3 Critical Inventory Management Protocols to Integrate Into Your Practice
Too many med spas overlook the importance of inventory management. From unexplained inventory shortages to having zero protocols in place to manage your inventory, these issues can over time lead to significant losses for your business. Unfortunately, many practices lose out on valuable retail profit because they do not have protocols in place to accurately order, receive, track, and train their staff on proper management of inventory for med spas.
In this article, you’ll learn 3 key retail inventory management protocols you need to implement in your practice to help boost your bottom line.
Why Inventory Management Is Important For Your Business
Inventory management is critical for your business to ensure you aren’t unknowingly losing retail profits due to a lack of inventory control. You should aim to have retail be at least 10% of your business’s income or better. This will help not only diversify your business’s revenue streams, but your retail offers strong margins of profitability for significantly less of your time and effort compared to providing services to patients.
While retail can be a great profit booster for your business, it can also be a profit sucker– whether you are aware of it or not! Unfortunately, many medspas struggle with unexplained inventory shortages or don’t even have any inventory management protocols in place to be aware that they have an inventory issue.
If you aren’t consistently tracking how much inventory is flowing in and out of your business, how will you know if your inventory is actually driving profit for your business?
Below are several issues I’ve seen med spas struggle with if they lack proper inventory management systems.
- Inventory counts that do not match your actual stock levels
- Products disappearing without documentation
- Gaps in inventory tracking
These problems can indicate you may be struggling with an inventory reconciliation problem, theft, or you don’t have the proper protocols in place to effectively manage your inventory. Regardless of the reason for your unexplained inventory shortages, this can slowly but surely eat away at your business’s profits. However, you don’t have to wrestle with unexplained inventory losses forever.
3 Critical Inventory Management Protocols
Many medspas overlook the importance of effective inventory management systems. Retail has the potential to contribute at least 10% (or more!) of your bottom line. However, if you do not have set inventory control protocols in place, you can easily be losing out on revenue, without even realizing it. Follow the below inventory management protocols to ensure your business isn’t losing retail profits.
1. Ordering and Receiving
Implementing a strategic ordering and receiving protocol is crucial to ensure you have a strong foundation for the accuracy of the inventory you purchase. When it comes to ordering your inventory, ordering monthly and buying in bulk is a great way to stay consistent month to month, while receiving volume discounts.
When receiving your inventory for med spas, you’ll want to set up a protocol where a staff member counts the number of packing slips to verify the number of new products you received matches how much you ordered.
Plus, you should immediately log the quantity of new inventory into an electronic scanning system, such as Excel or an EMR scanner. This is also the time you should compare the products you received to the vendor order form and resolve any discrepancies with the vendor if you find the shipment you received does not match the amount you ordered.
2. Tracking and Reconciliation
Having tracking and reconciliation protocols in place is another crucial inventory management system to help optimize your retail profit. It’s difficult to track whether or not you are making a profit from your retail if you aren’t keeping track of how much inventory is flowing in and out of your business each month.
We recommend conducting weekly inventory counts and reconciling those counts to ensure you have an accurate count of how much product you have. Doing this weekly (rather than monthly) will ensure you can quickly assess and fix any problems that may arise if there are variances in the amount of inventory you should have vs how much inventory you actually have.
Remember, numbers don’t lie! If the variance between your counts (how much product you should have vs what you actually have) is more than 5% then you have an issue that needs to be resolved. Common issues may include processing issues or theft from patients or your own employees. You’ll also want to consider counting and tracking your high-value goods that are rather small yet expensive more frequently (i.e. your injectables) as these can leak out significantly more money from your business if an issue occurs.
Last but not least, effectively training your employees on all your inventory control protocols is critical to ensure there’s no disconnect between the time you order a new shipment to the time you sell that product to a customer. A comprehensive list of protocols you should have in place and implement with your staff includes processes like:
- How to generate an order/new shipment
- How to receive the shipment, ensuring it’s accurately counted and recorded
- How to count your inventory weekly
- How to reconcile your inventory to ensure accurate records
- How to store and secure retail to prevent losses due to theft or improper storage
As a rule of thumb when considering inventory for med spas, your retail cost of goods (beginning inventory + net purchases – ending inventory) should be around 40% to 50%. If your cost of goods is greater, such as 75%, then you have an issue, or multiple issues, that need to be diagnosed and resolved.
Ready to Take Your Business to The Next Level
Effective management of inventory for med spas is just one of the many areas of your business you can optimize to boost your bottom line. With over 20+ years of experience, we’ve helped thousands of practices improve their profitability and take their business to the next level.
Ready to improve your business? Book your free strategy call with one of our experts today!