by Lynne Fales and Kira Martell

Get inventory costs under your control

In busy orthodontic offices where supplies are constantly arriving and being used, inventory costs can quickly spiral out of control. Here are some best practices that will help you track and minimize these expenses.

Create a repeatable system that computerizes all of the supply management information in a database that is accessible to all and controlled solely by the practice.

Why: In many practices, one person does all the ordering. Vendor reps often place orders for only their company’s supplies, and reps come and go. If the ordering team member gets ill or quits, everyone has to scramble to determine which supplies, quantities, and/or which vendors to order from. With a computerized system, supply information only needs to be entered once and is legible to all, and departments can manage their own supplies. Paper systems are too easy to misplace or have disappear. Repeatable computerized systems save employee training time.

How: Set up records for each supply with its supplier, catalog number, fully stocked and reorder levels, and order frequency. Consider tracking units per package, price, category, department, storage location, and chart of accounts. Train alternate employees in the ordering procedures you create, including e-mailing a purchase order requisition to the doctor or office manager for approval prior to ordering.

Consolidate orders to every 3 to 4 weeks.

Why: Ordering this way instead of “as needed” 1) reduces the possibility of running out of supplies; 2) saves shipping costs; 3) saves staff time placing and putting away orders; and 4) reduces the risk of inadvertent order duplication.

How: Create a “fully stocked” and “reorder” level for each supply, allowing for at least a 3 to 4 weeks’ supply on hand between orders. Establish regular order frequency intervals for each supply and/or record daily stock usage for each supply to allow for low supply level reporting. You can use a tag system or sticky note list to alert the ordering team member that stock is low. Adjust stock quantity needs seasonally as necessary.

Compare supply prices from multiple vendors on a regular basis.

Why: Sending supplies out for quotes can save the practice money. Quantity buying may be attractive, but you also have to consider storage room availability, out-of-pocket costs, obsolescence, and shrinkage.

How: E-mail or fax multiple vendors requesting price quotes for supplies you use frequently. Allow the vendors to see that you have also sent the requests to their competitors. Vendors may be more likely to compete for your business. E-mail or fax the vendors a report of your buying history so they can base their quotes on the quantities your practice buys. Then ask them to guarantee prices for an extended period of time if you agree to buy from them.

Make sure to compare unit price instead of package price, since units per package may vary by vendor. You can use Google Product or other comparison shopping Web sites to find the best price on many office supplies, such as copy paper.

Keep in contact with your supplier representative and ask him or her to alert you to specials via e-mail.

Reduce shipping and handling costs.

Why: “Panic” ordering when a supply is needed ASAP requires overnight shipping, which can be very expensive. Multiple small shipments are wasteful, expensive, time-consuming, and unnecessary.

How: Examine and compare suppliers’ true costs by separating shipping costs from supply costs in your bookkeeping, then ask vendors for free or reduced-cost shipping terms, making sure the value of the free or reduced-cost shipping is not offset by higher supply prices. It also helps keep track of supplier minimum amounts on orders for free shipping. Try to meet these minimums whenever possible.

Keep supply request notes in a single place—in the computer.

Why: Paper sticky notes can easily be overlooked or lost. Recording supplies on the computer makes the information easily accessible to all team members, and notes can be saved in one location without having to physically place a paper note in the “correct” location.

How: Use your database to create a “supplies needed” list, then save the file on the server and share the folder with all workstations.

Make sure you only pay what you owe. Don’t pay for backorders, miss-shipped, or returned items.

Why: Vendors can make mistakes. Prices and quantities need to be confirmed to eliminate overpayments. Paying bills without confirmation may also result in overpayments or missing a credit due. Credits not tracked carefully may never be received or may take a long time for processing.

How: Verify packing tickets and invoices against your purchase order for items shipped, price, and quantity. Also keep track of backorders and returns. Vendors should not charge separate shipping on backorders. Clearly mark discrepancies on the packing ticket or the computer-generated bookkeeping report before giving it to the bookkeeper to make a payment.

Track currently on order and back-ordered supplies in your database.

Why: Duplication of orders cost the practice time and money. Knowing estimated shipping dates on back-ordered supplies will alert the practice as to whether an alternate supplier needs to be found to avoid running out of stock.

How: Keep a list of back-ordered items in your database with estimated ship date, and record the date they are received as they come in. If supplies are long in coming, e-mail or fax vendors requesting the new expected ship date or cancel the backorder and reorder from a different supplier. It always helps to know which alternate suppliers are available in case the supply is needed before the backorder is expected.

Assign a constant General Ledger Account (chart of accounts) to supplies in the database in order to allow the computer to sort and subtotal for correct cost posting by the bookkeeper.

Why: Financial reports will be more consistent and comparable from one time period to the next than if you were manually reviewing each item received and writing the chart of accounts. The bookkeeper should apply those supply costs on the invoices or packing tickets. It saves time for the ordering team member and the bookkeeper if the chart of accounts information is tied to the supply and is sortable in the database.

How: Assign a specific general ledger account to each supply, then print or preview bookkeeping reports that show received items with their corresponding general ledger account, tax, and shipping costs to compare and attach to vendor invoices. This not only ensures accurate posting of costs in your financial statements, but also is a double-check that the price listed in your inventory database is correct.

Use the database to create reports for sales tax paid/unpaid so that you can report and pay your liabilities.

Why: States are auditing and assessing fines to dental and medical practices that buy supplies out of state and don’t pay sales tax on taxable items. Manually compiling this information, however, can be a daunting task requiring many team member hours.

How: Use a supplier database to keep track of those vendors that do not charge sales tax. Designate which supplies are and are not taxable on the supply database, then create reports and sort data by whether or not tax was paid and whether or not each supply purchased was taxable. This report can then be used to assist in accurately preparing your sales and use tax returns.

Create a system to keep track of earned versus used discounts, coupons, and specials.

Why: Discounts can reduce your costs. If you don’t ask for discounts or take advantage of “two for one” specials, they are lost. Be able to verify coupon use and compare discounted prices with prices of other vendors that may charge less without coupons.

How: Use a database to keep track of which vendors offer discounts or coupons and review reports on earned versus used coupons. Keep in contact with your supplier representative and ask him or her to alert you to specials via e-mail. If sales reps come to the office, let them know you would prefer they come during non-patient time. Include a message on your purchase orders to “please apply any available discounts” to the order.

Use virtual catalogs available at vendors’ Web sites.

Why: Vendors’ paper catalogs often take up too much space in the office, and it takes too long to find supplies in them. They may also be outdated. Using search features available on most vendors’ Web sites is a faster way to find supplies.

How: Have your vendor Web addresses in your database so that it is easy to log on and check for needed supplies. Make sure that the computer used by the ordering team members is able to access vendor Web sites.

Identify obsolete supplies and overstocked supplies, and return them, if possible.

Why: These unneeded supplies are taking up space that could be better used. You may be able to return supplies for a refund or credit toward other supplies.

How: Consider doing an inventory twice per year to identify unneeded supplies and determine inventory value. If a supply is no longer needed, remove it from storage and e-mail or fax your rep about returns ASAP. If returns are not possible, alert staff that obsolete items should be “used up” before the new replacement supply.

Identify the supply as obsolete in your database. Reports on only obsolete supply data should not be deleted because this might cause past history to be incomplete.

Make sure that each supply has an assigned location.

Why: Supplies wind up in multiple or new locations and mistakenly get ordered because “I thought we were out.” Supplies with expired shelf lives waste money.

How: Assign a permanent storage location to supplies, and consistently put them in that location. Label storage locations, and assign a specific location to each supply in the database so that all staff can find supplies as needed.

Rotate newly received supplies, always placing the newly received items in the back so supplies that will expire soonest are used first. Use team members with entry-level salaries to put stock away in its assigned location.

Use your database system to view purchase histories and identify areas where you are overspending.

Why: You will know what you order, who you get it from, how many are usually ordered, how often you order, and what the price history has been. An accurate purchasing history of all supplies gives you leverage to prepare quote requests for better pricing from vendors.

For information on all the companies that offer office-management software, visit our online Buyer’s Guide.

How: Set up a database system such as Microsoft Excel or Access, or buy an industry-specific software program such as Office Inventory Ordering© by FoxFales Inc (

Require that staff prepare and e-mail monthly reports for the orthodontist to review. Compare costs for specific time periods, using the inventory software or by sorting Excel data by parameters such as supply, price, supplier, department, or category. Establish a supply budget based on industry averages—for example, no more than 10% of receipts after adjustments for clinical, 1% for office, and 1% to 3% for marketing.

Lynne Fales is an orthodontic practice-management consultant. In 1998, she partnered with Jerry Fox, an accomplished programmer, to form FoxFales Inc, which now has more than 600 users. She has a financial interest in products mentioned here. Lynne can be reached at

Kira Martell is a practice-managment consultant specializing in project and inventory management. She earned her Master’s in Business Administration degree at the University of Queensland. Kira can be reached at