May 12, 2017 by Edward L. Blach, DVM, MS, MBA
Inventory and related services are the second highest expense category in most practices. Whether you call it Cost of Goods Sold, or Cost of Professional Services (COPS), this group of expenses represents between 15% and 30% of revenue in most practices. The healthiest, most profitable practices maintain COPS at 20% of revenue or less in most cases.
To help practices manage their high impact practice metrics, it is recommended that you use Trailing 12 charts (see the data dashboard), because they provide valuable insights regarding not only your current status, but trends in your practice from past months as well. Your trends, whether COPS is rising or declining, and being able to see the impact of your management decisions, is very valuable.
To optimize your inventory costs, measure your practice performance, use Trailing 12 charts to remove seasonality and to reveal true trends, and then make decisions and implement the changes needed. Then, in future months, repeat this process to see the impact of your recent decisions. If you see positive changes in trends, then continue your efforts to improve. If not, then make additional decisions to find the source of poor performance, and make those changes.
Remember, what gets measured, gets done. Use Trailing 12 charts to improve the profitability of your practice.