Veterinary inventory waste: 6 ways to combat this pesky revenue killer

After performing end-of-year inventory counts and adjustments, it can be eye-opening and gut-wrenching performing adjustment after adjustment to your inventory. As a brand-new inventory manager, I did a full inventory count for a practice that hadn’t counted anything in nine years. I remember adjusting item after item by thousands, if not tens of thousands of units, thinking “how does this happen? What do all these adjustments mean?” The difference between what’s on the shelf and what is in the practice management system (also called shrinkage) can signal many things, but it’s often a sign of waste or missed charges.

Inventory waste, expiration, and adjustments can have a significant impact on your practice. Every time an adjustment needs to be made, with the exception of an error in your practice management system, typically that means there was a loss of revenue that occurred somewhere — and it can add up FAST. 

Let’s say that during an annual inventory count, the following adjustments need to be made for one category:

With just these five products, the value of adjustments is over $7,250. Now, if there were similar adjustments in 12 different categories, that totals over $87,096 in just one year! Keep in mind that is just product COST and not product revenue that’s missed. Imagine what equipment or team raises you could invest in with an extra $87,000!

6 ways to combat veterinary inventory waste

Differences between what’s on the shelf and what’s in your practice management system can happen for a number of reasons. It could be from missed charges, expired products, mishandled employee accounts, broken or wasted products, products not invoiced correctly, and maybe even when the clinic cat tears into a prescription diet food bag. With all of the opportunities for potential loss in revenue, what can we do about it?

1: Count more frequently than once a year

One of the challenges of only counting once per year is that if you notice a huge difference between what’s on the shelf and what’s in your software, it becomes increasingly more difficult to find the source and investigate what might have happened. 

Counting small amounts of your inventory throughout the year, called cycle counting, is an excellent way to counteract this. When counting smaller amounts throughout the year, it’s much easier to make a smaller course correction than a major overhaul. 

“It’s much easier to find the source of smaller differences each month than thousands of units once a year.”

Not only that, but it makes the year-end inventory count much more manageable!

For cycle counting, I recommend counting high-turnover or fast-moving items once per month. For medium-turn items, count these items once per quarter. For things that are slow-moving or have low-value, count these twice per year.

2: Conduct chart audits

Conducting routine and regular chart audits can not only help identify any missed charges but can also point out and bring to the surface any patterns and trends. For example, it might bring to light that a standard operating procedure needs to be created for multiple-day hospitalizations. Or, maybe that there need to be better charging guidelines for dental blocks and sutures used during dental extractions.

When conducting chart audits, I like to check to make sure the correct exam was charged and then I cross-reference the medical record, any treatment sheets, or travel sheets to identify missed charges. These can be completed once or twice monthly.

3: Double-check charges

In addition to more formal chart audits, it can also be helpful to double-check charges and invoices before the patient leaves and the client checks out. Could at least two people double-check all patient invoices before check out? Could a member of the management team verify charges on all major, non-routine surgeries and large hospitalization cases? 

There is nothing worse than having to call a client for payment after forgetting to charge for radiographs or an expensive blood panel.

4: Utilize software automation 

There are a number of software tools and dispensing cabinets that make the charging process automated, especially with treatment sheets and hospitalized patients. One of the most common areas of missed charges that I find is with medications or injections administered during hospitalization. 

Using a software system to help capture these charges can help reduce or eliminate the forgotten charges. Various veterinary-specific software are becoming more advanced and beneficial for these exact purposes.

5: Set up your software with groups, packages, etc.

Your practice management system (PIMS) can be an incredibly helpful tool when it comes to accounting for inventory. Most PIMS systems can be set up with packages or bundles to group codes together so when added to the medical history, the inventory items that were used or dispensed can be easily added. 

One of my favorite packages to use is for pre-medication administration or induction. All of the options for premeds and/or induction agents can be added to this group and then a team member can easily enter the quantity administered. I like to think of creative groups or bundles that make it easier and more efficient for team members to properly document what was used, thus keeping your on-hand quantities more accurate!

6: Monitor expiration dates

Another major source of waste in many veterinary practices inventory is expired products. I find it helpful to regularly monitor expiration dates and pay much closer attention to those products that are expiring within three months. If something expires (and isn’t an emergency medication or critical to the practice), ask, does this truly need to be carried within the practice? Could it be outsourced to your online pharmacy? 

If products are regularly expiring, review your ordering procedures and on-hand amounts to see if overordering is occurring.

Reduce veterinary inventory waste to increase revenue

The goal of utilizing these tips is to reduce the amount that you are needing to adjust in your inventory. Typically, an adjustment signals that there was some type of loss of revenue so it’s important to keep track of adjustments and monitor for trends or sudden increases in the number of adjustments made.

Let us know which of the six tips you implement — hopefully, all of them!