In veterinary practice ownership, cost of goods sold (COGS)—comprising consumables like medications, diagnostic supplies, and vaccines—can quietly erode your margins if left unchecked.
Understanding COGS and Its Impact in Veterinary Settings
COGS includes the direct costs of items used or sold during patient care. This is separate from overhead like rent or payroll.
Monitoring this metric is vital because even strong revenue streams can mask profitability issues if COGS are high. Efficient COGS management goes a long way toward accurate budgeting and sound financial planning.
For veterinary practices, COGS combined with labor make up the bulk of controllable expenses. This means it’s important to practice precision—both in clinical care and inventory control. A good rule of thumb: drugs and medical supply costs should represent around 10–12% of revenue. Any higher and that becomes a direct hit to your bottom line.
Three Compassionate, Practice-Forward Strategies to Reclaim Profit
Optimize Inventory Flow with Turnover Goals
Your pharmacy isn’t a warehouse—it’s more like produce at the grocery store: ideally moving off the shelf in about 30 to 45 days. Setting a target turnover rate of 8–12 times per year helps to reduce clutter, spoilage, and unnecessary tie-up of capital.
Simplify Your Item Mix
Holding five brands of flea preventives or multiple package sizes may please every preference—but it ties up cash. Streamlining to one or two trusted options can produce faster wins and better cash flow.
Where possible, incorporate classification standards so high- and low-impact items are flagged for differentiated handling. This helps manage space and capital more wisely.
Leverage Your Practice Management System to Automate Precision and Pricing
Your PIMS can—and should—do more than track patient visits and info. Accurate inventory tracking and automatic markup adjustments help ensure rising costs don’t silently undercut margins. These tools empower you to respond dynamically when vendor costs change.
Also, compare lab fee options and consider joining buying groups for volume discounts—these can shave costs from lab-related COGS.
Be Strategic with COGS
Reducing inventory waste and aligning ordering with actual usage frees up funds to reinvest in your team, enhance equipment, and support future transitions—without sacrificing the care standards you’ve built.
Your Practice, Stronger and More Sustainable
Your veterinary clinic isn’t just a business—it’s the result of years of care, reputation, and relationships. Prioritizing COGS clarity and control honors that legacy while building financial resilience.
So how do you feel about your P&L today? And hhow might a focused look at inventory turnover, product simplification, and smarter pricing help strengthen your practice—for now and for what lies beyond? Let’s explore that together.
