Counting your meds and supplies inventory

If you keep a stock of meds or supplies to sell or dispense, the shelf is money you haven't used yet. A simple count at month end, or at least at year end, keeps your profit honest and shows you what's sitting unused.

Why the shelf matters

Say you buy six months of a medication in one order because the price is better. If the whole bill hits your P&L as an expense that month, profit looks terrible that month and too good for the next five. Your real cost is what you dispensed, not what you bought.

Inventory fixes that. What you buy goes on the Balance Sheet as an asset first. As you dispense it, the cost moves to the P&L. The count at month end tells your bookkeeper how much is left.

When it's worth tracking

Not every practice needs full inventory tracking. I'd track it when:

• You sell or dispense meds, supplements or supplies and charge for them.
• You buy in bulk, so one order covers more than a month or two.
• The amount on your shelves is large enough that ignoring it would change your profit in a way you'd notice.

If you buy a little at a time and it's gone within the month, expensing it when you buy it is usually fine. Ask your CPA which method fits your practice and how they want it handled at tax time.

How to count without it taking all afternoon

• Pick the last business day of the month and count then, every time.
• Keep a simple sheet: item, quantity on hand, cost per unit, total.
• Use what you paid per unit, from the supplier invoice, not what you charge members.
• Count the expensive items every month. Count the cheap ones quarterly.
• Send the sheet to your bookkeeper with your statements.

In a made-up example, you count $6,200 of meds on hand at the end of March and $5,400 at the end of April. You bought $3,000 during April. Your cost of meds dispensed in April is $6,200 plus $3,000 minus $5,400, which is $3,800. That's the number that belongs on the April P&L, not the $3,000 bill.

What the count tells you

The count is also a check. If the shelf keeps shrinking faster than your dispensing records say it should, something is off: expired stock that got tossed, items used in visits but not charged, or a counting mistake. Expired stock is a real cost and should be recorded as one.

It also feeds your margin math. This post shows how to see whether meds and labs make or lose you money.

What I'd do this week

• Make a one-page count sheet with your ten most expensive items.
• Count them on the last business day of this month.
• Ask your bookkeeper whether your books track inventory now, or expense everything when it's bought.

Common questions

Do I need inventory software?
Not to start. A spreadsheet with item, quantity and unit cost works for most practices. Software helps once you carry a lot of items or sell online.

What about samples I got for free?
They didn't cost you anything, so they don't belong in the dollar count. Track them separately if you want to know what you have.

How should expired meds be recorded?
As a cost in the month you throw them out. Tell your bookkeeper the item and the amount so it doesn't stay on the Balance Sheet.