The rule of thumb for inventory costs is that they should be no more than 5-6% of collections and that office supplies costs shouldn’t exceed about 2%. Dental supplies are usually defined as those items priced at less than $500 per item (not per invoice). Any item with a value above $500 would be classified as equipment.
Always account for your supply costs separately from maintenance expenses, even if they’re provided by the same vendor; this is important because maintaining accurate financial records ensures that expenses are tracked properly. It also reduces the possibility of skewing your profit and loss statements.
Again, the rule of thumb is that any single month’s bill should not allocate more than 6% of the prior month’s collections to supplies and inventory. Implement a protocol whereby the staff person responsible for maintaining inventories and ordering supplies advises you when costs are approaching that threshold so the two of you can determine the source of the rising costs.
Whenever possible, streamline operations by having your supply representative set up an inventory control system with the staff person who manages this part of your practice. Train at least one other person as a backup.
Keep in mind that a strong control system ensures that supplies actually make it into your practice. Unfortunately, the supply management function is often one of the easiest targets for fraud and abuse since most dentists are too busy to fully monitor what supplies are being used, what supplies are being ordered and what items might be going out the door.
Opinions vary when it comes to using a single supplier for all of your inventory and supply needs versus other options, such as ordering from third-party suppliers. While you may need to invest some time researching the options in order to find out which purchasing tactic works best for your practice, it likely will be time well-spent.