0 Comments

It really doesn’t seem like that long ago when we found out the sum total of our Cost of Goods Sold from our accountant just before filing our taxes. Sure, there have always been metric happy (before “Metrics” became the buzzword it is today) practitioners who assiduously tracked every dime that flowed through their practice, and probably would have been happier as a CPA. But that was then, and this is now, and all the tools you need are at your fingertips.

Practice Management software has revolutionized the way we do business, from our appointment books to electronic billing to having the capability to go virtually totally paperless. Two other major areas that should be front and center in your consciousness is running Cost of Goods Sold (COGS) and inventory reports monthly (more on this next post), and comparing them with actual hardware sales. This neither requires hours of your time, nor an MA in Accounting to give you useful data.
Experts make recommendations all the time about what a healthy ratio is between sales and COGS, but in reality, it comes down - do you feel you make a reasonable and adequate profit margin on the level of sales you make for the market on which you focus? Generally, for example, a practice which exclusively sells at the top end of the market will have a higher COGS than one that is oriented more towards the middle part of the market. The key is is to be aware of your COGS, and to track it regularly.

Watching your COGS will do several things for you. It will establish a baseline, so if you see spikes, you will know you need to do some research. A new employee with a lot of redo’s? A price increase from a vendor that you need to pass along to the patient? Or maybe now that you are tracking it, it looks like a black hole that is sucking the profits out of your practice because no one has been accountable?

Having a review of your COGS be a part of a staff meeting once a month will let your staff know that this is important to the practice, and that you are watching, and that you care. If you see a spike that is not supported by sales (a spreadsheet that compares your capture rate with your COGS would be and easy and effective tool), have your staff research exactly why and report back within 48 hours. If they are not aware that this is important to you, it won’t be important to them, and unnecessary expenses will silently start to suck the lifeblood out of your practice.

Are you tracking YOUR COGS? Have you found any tools that work well for you in this area? Let us all know, so we can keep our practices alive and healthy.

Further resources: http://www.billgregoryoptician.com/
Facebook: Bill Gregory Optician
Follow me on Twitter at @BillGregoryLDO