Supply Cost

Look at your dental supply catalog and you may be shocked at how expensive a bottle of bonding agent can be.  It won’t be a surprise then to find out that the cost of dental materials is one of the common places for the overhead monster to rear its ugly head.  The good news is that it’s easy to track your spending and make strategic decisions.

(1) Add up your spending in this category for a given time period.  If you use Quickbooks or a similar accounting software then this should be easy.  I recommend looking at quarterly, semi-annual, and annual periods.  Spending on supplies can vary significantly from month to month, so you don’t want to make any big decisions based on a single month.  Okay, so now you have a big number, now what?

(2) Divide this number by your gross collections and multiply by 100 to get a percentage.  Your overhead for dental supplies should be around 5%.

PearsonProductsIf your number is too high, you may be tempted to just start ordering less expensive materials.  Hold your horses!  You can do a procedure cost analysis, to find out if a certain material is too expensive for what you’re charging.  You may find that a particular material is too costly for your fees but I doubt that making that change will drop your percentage significantly.

Instead, look for an overall reduction in the cost of your materials.  When was the last time you sat down with your dental supply sales representative and talked about your bill?  Armed with this overhead analysis, you may be able to negotiate a bigger discount on all of your materials.  If not, perhaps it’s time to find another supplier.  This is the strategy that can result in dropping from 8% to 5%.

Of course, another strategy is to just produce more.  Perhaps your supply discount is perfectly fine and you are just sitting on a lot of inventory your don’t need.  increasing your production isn’t as simple as just snapping your fingers, but it may the the underlying cause of why your overhead supply percentage is too high.  A good way to find out is to run the overhead calculations for your other costs, like staff and lab.  If all of your numbers are running a bit high then you probably are under-producing.

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