Procure to Pay (P2P)
A dental clinic needs a lot of supplies to function but good inventory management is often neglected for the illusion of speed. All team members have access to the stockroom so they can take what is needed, when it is needed. Supplies used are often recorded on a paper system, prone to errors or forgotten entries.
This is a mistake, it leads to shortages of critical supplies, costly items going out of shelf life, stock losses; poor inventory management can also lead to the temptation of theft. Lack of inventory management may also lead to a failure to charge for all items used during a procedure.
Inventory management is critical to the smooth running of your practice. But I will go further, your inventory management processes must be extended to cover the whole process from procurement to payment. Are your systems robust enough to catch if a supplier invoices you twice for the same delivery? It happens.
It all starts with a humble sequential Purchase Order number, this can be as simple as a notebook with a list of numbers where you write the name of the supplier against the number to sophisticated inventory management systems, but control starts with a PO number. The PO number must be quoted on every document in the P2P process, during every contact with the supplier, even if only verbal, by doing this you will reduce the potential for error. At a minimum your tracking systems should record: the date the order was placed, the price agreed, the date the goods were received, if the goods were received in full, the date the invoice was received. You can do more but this will give you a start at managing inventory.
Take a look at your accounting system, most systems, such as Xero, have inventory management tools.
Segregation of duties is critical for good inventory management and to minimize the risk of fraud. Ideally one employee will generate a purchase requisition when the re-order point for an item is reached. This is reviewed and approved by another member of the team before the order is placed. In a perfect world, yet another staff member will check the goods when they arrive to ensure they are correct and right quantity has been received. In reality, in a busy clinic, this may not always be possible, so it makes sense to classify items by value. Low value fast moving consumables it maybe acceptable to have one person handle all three functions. For such items it is not necessary to book the goods into and out of inventory. However it is prudent to regularly track such supplies using a metric such as cost per patient. If this is increasing it is worth looking into.
I mentioned re-order point above, for high value or items with a limited shelf life you should set a reorder point based on historical usage and your suppliers lead time. The reorder point should include a level of safety stock in case of delays. Dental supply companies often offer deals for larger quantities, these can be very tempting. But check your historical usage before accepting such an offer. Goods that go out of shelf life not only are a loss of inventory, they may incur additional disposal costs.
How Inventory Management and P2P Work Together
To take full advantage the inventory management processes you have installed ensure your stockroom is well organized. In a hurry people will grab the first item to hand, make sure that the layout of the stockroom makes it natural for your staff to use the oldest inventory first. This is referred to as First In First Out or FIFO. This will minimize the risk that items will exceed their shelf life and have to be disposed of.
A well managed inventory and P2P process will deliver higher earnings for your clinic by ensuring inventory is optimized to ensure everything you need is available when you need it, while avoiding inventory exceeding its shelf life. Add P2P and you can be sure you will never pay twice for the same goods and catch any invoicing errors from your suppliers.
The Dentist's CFO 