Organization of Practice Flashcards
Online Pharmacy
An online pharmacy, internet pharmacy, or mail-order pharmacy is a pharmacy that operate over the internet and sends the orders to customer through the mail or shipping companies.
Mark-up
The amount added to the cost price of goods to cover overhead and profit
Mitigation
The action of reducing the severity, seriousness, or painfulness of something
Medical terminology
Language that is used to accurately describe the patient’s body and associated components, conditions, processes, and procedures in a science-based manner.
Medical records
Written reports by veterinarians on the animals he or she treats
Medical record audit
Methodical review and examination of practice records to assess accuracy and completeness.
Local Area Network (LAN)
A computer network that links devices within a building or group of adjacent buildings.
Inventory turnover
The relationship between expense of total items sold and the inventory value, computed by dividing the costs of the drugs and the dispensed items by the average inventory value.
Inventory audit
An accounting procedure used to keep track of products and merchandise.
Internet accessibility
Refers to the inclusive practice of removing barriers that prevent interaction with, or access to websites.
Integrating Systems
The process of bringing together the component subsystems into one system and ensuring that the subsystems function together as a system.
Insurance Agent
A person employed to sell insurance policies.
Inspection
Careful examination or scrutiny. A practice may be inspected by various agencies such as the DEA, OSHA, local fire department, etc. A manager should be aware of the laws and standards necessary to pass those inspections.
Operations Manual
A document that describes in detail the processes and systems that a company uses to produce its goods and provide its services.
Overstock
A supply or quantity in excess of demand or requirements.
Paperless/Paper Light
A term or phrase used to describe a practice that no longer uses physical medical charts, and relies primarily on electronical medical records
Five-Force Analysis
A strategic planning activity that organizes the practice’s evaluation of the external environment and its opportunities and threats.
Required content
Every state has a Veterinary Practice Act that defines the required content in each patients medical record.
Risk Management
The identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability of said risk.
Service Warranty
In contract law, a warranty has various meanings but generally means a guarantee or promise which provides assurance by one party to the other party that specific facts or conditions are true or will happen.
Shrinkage
Inventory loss, usually unexplained or difficult to isolate.
Server
A computer on the network that manages network resources, and provides functionality for other computers on the network.
Unit of measure - or - buy/sell ratio
Is assigned to all inventory items and must be defined before a product can be entered into inventory. Each product will have a stocking unit of measure, sales ordering unit of measure and a purchasing unit of measure.
Value Chain Analysis
Analysis tool for strategic planning and goal setting that describes as series of activities, with each stage adding value to the final product or service income.
Value Proposition
Description of the value that a product, service, or process will provide to the pet owner, hospital, and staff.
Veterinary Practice Scorecard (VPS)
A management process tool that assists in identifying and targeting measurable performance goals in operational quadrants; client perspective, patient perspective, learning and growth perspective and financial perspective.
Housekeeping
Operations such as record-keeping or maintenance in an organization, or a computer that make work possible does not directly constitute its performance.
Human resource risk management
Having a process by which your organization identifies and understands the risks to which you are exposed when it comes to human resources activities. It also means having deliberately evaluated the risks and have strategy in place to remove the risk altogether, reduce the likelihood of the risk happening or minimize harm in the event that something happens.
Stakeholders
An individual or group with an interest in a particular business; the individual or group usually has something at risk.
Standards
Statements of what a practice believes in and recommends for its patients.
Strategy
A plan or action to achieve a specific end, typically within a long time frame (usually more than a year). Often times strategies are achieved utilizing various tactics to achieve various aspects of the overall strategy.
SWOT Analysis
A tool used that analyzes the practice’s strengths, weaknesses, opportunities and threats when making a plan.
SOAP
A systematic method used when writing out medical records that includes: Subjective, objective, assessment, and plan for patient care.
Tactic
A plan or action to achieve a specific end, typically within a short time frame (usually less than a year, but occasionally spanning a few years).
SMART Goals
Specific, Measurable, Attainable, Relevant, and Time-bound. Useful acronym to remember when establishing inspiration objectives for the practice team
Software
Programs or applications that run on computers
Special Orders
Patient medications or food that is ordered by a client, typically because it is not kept in stock on a regular basis.
Secure login
A secure login page utilizes a Secure Sockets Layer (SSL) to encrypt the user name and password before passing them to the mail server so that anything that might be intercepted are in an encrypted format that will be unreadable.
Security Standards
A set of administrative, physical, and technical actions to protect the confidentiality, availability and integrity o information or data.
Hardware/software support
Assistance for technical problems with electronic devices or computer software applications. The technical support team is composed of individuals that are familiar with the ins and outs of a device and/or software application.
Hardware
The physical equipment used in a computer system.
Depreciation
Systematic allocation of the cost of a tangible asset over time.
Data breach risk management
Strategies and procedures put in place to protect confidential data from unauthorized access.
Firewall
A system (hardware, software or a combination) on your local intranet network that is designed to prevent unauthorized access to or from the network.
Efficiency Ratio for Accounts Payable to Sales
Ratios used to analyze how well a company uses its assets and liabilities internally.
Expired inventory
Inventory that has reached the end of its useful life, and cannot be sold as a finished good.
Desktop
A computer where the central processing unit (CPU) sits either on the desk or under it; not considered portable.
Disclaimer
A clause or a statement that tries to prevent the creation of a warranty or contract.
Economic risk management
The identification, assessment, and prioritization of financial risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability of said risk.
Economic Order Quantity (EOQ) [definition only]
The most economical quantity of a product to order, factoring in both holding and operation costs.
Costs of goods sold (COGS)
A figure on the income statement that reflects the cost of products sold to consumers in the primary business activity of the practice
Controlled Drugs
Any drug or therapeutic agent commonly understood to include narcotics, with a potential for abuse or addiction, which is held under strict government control, as delineated by the Comprehensive Drug Abuse Prevention & Control Act passed in 1970.
Consent Form
A form signed by a client prior to a medical procedure to confirm that he or she agrees to the procedure and is aware of any risks that might be involved.
Complementary Practitioner
A veterinarian that uses healing practices and products that work in conjunction with traditional medicine.
Bluetooth
A standard for the short-range wireless interconnection of cellular phones, computers, and other electronic devices.
Damaged Goods
A good that is unfit or reduced in value for it’s intended use due to damage of some sort.
Ancillary Service Provider
A healthcare service provider that support the work of a primary physician.
Client risk management
The process of identification, analysis and either acceptance or mitigation of uncertainty in client decision-making
Client portals
An electronic gateway to a collection of digital files, services, and information accessible over the Internet through a web browser.
Capital Asset
Property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating.
Quantity on hand (QOH)
Total number of inventory units currently in stock
Regulatory Risk Management
Generally defined as the risk of having the ‘license to operate’ withdrawn by a regulator, or having conditions applied (retrospectively or prospectively) that adversely impact the economic value of the practice.
Warranty Period
A defined time frame that a product or service is guaranteed.
Waiver
A form that is signed by the owner/agent of a pet stating that they decline to accept the veterinarian’s recommendations or advice
Volume Purchasing
The act of purchasing goods in multiple units or in large quantities, usually with a financial incentive for doing so.
Business Assessment Report Kard (BARK)
A strategic planning process designed to evaluate veterinary practices.
Business liability insurance
Insurance that protects the company and/or business owner in the event of a formal lawsuit or other third party claim.
Backup
The procedure for making extra copies of data in case the original is lost or damaged.
Back Order
An order placed for a product that is temporarily out of stock
Grief Counseling
A means by which an owner is assisted in coping with the loss of their pet.
Procedural Logs
Documents used to ensure that tasks have been completed in a specific manner.
Product Warranty
A guarantee that a manufacturer or similar part makes regarding the condition of its product.
Problem Oriented Veterinary Medical Record (POMR)
A veterinary medical record model designed to organize patient information by the presenting problem. The record includes the patient database, problem list, plan of care, and progress notes in an accessible format.
Pharmacy
A store where medicinal drugs are dispensed and sold.
PCI Compliance
The Payment Card Industry Data Security Standard (PCI DSS) is a set of requirements designed to ensure that ALL companies that process, store or transmit credit card information maintain a secure environment.
PEST Analysis
A framework using four factors to help scan the external macro-environment in which the practice operates: Political, Economic, Sociocultural and Technological.
Implementation
To put into effect. Strategic Planning can only succeed with the implementation of the plan.
First In - First Out (FIFO)
The principle by which the oldest inventory items are recorded as sold first, but do not necessarily mean that the exact oldest physical object has been tracked and sold.
What negative effects are seen when multiple products of the same category are carried in house?
> Increased dollars are spent on products
> Products sit on the shelf and have a decreased turnover rate
> Products expire and the practice loses money
> Team members need additional training to remember the functions of each product.
> Client communication and recommendations suffer because specific recommendations are not being made, ultimately decreasing client compliance
What is the formula for Average Inventory?
Beginning inventory + Ending inventory
2
How many times per year should products located in the top 20% of inventory items turn?
12 times per year
What factors should be considered when determining effective reorder quantities?
- Average Daily Use
- Turnover Goals
- Product Expiration
What is the formula used to determine the inventory turnover rate?
Total units of product purchased during measured period
Average inventory
What is the formula used to determine the reorder quantity of a product?
Average daily use x Turnover goal (in days)
What is the formula used to calculate the reorder point of a product?
Lead time x Average Daily Use
What factors should be considered when placing a bulk order?
- Quantity is based off of historical sales, within the period being measured
- The quantity ordered must sell before the delayed billing is due
- Product cannot have a short shelf life
- Consider year-end tax implications (cash versus accrual reporting)
What formula is used to determine the quantity of a bulk order
Average daily use x # of working days in billing period x % of growth
What are ordering costs?
Human resource-related and basically account for all time spent preparing and maintaining an order.
What is the replacement cost of an item?
The price a practice would pay to replace an item.
What are the holding costs of a product?
facility related and account for approximately 8% to 15% of the unit cost.
What are the hard costs of an inventory item?
The costs associated with paying veterinarians when they are compensated by the production method.
What are the hidden ordering cost associated with inventory?
- Determining reorder quantity and reorder points
- Price Shopping
- Visting with sales representatives
- requesting an order
- researching items to replace back orders
- receiving and unpacking products and supplies
- entering invoices into veterinary software
- reconciling statements
What are the hidden holding costs associated with inventory?
- Property tax paid on inventory value
- Insurance
- Utilities to maintain safety of product
- Shrinkage
- Pharmacy licensing/DEA fees
- OSHA training and maintenance
What is the formula for break-even analysis (i.e. what is your minimum sales price to achieve your desired profit)
Unit Cost + Hard Cost + Soft Cost + (Profit x sales price)
What are potential causes of discrepancies in inventory counts?
- Shrinkage - the loss of product inventory
- Missed charges - items are not put in and charged out, but are sent home with a client
- Incorrectly invoiced products - may either enter the wrong product into the computer system, or pull the wrong product to send home with the client.
- Medical supplies
- Free doses
- In-House Use - Items used in house but not logged out of inventory
What are four ways that teams can contribute to decreasing the loss of inventoried items?
- Use a travel sheet
- appropriately set fees
- Have a structured inventory system
- Ensure team member accountability
Define Inventory Control
The process whereby the need to maintain sufficient inventory to meet hospital operating demands is weighed against the monetary cost of carrying inventory.
How much of the true cost do ordering and holding costs account for?
Approximately 25 to 35 percent of the total true cost.
What are the four functions of an inventory system?
- Control functions
- Forecasting functions
- Purchasing functions
- Selling Functions
What are the different ways to track inventory in a manual inventory management system?
- Control-Card system
- Red-Tag System
What things are tracked in a manual inventory system?
- Item
- Suppliers
- Quantity
- Reorder Point
- Invoice Costs
- Storage Location
- Price to client
What is a purchase order?
A document issued by the practice to vendors to request the delivery of materials, including supplies, any other item to be placed in inventory, equipment, and the like.
What is one of the greatest safeguards against employee theft?
A perpetual inventory system
What are the steps used to enforce a ration-based inventory system?
- Understand the system
- Assess the Risks
- Evaluate the Labor Costs
- Inform Staff
What is selective inventory control?
A profit based management system that prioritizes inventory based on value and importance.
How is Pareto’s principle applied to inventory?
- 20 percent of the items account for about 80 percent of the sales revenues
- 80 percent of the inventory cost exists in 20 percent of the inventory
- 80 percent of profit can be predicted to come from 20 percent of products sold
What is an ABC analysis?
A method of sorting inventory into manageable components based on cost and relative value.
What inventory items fall into Class A of an ABC analysis?
The 20 percent of SKUs that account for about 80 percent of the Annual Usage Value.
What inventory items fall into Class B of the ABC analysis?
The next 30 percent after class A. These items account for about 15 percent of the Annual Usage Value.
What inventory items fall into class C of the ABC analysis?
The remaining 50 percent of items that account for the remaining 5% of the Annual Usage Value
- Lowest priority
- Simplest possible control
- weight cost-benefit relationship of micromanagement and stock savings
- consider ordering larger quantities with bigger safety stock margins and stock savings.
What inventory items fall into Class AA in the ABC analysis?
- Controlled substances
- Highest risk / highest priority
- Tightest controls
- Frequent review and inspection by a responsible doctor or chief of staff
Define operating level in regards to inventory management
The inventory amount of an item that is expected to be used up between the point of order receipt and the time another order must be placed.
Define Lead Time
The time between the point of order and when the shipment will be received.
Define Reorder point
The time at which the purchasing manager should place a restock order with the vendor because supplies have fallen to a specified level. Reorder point is determined by the SKU quantity that will meet predicted normal operating needs until the restock supplies arrive on the premises plus the selected emergency stock quantity.
Define Safety Stock
A desired inventory cushion, in excess of lead-time quantity, to help mitigate the event of a stock outage if the shipment was delayed or if the item was placed on backorder.
What is the formula to calculate the average shelf life of inventory in days?
365 ÷ annual inventory turnover rate
What factors influence the timing of orders?
- The time needed for delivery
- The rate of inventory usage
- The safety stock level
- The effect of special manufacturer and vendor offerings
What are two leading causes of drug shortages?
Manufacturing problems and regulatory issues
Define Economic Order Quantity
The optimum order quantity by determining the point at which inventory ordering and holding costs are minimized
What is the economic order quantity (EOQ) formula?
A = Annual demand in Units F = Fixed ordering costs incurred per order H = Holding costs expressed on an annual basis as a percentage of unit cost UC = Unit cost to purchase from vendor or supplier
Define Freight On Board Shipping point
The sale occurs at the vendor’s shipping dock, when the merchandise is loaded on the carrier.
Define Freight On Board destination
The title of ownership passes when the merchandise is delivered to the buyer (in this case, when the carrier unloads the shipment at the veterinary practice.)
Define Procurement
The act of obtaining or buying goods.
Define Supply and Demand
The relationship between the product availability and the desire/need of consumers to purchase it.
Define Shelf Life
The period when goods can be stored and remain in optimum condition (before expiration) and suitable for sale or use.
Define Markup
An amount added to a cost price in calculating a selling price, usually expressed in a percentage
Define Margin
The difference between total sales and the cost of those sales, expressed as either a percentage or dollar amount
What are the duties of an inventory manager?
The responsibilities of an inventory manager include the separate roles listed below as well as supervising and overseeing others who perform those roles. The role of inventory manager may be a role that is played by the hospital manager, or it may be a role played by someone else and overseen by the hospital manager.
- Inventory Researcher
- Inventory Purchaser
- Department Lead
- Inventory Receiver
- Inventory Documenter and Tracker
- Inventory Counter
- Bookkeeper
What responsibilities does an Inventory Researcher have?
The responsibilities of an inventory researcher include evaluating and selecting suppliers and products. Product selection criteria is also the responsibility of the inventory researcher and may include the following:
- Evaluate products from three aspects: medical efficacy, patient or condition need, client compliance factors
- Compare similar products and product lines
- Choose which products will be stocked in the practice
- Choose which products will be available for online purchases
- Create and follow product addition guidelines to ensure overstock and product duplication is minimized.
What responsibilities does an Inventory Purchaser Have?
Identifies product purchase needs and places orders for those needs through the pre-chose suppliers chosen by the researcher. This is also known as procurement. The inventory purchaser may rely upon area leads from each department within the practice to provide product purchase needs.
What responsibilities does the Department Lead have regarding inventory?
Takes responsibility for identifying product needs in a particular department, like surgery, treatment, kennel, etc. and communicates those needs to the inventory purchaser. There may be several area leads depending on the number of departments within the practice. Assigning department leads alleviates a heavy burden from the inventory manager while elevating the people who typically work within each department who ave a keen understanding of the products they use/sell and the rate at which they typically are used/sold.
What are the responsibilities of an Inventory Receiver
An inventory receiver is someone who has been trained to unpack, account for, and stock inventory as it is delivered to the practice. There should be enough people trained to handle this role so that shipments coming in on any day at any time can be properly stored and secured.
What are the responsibilities of the Inventory Documenter and Tracker?
The movement of inventory must be documented. And while inventory sales are easily documented in the inventory management software, other movements are not as easily documented and may require tracking systems and manual entries. The inventory documented and tracker role is important in that it documents the receipt of inventory, transfers of inventory, hospital use, shrinkage, etc. so that inventory reports in the practice management software remain accurate and up to date.
What are the responsibilities of an inventory counter?
Counting inventory is part of inventory management and is a critical function for the inventory documented and tracker. All employees, at one time or another, will likely be asked to count inventory. Inventory counting ensures levels on hand match levels documented in the practice management software, and where discrepancies are found, research is done and protocols are updated to correct the issue.
Why would product cost be different from replacement cost?
- Free goods were received as part of a purchase
- Bulk purchasing decreased the per unit cost
- Pricing lists from vendors are updated
- Product discontinuation or back orders force consideration of a different product.
What are the most common symptoms of unctrolled inventory?
- On-hand quantities do not match computer quantities
- Products are somewhere in the practice, but cannot be found
- Stock-outs are a common occurrence
- Products received aren’t entered into the software. There may be stacks of invoices waiting to be entered.
- Product duplication is common
- Low product turnover
- High cost-of-goods expenses
What are the five initial steps that need to be taken to “clean up” an inventory system?
- Print code lists. The list needs to be clean. Deletions or inactivations should be made. Reclassifications should be made so that items are classified correctly. Duplicates should be consolidated. Check the medical supplies and consumables that are entered into the software.
- Reprint the list and double and even triple-check the classifications, drug names, code duplciations, etc.
- Create a list of UNCONSOLIDATED areas where duplicate or similar products exist. Ask the veterinarians in the practice which ones can be paired down.
- Count inventory. These should be conducted when the inventory is not in motion. And the on-hand totals should be corrected as soon as possible.
- Enter/Receive inventory. Going forward, all inventory received from vendors must be entered into the software as it enters the practice.
What are the phases of inventory movement?
- Needs Assessment
- Procurement
- Receiving
- Protection
- Sell/Use
What three sets of criteria should be considered when choosing which vendors best fit with your practice?
- Business Practices
- Representative Qualities
- Practice strategies and needs
What are four considerations for protecting inventory?
- Segregation of inventory management duties
- Storage solutions
- Counting Inventory
- Staff Pet Solutions
What is an acceptable variance for high-turn items?
1 to 4% variance
Which DEA form is required for federal registration
DEA Form 224
Which DEA Form is the Certificate of Registration?
DEA Form 223
How often are DEA renewals done and what form should be used?
Every 3 years. DEA Form 224a
What are the 4 steps to creating an inventory budget?
- Project Revenue.
- Project COG expenses
- Project COG subsection expenses
- Share the budget and communicate expectations with anyone involved with inventory management.
What is Merchandise Inventory
Products purchased for resale to clients
What is Medical Supply Inventory?
items used in the course of providing veterinary medical and surgical services.
What is Just In Time Inventory Practices?
Receiving a product just as needed versus storing the product. Can lower holding costs, and usually have no expired products, but causes higher ordering costs with a higher risk of stock outs and backorders.
What are the goals of inventory control and management?
- The Inventory Roles are filled and responsibilities defined and training performed.
- Products are available to treat patients when needed and clients can conveniently obtain refills
- Quantities are controlled to minimize expenses
- Accurate inventory reports are available
- Regular evaluation of preferred pharmaceuticals and supplies to avoid redundancy, streamline storage, ordering and training.
- Employees can efficiently order, stock, and dispense needed items.
- Controlled drugs are properly maintained
- Security, systems, and safeguards exist to ensure proper use.
- Employees are well versed in communicating the value of products dispensed at the practice and can also confidently field client inquiries regarding online pharmacies or big box stores.
- Fees are adjusted regularly and profit margins are set and accomplished.
What are some losses due to poor inventory management?
- Too much product on the shelf
- Not enough product on the shelf to meet needs of clients or patients
- Frequent ordering
- Shrinkage
- Theft
- Back orders
- Expired product
- Incorrect products ordered or received
- High cost of overnight or rush shipment for products needed asap.
- Shipping costs associated with smaller orders.
What are the minimum categories that should be included in an inventory system?
- Imaging
- Laboratory (in house)
- Flea/Tick/Heartworm prevention
- Retail/OTC
- Diets
- Drugs and medical supplies (can be further broken down)
What are Control Functions?
preparing and distributing written policies and procedures, creating and maintaining security and safety protocol, and regular monitoring of the system via counts and accountability. Needs to be flexible to change.
What is a perpetual inventory system?
One that can provide an accurate idea of inventory quantities at any time. When items are received they are immediately added to the inventory records and when items are used or sold they are removed from the inventory records.
What is a Periodic Inventory System?
Uses data from manual product counts at the end of every financial period.
What are Internal Controls?
All measures, systems, and protocols used to prevent errors, waste, and fraud.
What are Forecasting Functions?
The inventory system should include the ability to signal when an item needs to be reordered to avoid an outage.
What are Purchasing Functions?
The elements of an inventory system that includes purchasing details:
- How, where, and when each item is ordered
- How to avoid ancillary charges
- track back-orders
- Identifies seasonal usage
- Identifies upcoming expiration dates
- Invoices match requested and received products.
- Allows for immediate assessment of increased cost from the vendor in order to pass that increase along to clients.
What are Selling Functions
The elements of an inventory system that deal with profit.
- Price setting
- Tracking profit margin
- Compare inventory and supply expense to revenue generated
- Gross Profit is the difference between the price of a product to the client and the total cost of that product to the practice.
What information should be included on a card using the Inventory Control Card System?
- Item details
- Supplier details
- Quantity
- Re-order point
- Invoice costs
- Storage
- Price to client
1) Inventory Control is defined as the process whereby the need to maintain sufficient inventory to meet _________ ___________ is weighed against the monetary cost of carrying the inventory.
Operating Demands
Combined ordering and holding costs account for approximately what percent of the total true cost?
25% to 35%
When items received are immediately added to the inventory record, and items sold are immediately subtracted from the inventory record, it is called a ___________ Inventory System.
Perpetual
Define Gross Profit on a product
The difference between the price of a product to the client and the cost of that product to the practice.
What are the two main benefits of using a Central Supply Inventory System?
Reduce theft and waste, and better organization and tracking of products.
The ABC Inventory Analysis contains multiple steps and can be somewhat complex – if you had to define the ABC Analysis in 5 steps, what would those steps be?
- Create a spreadsheet and calculate Annual Usage Volume.
- Then calculate cumulative Annual Usage Volume.
- Then calculate the Cumulative Percentage of Annual Usage Volume.
- Then calculate the Annual Usage Distribution.
- Group items into classes A, B, C.
The sum of the beginning inventory (BI) and the ending inventory (EI) divided by 2 is the calculation to determine what metric (BI + EI) / 2?
Average Inventory on Hand (AI)
The higher the inventory turnover ratio, the ___________ the inventory control.
Tighter
What mathematical formula, that recognizes three specific costs including unit cost, ordering cost, and holding cost, allows calculation of ideal inventory ordering?
Economic Order Quantity (EOQ)
Regarding Mark-up and Margin pricing structures, which is a useful strategy to use where there are large differences in the end resulting price based on the size of the patient?
Margin Pricing Method
Which category of drugs is likely to have a higher mark-up; competitive drugs or drugs used to treat chronic conditions?
Drugs used to treat chronic conditions.
Itemizing the various fees potentially associated with dispensing medication (labeling, dispensing, minimum, etc.) on the client invoice helps improve perceived value of the medication. True or False?
False. Clients do not have a complete understanding or appreciation of the costs associated with dispensing medications.
Calculate the inventory variance using the following data;
- Beginning quantity = 250
- Amount ordered and received = 1000
- Amount sold = 942
- Physical count of quantity on hand = 298
- Variance = ________________.
10
What benefits and disadvantages may be involved in Just In Time ordering?
- Benefits – low holding costs, no expired product.
- Disadvantages – high ordering costs, stock outs and back orders.
What are the two main inventory organizational techniques?
Zoning and Central Supply
A running capitol inventory list should contain what information about the equipment?
- Equipment name
- Manufacturer
- Model/serial number
- Purchase date, amount paid and purchase location.
Using the metrics below; what is the break-even number for a potential Laser machine purchase;
- Purchase price $25,000
- Client cost $65
- Technician time to perform the service $15
500 invoices to break even
The practice purchased a digital radiology unit for $35,000. Shipping charges were $2,525. Installation and training costs were $2,750. The practice is planning on the equipment serving them for a minimum of 10 years. Using the formula for calculating equipment expense for profit center use, what is the estimated monthly expense you can subtract from the profit center?
a. $731.25
b. $602.50
c. $4,027
d. $335.62
d. $335.62
According to Practice Made Perfect; applying Pareto’s 80/20 rule to inventory helps in;
- Making organizational decisions about inventory.
- Prioritizing inventory time investment. Since 20 % of our products bring in 80% of our produce revenue, we should concentrate the lion’s share of our efforts on that top 20%.
- Creating a marketing strategy regarding inventory.
- Making budget decisions regarding inventory.
b. Prioritizing inventory time investment. Since 20% of our products bring in 80% of our product revenue, we should concentrate the lion’s share of our efforts on that top 20%
Ideally, the top 20% of inventory items should be ordered;
a. Monthly
b. Weekly
c. When stock is down to 1-3 units.
d. When stock is no lower than 10 – 12 units.
a. Monthly
To maintain tight internal controls the role of Inventory Purchaser should always be a separate individual from (multiple choice)
a. The Inventory Receiver
b. The Inventory Counter
c. The Inventory Documenter and Tracker
d. The Inventory Researcher
a. The Inventory Receiver
c. The Inventory Documenter and Tracker
- The Tax Act of 2003 provided what increased benefits to small business owners (Multiple Choice);
- Significantly increased the amount of eligible property that can be written off in the first year.
- Gave an additional deduction of 50% of the remaining balance of the equipment purchased that is above the $139,000.
- The remainder of the purchases can also be depreciated on a straight line depreciation schedule.
All answers are correct.
- Significantly increased the amount of eligible property that can be written off in the first year.
- Gave an additional deduction of 50% of the remaining balance of the equipment purchased that is above the $139,000.
- The remainder of the purchases can also be depreciated on a straight line depreciation schedule.
- Practices should plan to reinvest around ___% of gross revenue for replacing or acquiring equipment annually.
- 5%
- 3%
- 1%
c. 1%
- Is the digital radiography unit in your practice considered Capital Inventory?
- If it is valued at $1,500 or higher.
- If it is valued at $15,000 or higher.
- Yes, if it is in useable condition.
c. Yes, if it is in useable condition.
What is the formula to calculate annual usage value?
Volume used in a year x Average cost
What information should a Hospital Formulary contain?
- Product
- Use/treatment regiment
- Species Use
- Typical Dosages
- Contraindications
What goals should a completed hospital formulary accomplish?
- Consolidation of existing inventory to a tight manageable supply that increases profitability and decreases product on the shelf.
- Creation of a physical inventory map
- Reorganization of the practice management databse.
What are strategies to minimize inventory costs?
- Delayed billing
- Quantity discounts may be beneficial if the product is salable and if the storage costs do not neutralize the savings
- Do not take discounts, bulk prices, or delayed billing into account when pricing products for client sale.
- If holding costs and risk of shrinkage is high and inventory turns are low on a specific product, it may make more financial sense to offer that product on an online pharmacy or other suppliers
- Make sure short dated stock is identified and sold first or returned
- Price increases should be passed onto clients immediately.
Define dispensing fees
Fees added after the markup has been determined. These fees cover the staff time used in counting, preparing, packaging, labeling and the supplies involved in doing so.
Define Labeling Fees
Applied to products sold in the original container that do not require a team member to count. These fees cover staff time to prepare and label the supplies.
Formula for Aging Inventory Pricing Model
Product Cost + Markup + Dispensing Fee
Formula for Modern Inventory Pricing Model
Product Cost + Hidden Costs + Profit + DVM Pay
Formula for Regular Pricing
Total product cost + 50% profit + 15% DVM Pay
Formula for Competitive Pricing
Total Product Cost + 20% Profit + 10% DVM Pay
Formula for Online Pricing
Product Costs + Labor Costs + 30% Profit
What is a break even analysis?
An analysis that is used to determine when your business will be able to cover all of its expenses and begin to make profit.
What is a break even point?
The amount of revenue that covers all fixed and variable costs, without generating either profit or loss.
What are the options for disposing of expired drugs?
- Return to vendor if possible
- Dissolve expired tablets in wafter, add to cat litter and dispose of in trash (injectable drugs treated the same)
What things should be considered when purchasing new equipment?
- Is the equipment new to the practice or replacing existing equipment? If it is a replacement, what benefits does it have over the existing equipment?
- How will the equipment be paid for: cash, lease, finance?
- What will the client be charged, and where is the break-even?
- Cash is typically the smartest, most economical way to purchase.
- Perform a break even analysis prior to purchase
What considerations should be made when financing equipment?
- What is the interest rate and terms of the loan, and is it the best you can find?
- Develop cash flow projections of revenue and expenses, including a reasonable payback plan
- Equipment loan lengths should not exceed the expected lifespan of the equipment (normally 5 to 7 years)
- Credit lines are not recommended for equipment purchases since they often must be paid back within 12 months. Credi lines are best left for emergency withdrawals if needed.
What are the 3 C’s that lenders are interested in?
- Cash flow of the project purchase
- Credit history of the business or owners (owners will often need to co-sign the loan to the business)
- Collateral
What considerations should be made when leasing equipment?
- Thoroughly research different equipment
- Interest is often higher for leases than loans
- Balloon payments can be necessary at the end of the lease in order to keep the equipment
- The option of returning the equipment at the end of the lease may leave the practice without needed equipment
- If a piece of equipment has a short life span before it is obsolete, leasing may be a wise strategic option.
- Lease payments may be 100% deductible on income tax returns
Define ATC
Total revenue over a period of time divided by the total number of transactions during that same period; this represents the average amount spend by clients each time they visit the practice. (Average transaction charge)
Define KPI
Key metrics (financial and operational) used to measure performance of an organization.
Define Practice Information Management System (PIMS)
The software system used by the practice for client invoicing, medical records, inventory, metric analysis, tracking of accounts receivable, and other revenue-related activities.
How much of total gross revenue does vaccination revenue account for in a companion animal general practice?
7 to 8%
What percentage of total gross revenue does diagnostic services (laboratory, imaging, and other) account for in a typical companion animal general practice?
18 to 20%
What percent of total growth revenue does dentistry revenue account for in the typical practice range?
2.5 to 5.0%
What is the typical percentage range of total gross revenue that is accounted for in revenue from product sales (prescriptions drugs, HW prevention, flea and tick products, food, and OTC)
28 to 34%
How do you determine revenue ratios?
By dividing a particular revenue or expense amount by total gross revenue.
Equation for Total Practice Revenue
Revenue = Number of transactions x ATC
Total practice revenue divided by the number of full-time-equivalent doctors of veterinary medicine helps evaluate the productivity of the practice as a whole.
Equation for total doctor revenue
Doctor Revenue = Number of doctor transactions x Doctor ATC
Includes revenue for all medical and surgical services
Does not include revenue for ancillary services (boarding, grooming, OTC product sales)
Usually 85 to 90% of total practice revenue
Total doctor revenue divided by the number of full-time-equivalent veterinarians helps evaluate medical productivity of the practice.
What are conditions that cause changes in revenue KPIs?
- Fee increases
- Change in transactions (number of clients or number of visits per client)
- Change in recommendations made to and accepted by clients
- Change in support staff (number, competency)
- Equipment additions
- Change sin the demographics of pet owners visiting the practice
- Range and mix of services
- Changes in economy
- Discounts and missed charges
- Efficiency
What things should be considered when moving towards a more logical fee schedule?
- Cost of providing services
- Perception of value
- Similar products should be priced at similar amounts unless there is a value component that will differentiate them.
Define Actual Value
Actual value is obtained from real performance. Actual values are either current for the time period being studied, or they may be historical from an earlier time period.
Define Bottom Line
Typically, a synonym for profit, referring to the bottom line in financial statements that indicates net profit or loss.
Define Favorable in accounting
Historically, people described budget variances as “under budget” or “over budget”. These characterizations created confusion because sometimes being under budget was a good thing sometimes it was a bad thing. In lie of these characterizations, the term favorable should be used. A favorable results is always a desirable result.
Define Operating Budget
The most common budget format encompasses a 12-month period of operations. Operating budgets typically include those items found on a profit-and-loss statement, bu not usually items found on a balance sheet or cash-flow-statement
Define Projected Value
Projected value is your best guess for anticipated future performance. For example, if last year the practice generated $1000 and the next year it expects to generate $1,100 the practice’s projected value is $1,100.
Define unfavorable in accounting
An unfavorable result is always an undesirable result. For example, if the practice projected $1,000 in revenue and only produced $900, the result is a $100 unfavorable variance.
Define Variance
Variance is the difference between the projected value and the actual value for each line item in the budget. For example, if the practice’s projected value for the current year was $1,100 and the actual value generated is $1,150, the variance is $50
Define Top Line
Typically a synonym for revenue, income (or turnover in some countries), referring to the top line in financial statements that indicates income received by the business.
What factors determine how much product sales contribute to practice revenue and profitability?
- Display space and location
- Appropriate markups
- Marketing and sales training of support staff
- Use of point-of-purchase sales material, signs, and so on.
What are steps that can be followed to increase revenue from laboratory testing?
- Establish circumstances under which the test will be recommended to clients.
- Develop a protocol for recommending the test to clients.
- Introduce protocols at staff meetings, and review the benefits associated with the test and its implementation
- Implement the program and measure its success. Review results with staff at your next staff meeting.
Define Chart of Accounts
Systematic listing of all categories used to group payments in a practice’s accounting system.
Define Cost of Professional Services
Group of direct costs associated with producing a product or service; in veterinary medicine, these costs generally include drugs and medical supply expense, laboratory expense, dietary product expense, and other similar items. Employee labor costs are not included here.
What is the first step in monitoring expenses?
Ensure that the person paying the bills understands the categories to which expenses should be assigned, and consistently puts expenses in the appropriate categoreis.
What are the two broad categories that veterinary expenses are divided into?
Cost of professional services (direct costs of patient care and product retailing, like drugs and professional supplies and laboratory fees) and general and administrative (G&A) expenses.
Define Accrual Basis Accounting
Accounting method that recognizes income when it is earned and expenses when they are incurred, regardless of when cash is received or disbursed. The accrual method in its purest form provides a very close matching of assets consumed (G&A costs expended) with revenue generated for the period of time under consideration.
Define Capital Asset
A cost that has utility over more than one accounting period; for example, a computer printer
