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Reconciling and Managing Inventory at Your Veterinary Hospital

February 28, 2022

Veterinary Services Group

For every dollar that a veterinary hospital generates, roughly 21 to 28 cents walks right back out the door in the form of direct costs (cost of goods sold). Having accurate inventory counts helps ensure every spare cent stays in the hospital. But a physical count alone won’t ensure the most accurate inventory value.

Counting inventory at your hospital can seem like a chore. But using technology can help make the process faster and more accurate. In fact, various counting apps are free to use on smartphones and can reduce the amount of time you spend doing the physical count.

For most veterinary hospitals, it’s a best practice to count inventory items annually, but high-volume items such as heartworm and flea products should be counted each month, along with other controlled substances. This not only helps track what exactly is in the hospital at a given time; it has the added benefit of helping to avoid fraud or catch it early. It can also help prevent significant year-end adjustments that affect the hospital’s profit-and-loss statement.

After doing the yearly inventory count or the monthly rolling count, the final numbers should be compared to what the hospital’s practice management system shows as available inventory. If actual inventory is different from the information logged in the practice management system, it could affect the cost of goods sold, which also impacts margins by category. It’s important to be proactive in understanding variances so you can identify and address internal control issues that may result in a future profit if corrected.

If you need help evaluating and improving your hospital’s profitability, please contact KSM’s veterinary consulting team.

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