Flora Veterinary Clinic in Flora, Ill., has a floating pharmacy designed and installed that saves space and is easy to access, especially for inventory counts. Photo courtesy Patterson Veterinary Spring is the perfect time to complete some essential management tasks, such as handling your inventory. Many of us send an inventory count and valuation to our CPA at the end of the tax year and keep our fingers crossed the numbers are accurate—or at least close to what they should be. How do you ensure you are managing finances properly? Are your number counts even accurate? A lot has changed within practices over the past several years, and your inventory strategies also have to change. To manage inventory at peak levels, “We need better accounting controls, higher levels of efficiency, and stable profitability while keeping enough product on our shelves to provide high-quality medicine and client convenience, and there are concrete steps that can be taken to achieve these goals,” says Sandy Walsh, RVT, CVPM. Walsh breaks down the task of consolidating your inventory in three steps: Step 1) Evaluation The first step in evaluating the status of your current inventory is to examine what your practice information management system (PIMS) says—specifically, your computer reports. “Start by printing a complete list of your inventory items. Whether you do it from A-Z or 1-99,999, this will be your starting point.” Walsh says the main emphasis should be your pharmacy inventory instead of your white goods. “Although it’s important to manage all inventory items, we are going to focus mainly on your pharmacy, medications, OTC, and diets. Once you have the report in front of you, it’s time to do a comprehensive and complete review of what your computer system tells you and how it compares to what you actually have on the shelves,” Walsh says. “Go through the list line by line and item by item. It’s time to clean up the ugly, whether it is a result of inappropriate entries made recently by you or errors you inherited from previous inventory managers.” She notes there are several things you will be looking for as you evaluate these reports, including: Proper drug classification: antibiotic, NSAID, antiparasitic, etc. Proper drug form: tablet, capsule, etc. Proper dispensing quantities identified: Single dose, six-pack, or whole bottle Obsolete items: Discontinued products or those not in use in the hospital Duplicate items: Same item with different descriptions (listed by size and listed by color); this is a common issue with preventatives Look for typos Look for consolidation opportunities “Once this comprehensive review and evaluation is complete, make the corrections in your PIMS as soon as possible so you are working with a clean platform that accurately represents the products in your hospital,” Walsh says, adding, “Print the list again and do one more review of the list for anything you may have missed. This will be your starting point as you begin your inventory cleanup.” For inventory counts, break the hospital into zones, such as the treatment center,and assign to specific team members. Pictured: Alicia Gerald, DVM, of Ivor Veterinary Clinic, Ivor, Va. Photo courtesy Patterson Veterinary Step 2) Verification Once corrections have been made, complete a comprehensive inventory count. This can be time-consuming, and it’s best if the whole team participates. You want to complete it in the shortest time possible. Break the hospital into zones and assign specific team members to complete the counts quickly. Walsh says, “For maximum accuracy, perform your counts while inventory is not in motion. This means after hours if possible. Don’t forget to account for prescriptions and diets that are processed and waiting for client pickup. It’s inventory on hand until it’s charged out and picked up.” Identify products that are short-dated or expired. Label the short-dated items for immediate use and pull expired or damaged items off the shelf. Once the counts are complete, immediately update quantities in your PIMS. “The ultimate goal is to correct quantity on hand and move toward an accurate inventory system,” says Walsh. “Your reports should now match the quantity you actually have on hand, with a very small margin of error.” As new items are received, enter them into the PIMS immediately. Update the quantity and adjust the pricing as needed. Also, make pricing updates immediately as you become aware of them. In order for your reports to be accurate, the PIMS must decrement quantities as items are used and charged for. Establish a system to record in-house use and free doses to account for them. Your accounting of quantity on hand will have a higher level of accuracy if the PIMS is accounting for use, sales, and quantities received. “Your inventory reports will really mean something,” says Walsh. Small-sized packaging gives clients a start at prescription foods or products, which they can then buy through your online pharmacy. Photo courtesy Patterson Veterinary Step 3) Consolidation One of the most impactful actions you can take is to reduce the number of products you carry in the hospital. If you have an online pharmacy, there is no reason you should stock every NSAID, antibiotic, shampoo, antiparasitic, and prescription diet available. “If you don’t have your own online pharmacy, what are you waiting for?” Walsh asks. “Your clients are shopping online whether you like it or not and you are probably approving multiple prescription and refill requests every day! Why not direct them to your own pharmacy?” With an online pharmacy that is branded to your practice, you can carry less inventory in-house, have fewer stock-outs, increase product availability, and still generate revenue from those products. “It’s a win-win scenario,” says Walsh. Do you carry more than one product that does essentially the same thing? This is an opportunity to consolidate. This is especially impactful if you have multiple antiparasitic products. “These are the most expensive products we stock with the lowest markup.” Walsh says. “There is no reason to carry them all. Work with your veterinarians to determine which products you will carry in-house, and which will be moved to your online pharmacy. Opinions vary, so decisions should be made based on best medicine and what makes the most sense financially.” “The goal with inventory should be a healthy turnover rate. Turn it before you have to pay for it. Consolidation will help as you will be able to carry less inventory on the shelf,” Walsh adds. Establish protocols to address new or better products as they become available. If the new item can replace one you currently carry, shift the old item to your online pharmacy or replace it and add the new product to your in-house pharmacy. Prescription diet management is another consolidation opportunity that will reduce your quantity on hand as well. “Diets are expensive and take up a lot of room.” Walsh said. “You shouldn’t have to carry large quantities of every diet. Carry enough small bags or cans to get clients started and then direct them to the online store or move to a special-order program. Clients can choose auto-ship through your online pharmacy.” Inventory management is a tough job. If you take a good look at what you have and establish concrete protocols and procedures for better inventory control and accuracy, the job gets a little bit easier. Angela Moore has been with Patterson Veterinary for 15 years. She focuses on veterinary software, including Vetsource Prescription Management, and thrives on building strong partnerships, optimizing processes and driving team and product success.
