I love practice ownership. Being able to develop the careers of team members, enjoy financial freedom and having major flexibility in my work hours have been some of the most rewarding aspects of running dental clinics. Especially as a working mum! But over the last decade, it has become increasingly difficult to increase revenue while simultaneously managing rising operating costs. Where previously dental practices could comfortably enjoy profit margins of over 25%, many now report profits of 10% or even less. We have certainly seen a drop in profit across our 3 practices in NSW over the last 3-4 years and have been working hard to improve profitability using cost saving strategies.
The two greatest variable expenses for any dental practice are staff wages and dental stock spend. With rising inflation, the costs of dental materials have increased significantly in the last few years, as have staff wage demands. A major reason for the increase in operating expenses was certainly COVID related inflation and supply chain issues. Even though that period of unrest has passed, inflation has unfortunately stuck and had a lasting effect on the rising costs of materials. From composite resin to impression materials, the prices can quickly add up, putting a strain on your practice’s budget.
When interviewing dental practice owners and their staff they commonly report stock spend somewhere between 8-10%, some as high as 12%, of production. Many practices have dedicated staff members with the sole job of managing stock levels and placing orders. A huge financial burden to any practice and a major waste of human resources that could be better delegated to other revenue generating tasks within the business.
It can all seem hopeless at times. How can we save our staff time and save money on dental stock simultaneously? I’m here to tell you it is possible and there is hope! With a strategic approach, and some savvy tips, it’s possible to save money without compromising the quality of patient care provided or bogging our staff down in time consuming processes.
It has been a privilege to work closely with some large and highly profitable dental practices in Australia, and see their journey first hand as they navigated reducing their spend on dental consumables while simultaneously reducing the number of staff hours spent on the procurement process. In one example, a practice brought down their stock spend from 8.5% of production, to less than 5%. At the same time their practice manager saved an average of 8 hrs per week on stocktake, ordering and associated tasks. In total this represented over
$100k/year in direct savings for this practice and boosted practice profitability and revenue opportunities.
Here are some practical and effective strategies to reduce costs on dental stock and associated staff wages that have worked in our business and many others.
Budget and track
How many practices set, track and monitor their stock budget? What is an acceptable stock budget for your particular practice? Staying on top of how much you are spending each month will help manage purchasing behaviour and enhance cash flow, improving the overall financial health of your practice.
There are a number of ways you can set and track a budget, from excel spreadsheets, to online digital tools where your staff can visually see the practice budget every month and how much they have already spent. Ensuring your staff are aware of what the monthly budget is and providing them with a simple strategy to track spend is important for this process to be successful. Transparency and ease are key!
You can set your budget as a dollar amount each month, or as a KPI value or percentage of production each month. For example, one practice may set a budget of $5000/month. Another practice may choose to set their budget as 7% of the previous month’s production, allowing for the ebbs and flows that occur when a practice is more busy vs quieter periods.
Depending on the procedures and specialities a practice performs, your stock budget will vary practice to practice. For example, a practice that performs implant and orthodontic procedures may have a higher consumable spend as compared to a
general dental practice. However, on average, we should aim for a stock spend of no more than 6% of production to ensure a healthy profit margin. Ensuring that our staff stick to this budget month on month, and not allowing spend creep to occur, will aid in practice profitability.
Compare prices across multiple suppliers
Just as patients are encouraged to seek second opinions, dental practices can benefit from comparative shopping. You could save thousands of dollars just by shopping around and comparing prices from different suppliers. While it may take some extra time and effort initially, the potential savings can be well worth it in the long run. Online ordering platforms and dental supply catalogues make it easier than ever to compare prices and find the best deals. Remember to consider factors such as shipping costs, delivery times, and product quality when making comparisons. You could also consider reviewing where you buy products from once or twice a year to limit the amount of time spent on the process but still benefit from cost savings.
Negotiate prices with your suppliers (tendering)
Establishing relationships with suppliers can be mutually beneficial for both parties. Don’t hesitate to negotiate with suppliers to secure better pricing or terms. Many suppliers are willing to offer discounts or incentives to loyal customers, especially those who place large or recurring orders.
It may be beneficial to review any negotiated pricing on a periodic basis, say yearly. Often prices can increase over time and you may need to consider alternative options when these price increases occur. Regular conversations with your suppliers around price can be an extremely useful tool when looking to save. You can also utilise services such as certain online platforms that will perform this service on behalf of your practice. This is particularly useful for time-poor practices, or those who find these conversations with their suppliers uncomfortable.
By being proactive and assertive in negotiations, dental practices can unlock valuable cost-saving opportunities. You could be surprised at the discounts suppliers are willing to offer!
Strategic purchasing- bulk buying and less frequent purchasing.
When it comes to buying dental materials, strategic purchasing can make a world of difference. Rather than buying supplies on an ad hoc basis, consider bulk purchasing from reputable suppliers. Many suppliers offer discounts for bulk orders, which can result in significant cost savings over time. You can also save on shipping costs, which over time can really add up.
Additionally, keep an eye out for special promotions, discounts, or loyalty programs offered by suppliers. Traditionally, around the end of financial year and end of the calendar year most suppliers will offer great promotions. This is the best time to stock up! By planning ahead and taking advantage of these opportunities, dental practices can save money without compromising on the quality of materials.
Use business intelligence reports to understand spending patterns.
Take a close look at your practice’s material usage patterns. Are there any materials that are consistently overused or wasted? Can you negotiate pricing on certain products or suppliers based on your spending over time? By identifying areas of excessive usage, wastage or where you can leverage from your suppliers, dental practices can implement strategies to reduce waste, re-negotiate prices and save money. This could involve implementing stricter inventory controls, providing staff training on proper material usage, or exploring alternative materials that offer similar benefits at a lower cost. Regularly monitoring material usage and making adjustments as needed can lead to significant cost savings over time.
Embrace Technology
Technology has revolutionised every aspect of modern dentistry, including stock management and ordering. In the last 2 years we have seen a surge in this space and these days business owners have a variety of solutions available to help them operate their practices more efficiently. Embracing technological solutions such as inventory management software, digital ordering platforms, business intelligence reporting systems and automated supply replenishment systems to streamline your practice’s stock management processes can save your staff invaluable hours in the day and increase transparency and accountability over the entire process. These tools can help reduce manual human errors, delays in order placement, improve efficiency, and optimise inventory levels, ultimately leading to cost savings for the practice. They also allow you to track your spend against your budget, and include your entire team in the ordering process, reducing key-man dependency when someone is sick or leaves. While there may be an initial time and dollar investment required to implement these technologies, the long-term benefits can far outweigh the costs. When you consider how many staff hours BI dashboards and ordering platforms save your staff, it can be well worth the investment.
Saving money on the cost of dental stock is just one way to increase a practice’s bottom line and profitability, but it requires a strategic and proactive approach. By implementing the tips outlined above, dental practices can effectively reduce costs without compromising the quality of care provided to patients. From strategic purchasing and comparative shopping to evaluating material usage and embracing technology, there are numerous ways for dental practices to achieve significant cost savings. By adopting a mindset of continuous improvement and resourcefulness, dental practices can pave the way for a brighter, more cost-efficient future.
