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Dental Procurement; The Big Small Costs of Poor Procurement

September 18, 2020

Blog Articles

“Take care of the pennies, and the dollars will take care of themselves.”
– William Lowndes

It’s an adage that still rings true today, big dollars are made out of small pennies, and significant losses are made up of a series of perceivably minor hits.

When procuring high volume small-dollar MRO items (maintenance, repair, and operating supplies), what may seem inconsequential can, in fact, have a significant impact on your dental practices bottom line. A little effort to improve and digitize your dental practices procurement and administration processes can go a long way, helping you stack up substantial savings fast.

Here’s how.

Price Discrepancies

Just as your internal administrative processes may be lacking, so maybe your vendors. Prices and validity periods are often quoted but not adhered to. Verification of the invoice price to the PO price is a part of the standard three-way match procurement process and ensures you pay what the supplier committed to, what you expected and accounted for.

Invoicing Errors

The high volume, frequency of use, packaging, pricing, and order size variables make MRO items highly vulnerable to invoicing errors. Per-box pricing could easily be charged per item, short shipments could be charged in full, or the wrong UOM could be used. These issues are often difficult for the human eye, especially that of a busy employee, to catch.

Pricing Commitments

Without an easy way of keeping track of quotes, it’s easy to miss out on pricing commitments previously made, allowing vendors the opportunity to increase prices prematurely. If left unchecked, this can lead to price creep. Worse yet, you could lose out on even more of those hard-earned pennies by buying from a more costly source simply due to a lack of easy access to comparative quotes.

Promotions Management

Promotions can seem like a good deal and are often used as motivators to urge dental practices to order a little more, or sooner than they perhaps otherwise would. However, a deal is only a good deal if you actually get it. Due to the high volume and different types of promotions vendors offer, you may never receive your “free” items or end up paying for them.

Promotion types you may be missing out on:

  • % Discounts: 20% off your entire order
  • $ Off: $50 off a total order spend of $500 or more
  • Multi-buy: Buy X, get X
  • Hybrid: Buy 1 get one 50% off
  • Conditions based: Buy X many or before X date
  • Free shipping
  • Free promotional items or no charge samples
  • Product range specific: 10% off all private label products
  • Loyalty programs or yearly rebates: Spend a total of $X yearly, receive a 2% discount

Product Returns

Products may arrive damaged, or the wrong item may be sent in error. The lack of a three-way match between the purchase order, receipt, and invoice is likely you’ll pay in full and eat the cost yourself. A systematic way of processing returns ensures you pay for correct and usable products only.

Incidental Charges

Service charges, shipping fees, and taxes are just some of the miscellaneous, incidental charges that may crop up on invoices. It’s essential you’re aware of and agree to extra charges ahead of time and take them into consideration when reviewing requests and quotes for a true “apples to apples” comparison.

Redundant Invoices/ Dual Payment

Your office may receive multiple copies of the same invoice, vendors may invoice the same shipment twice in error, or you may miss noting payment was made, any of which may cause redundant payments. Ensuring you pay once and only once for what you received may seem like a no brainer, but without the right system and process, it’s amazingly easy for these expensive errors to occur.

Last, but most definitely not least, delays in processing invoices and thereby, payments, can have a further financial impact from incurred interest penalties.

Your office may handle hundreds if not thousands of products and services, each of which must be managed through every step of the Procure-to-Pay (P2P) process, for every order. The similarity of products and SKUs, the variability in packaging, short shipments, and backorders all cause extra confusion, leaving room for costly profit-eating errors and is just one more reason to add Method to the madness.