly recommend that you have a reputable accountant to help you with this portion of your practice. If you’re using a bookkeeper, it’s still a necessity to have a good accountant to verify and validate the bookkeeper’s work.
On the balance sheet, you’ll account for Assets and Liabilities. This is not the place to go into the nuts and bolts of it, but an example of an asset would be your inventory. A liability would be your supply bill.
Legally, your dental supply inventory and instruments are what are used in the ordinary course of your practice’s business and operations. You should have a sufficient, but not an excessive, amount of inventory in stock to be able to meet your practice’s normal business and operational needs. (Prescott, 2001, p. 32)
A successful business will keep a running total of their inventory. The most accurate way to do this is to shut-down once a month for a day and get the entire staff to count every item in the office. I don’t have to tell you that this is not desirable nor practical.
The second most accurate, and the least labor intense is to track inventory levels in a database. As inventory is removed or added, it is reflected in the “virtual” inventory. A running count is kept by the system. Then the data is verified by periodically checking the actual inventory against the database. For example, once a quarter choose 10 items at random, count them, and see how well they match the virtual inventory. If there are a few small errors, then there are no real worries (unless those particular errors show up consistently). But, if you see errors throughout the system you may have a problem. It may be relatively benign, such as employees not complying with taking inventory in and out from the virtual system. Unfortunately, it could also be a sign that your inventory is growing legs and walking over to eBay.
Misappropriation of supplies is becoming more common than you may think. This is primarily due to the fact that most offices have no idea what they have on the shelves. Think about your practice for a minute. Would you miss the occasional ream of printer paper that an employee might decide they’ll “borrow” until they can get over to Staples? What about a package of burs here, a vial of endo posts there? Is that handpiece that you put away in the lab because you’re not using it going to be there when you decide to donate it to your local clinic?
So, here’s what you’ll require in an inventory control system:
- All orders are placed and received through the system.
- All inventory is removed from the system when it is taken out of storage to be used in the operatories or lab.
- A minimum of inventory is kept in stock. I agree with one of the major vendors who recommend that the maximum of a month’s worth should be on your shelves at any one time.
- The minimum amount of inventory on your shelves should be just enough to protect you from backorders; perhaps 2 weeks’ worth.
- You should be able to get a snapshot of your inventory on-hand with a minimum of effort. (Quick – How many boxes of gloves do you have in stock right now? Will it be enough? Is it too much?) You ought to be able to find that data out without moving from your office chair.
- Compliance should take a minimum of effort on the part of your staff.
There is an inventory control system that can do for you all of this and more. You can find it at ghmouse.com.
In summary, inventory is an important asset of your dental practice. As such, it needs to be accounted for and controlled. There is one inventory control system on the market that will accomplish for you all of this, and more. It’s called “Grasshopper Mouse™”.
Franzone, K. (2014, August). Basic Financial Statement Analysis (It's not as scary as you think). Retrieved October 5, 2015, from dentaleconomics.com: http://www.dentaleconomics.com/content/dam/de/print-articles/Volume%20104/Issue%208/1408cei_Franzone_DE_rev.pdf
Prescott, W. P. (2001). Business, Legal, and Tax Planning for the Dental Practice (2 ed.). Penwell Books.
Valuing A Medical or Dental Practice. (2015, March 30). Retrieved October 5, 2015, from Peoples Bank: https://www.peoplesbank-wa.com/business-banking/medical-and-dental-professionals/valuing%20a%20medical%20or%20dental%20practice