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Your practice has many assets, but few rank higher than inventory. Inventory—items consumed in treatment or sold to patients for at-home use—is second only to cash in value to your practice. That makes it extremely important and not something to be overlooked.

Since inventory can easily be miscalculated (in quantity or value) and subject to theft if not properly accounted for and reconciled, detailed tracking is needed. This article outlines the activities associated with proper inventory management. Following them will help keep your inventory organized, properly accounted for, and secure for the welfare of your practice.

1. Accurately Define Inventory

To properly manage your inventory, you must first identify and define the products you have on hand. They will likely fall into one of the following categories:

  • Single-use consumables in treatment. A syringe of filler or a pre-packaged peel are examples of high-value, single-use consumables in treatment. The cost of these inventory items is passed to the patient in treatment cost. Therefore, proper management of both outbound and inbound single-use inventory is critical to practice cash flow.
  • Multi-use consumables in treatment. Backbar products (e.g., cleansers or skincare used before or after patient treatment), multi-use peel solutions, or technology cycle cards are examples of multi-use consumables. Multi-use consumables are often difficult to track, as different scenarios can result in a different consumption rate. However, it’s important to keep tabs on them, since inaccurate tracking may increase the cost of goods to your practice.
  • Medical supplies. Hair bonnets, disposable gowns, bandages, gauze, and needles are examples of disposable medical items required to deliver treatment. Like multi-use consumables, these goods may be difficult to track, but they are essential. Any misuse may result in a higher cost for supplies and, in turn, reduce practice profits.
  • Retail supplies. Prescription or recommended skincare products, home-use devices, supplements, or post-treatment garments are examples of retail products. These products can represent up to 50 percent of the gross sale price—not including potential state or local sales tax. Given that, it is critical to manage shelf life so maximum dollars are achieved for this revenue line item.
  • “Free” goods. Various goods supplied to the practice for training purposes, staff trial, replacement of faulty goods, or special promotion are examples of free goods. While they may not be directly tied to practice profitability, proper inventory procedures will help ensure these goods are consumed for the purpose they were received.

2. Properly Account For and Organize Inventory

Inventory is an asset on your balance sheet, and as such, needs to be properly accounted for and managed. Let’s look at injectables and skincare consumables, which have expiration dates. If not carefully tracked, they can expire and become a substantial loss for the practice. By monitoring inventory, you can effectively implement the first-in, first-out (FIFO) approach. It ensures that the most dated purchased consumables are the first to be used/sold as well as removed from inventory. While FIFO is an accounting method, a physical storage and organizational method that follows that approach is also needed to minimize waste and loss.

3. Assign Responsibility and Set Inventory Protocol

You likely have multiple people who handle or use inventory, as well as multiple locations that store and utilize it. Given that, successful inventory management involves select staff being responsible for the following:

  • Entering products into inventory
  • Sorting inventory
  • Tracking and recording inventory as it is used

As much as electronic inventory systems are necessary for tracking assets, it is equally important to set a physical count schedule. Depending on volume of use, number of providers, and your preferences as an owner or administrator, a weekly, monthly, or quarterly count is recommended. This physical reconciliation should always be performed by a minimum of two people.

Also, no matter where inventory is delivered, establishing an inventory storage protocol is advised. The protocol should define safe storage based on temperature and humidity, products to keep under lock and key, and the process for adding goods to the shelf that follows FIFO.

4. Safeguard Inventory From Loss

As mentioned above, inventory is an asset, and like any asset, it is subject to loss. Key loss instances include:

  • product expiration,
  • theft,
  • over-use,
  • add-ons to treatment,
  • spill/waste of multi-use product,
  • comped services, and
  • gift with purchase.

In most cases, the practice bears the cost of these losses. Any of them will impact the value of your inventory, as well as your bottom line, so they are best avoided.

Another incentive to prevent loss is insurance requirements. For certain products on site, such as neurotoxins, pain medication, narcotics, or anesthesia, your insurance carrier may require proof of safe, locked storage and inventory tracking. Not only does this adhere to regulations, but it safeguards public safety.

5. Monitor and Audit Inventory

Many practices rely solely on their practice management software (PMS) to manage inventory, but that’s not enough. This software cannot identify physical inventory loss, missing or expired product, or misuse of inventory, such as over-use of backbar products. Therefore, inventory requires checks and balances—like those used to manage cash flow—such as:

  • Conducting physical counts to reconcile the inventory in your PMS
  • Holding everyone who uses inventory accountable
  • Training on and reviewing protocols for consistent multi-use inventory usage
  • Updating your inventory roster continuously so products that are no longer ordered or are obsolete don’t clog the system.

6. Maintain Proper Inventory Levels

Much like everyone needs a cash cushion for emergencies or contingencies, an inventory of at least two weeks is reasonable and recommended to have on hand. This level of inventory will protect the practice from falling short on a high-demand patient day without throwing your balance sheet out of line.

It Counts

Inventory management is essential. It protects practice financials, enhances asset management, and ensures public safety—in short, it counts! Therefore, follow the recommendations outlined here to protect and manage a valuable practice asset that enables you to do business day-in and day-out.


Read Jessica Neff Pashuck’s article “Below the Surface: Take a Deep Dive into Inventory Management” in the December 2019 issue of Practical Dermatologyhere for a more in-depth look at managing practice inventory.

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