Cornerstone 8.1 Improving Inventory Performance Coaching Course

Transcription

1 IDEXX Cornerstone * Practice Management System Cornerstone 8.1 Improving Inventory Performance Coaching Course Participant Workbook

2 Proprietary Rights Notice Information in this document is subject to change without notice. Companies, names and data used in examples are fictitious unless otherwise noted. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical or otherwise, for any purpose, without the express written permission of IDEXX Laboratories. IDEXX Laboratories may have patents or pending patent applications, trademarks, copyrights or other intellectual or industrial property rights covering this document or subject matter in this document IDEXX Laboratories, Inc. All rights reserved *Compliance Assessment Tool, Cornerstone, Patient Advisor, Patient Clipboard, PetDetect, SmartLink and VetLab are trademarks or registered trademarks of IDEXX Laboratories, Inc. or its affiliates in the United States and/or other countries. All other product and company names are trademarks or registered trademarks of their respective holders. Published by IDEXX Laboratories, Inc. Published by IDEXX Laboratories, Inc. IDEXX Computer Systems 2536 Alpine Road Eau Claire, Wisconsin 54703, USA (715) idexx.com Printed in the United States of America. CS81_IIP_CC_ _REV04

3 Table of Contents Cornerstone 8.1 Improving Inventory Performance Coaching Course Table of Contents Introduction to Course...4 Improving Inventory Performance Chapter 1: Inventory Performance Introduction...6 Importance of Accurate Inventory Management...7 Experiences and Goals...8 Inventory Performance Benchmarking Sources...8 Inventory Cost and Quantity Workflow Overview...8 Identify Performance Improvement Target...9 Chapter 2: Quantity Troubleshooting and Goals...12 Item Setup...13 Quantity Troubleshooting Checklist...14 Quantity Troubleshooting Reports...17 Chapter 3: Cost/Price Troubleshooting and Goals...19 Cost and Pricing...20 Common Issues...20 Chapter 4: Profitability/Margin Troubleshooting and Goals...22 Profitability and Margin...23 Factors Affecting Profitability...23 Chapter 5: Turnover Troubleshooting and Goals...25 Turnover...26 Factors That Can Affect Turnover Rates...26 Wrap Up and Review Wrap Up and Review...29 Appendix Invoice Item Setup List Steps to Inventory Setup...38 Barcodes...40 Key Reports List...41 Inventory Tips...42 Modified Inventory Flowchart...43 Skill Assessment...44 Evaluation...46 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Page 3

4 Introduction Introduction to Course Overview This course focuses on improving your practice s inventory performance. Lessons, discussion points and exercises are designed for you to work with your live database to identify and stop inventory leaks. The overall goal is to assist you in increasing efficiency, inventory turns and profitability. Discussions and lessons are designed for single location only (see diagram). Prerequisities The following prerequisites are required for this course: Completion of the Initiating Inventory Management training or acceptable completion of Initiating Inventory Management Skill Assessment Currently running Single Location Inventory Minimum of 2 full EOM closed periods for reports Basic transaction recording of costs (receipts) and sales (invoicing history). Minimum of 2 full months for each. Objectives Maintain accurate quantities, with no negative quantities Monitor and maintain accurate costs Monitor revenues and maintain/increase margins Monitor and improve inventory turns Chapters 1. Inventory Performance Introduction 2. Quantity Troubleshooting and Goals 3. Cost/Price Troubleshooting and Goals 4. Profitability/Margin Troubleshooting and Goals 5. Turnover Troubleshooting and Goals These icons appear regularly throughout this training. Here s what eac one means. Discussion: The trainer will lead a discussion of the topics listed. Note: Provides additional information regarding the feature or topic. Tip: Provides helpful information as it pertains to the use of the feature or topic. Page 4 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Introduction

5 Section 1 Improving Inventory Performance Cornerstone* 8.1 Improving Inventory Performance Coaching Course Page 5

6 Chapter 1: Inventory Performance Introduction Chapter 1: Inventory Performance Introduction You ll learn these important concepts within this chapter: Importance of Accurate Inventory Management Experiences and Goals Inventory Performance Benchmarking Sources Inventory Cost and Quantity Workflow Overview Identify Performance Improvement Target Page 6 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Inventory Peformance Introduction

7 Importance of Accurate Inventory Management Cornerstone 8.1 Improving Inventory Performance Coaching Course Inventory management is an ongoing process required to achieve your optimal inventory performance levels. Proper training of the inventory team, proper inventory item setup, correct receipting, accurate invoicing and diligent monitoring are necessary to maximize your return on investment. Add to beginning; Learn to identify inventory performance components and set goals. Target an inventory item to improve performance. Inventory performance concepts of quantity, cost, margin and turnover Find industry benchmark sources to set goals Understand Inventory Workflow for cost and quantity Identify inventory target using key reports Action steps to attain inventory goals Performance and success, which will be the focus throughout this course, are directly linked to the following parameters: Quantity maintaining correct quantities on hand & avoid negative quantities Cost/Price maintain accurate costs & monitor fees Profitability/margin monitor relationship between revenues and costs for accuracy and at a margin that allows you to continue to invest in your business Turnover track frequency of items that complete a purchase and sale cycle Cornerstone* 8.1 Improving Inventory Performance Coaching Course Inventory Peformance Introduction Page 7

8 Chapter 1: Inventory Performance Introduction Experiences and Goals Every practice will have different experiences and goals with Cornerstone inventory. Here are some examples: Some of you may be unsure of what you should be reviewing and monitoring. You need an approach that will guide you through starting your improvement project and provides direction for how to go about collecting your current metrics to determine your starting point. Some of you may have experienced negative quantities on hand. This course enables you to identify the transactions, windows, and reports that will help you target the root of the problem. Some of you may be unsure about your inventory margin. This course will guide you to key reports to review and monitor margin and profitability as well as highlight factors that affect your inventory bottom line. Some of you may not understand what an inventory turn is. So, the first step is understanding its meaning, then understand what the reports are telling you. Then you may proceed with improving upon your inventory turn metrics. Inventory Performance Benchmarking Sources Goal setting can be established using industry benchmarks. Recognized sources include, but are not limited to: AAHA, Well Managed Practice Study, NCVEI and VHMA. Throughout this course, we may refer to these sources to help determine if the numbers on our Cornerstone reports are good or poor. Discussion: What other methods are currently used in your practice to identify problematic inventory? End of Period and Inventory reports with inaccurate quantities on hand, skewed costs or seemingly low revenues and/or margins Visual assessment of product on shelves including quantities, number of same product types (ex: NSAIDS), condition (dusty or expired) Anecdotal or mental notes of items that you need, but are frequently out of stock, or they consistently need to be ordered because it s preferable to order repeatedly rather than tie up cash on the shelves. Inventory Cost and Quantity Workflow Overview The diagram below illustrates how Cornerstone transactions impact inventory cost and quantity. Page 8 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Inventory Peformance Introduction

9 Identify Performance Improvement Target Cornerstone 8.1 Improving Inventory Performance Coaching Course Use these reports to view cost and quantity transaction information over periods of time for the previously mentioned transaction types: Quantity on Hand (QOH) focus: Counts Report Reports > Inventory > Counts Report Sort by Item Description, Location or Class ID Relevant report fields include: Actual (QOH write in), On Hand (sell UOM), Location, Expiration Date & Lot Number Cost Focus: Cost Report Reports > Inventory > Cost Report Sort by: Item Description, Class ID, Vendor, or Location Relevant report fields include: Base Price (sell price), current QOH (by/sell UOM, negative qty items excluded from report ), Average Cost, Total Cost, Markup/Margin, Last (purchase) Date, last purchase cost, primary vendor, location Cornerstone* 8.1 Improving Inventory Performance Coaching Course Inventory Peformance Introduction Page 9

10 Chapter 1: Inventory Performance Introduction Profitability/margin focus: Cost of Goods Sold (only sold items, based on net sales, for any time period) Reports > End of Period > End of Month > Cost of Goods Sold Report Sort by: Revenue Center, Class or Location Fields include Qty sold, Sales (Net-less discounts and manually changed prices, includes dispensing fees), Cost (based on avg cost x qty sold), Profit (dollars), Margin (%) and Percent of gross profit (% of all inventory sales). -or- Item Profit Analysis Report (all QOH items, based on gross sales, for current month & current YTD only) Reports > Inventory > Item Profit Analysis Report Sort by: Revenue Center, Class ID or Location Relevant report fields include: Month to Date and Year to Date Frequencies (qty), Year to Date Sales (grossexcludes discounts and manually changed prices, including dispensing fees), Year to Date Cost (avg), Year to Date Profit (in dollars) Page 10 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Inventory Peformance Introduction

11 Cornerstone 8.1 Improving Inventory Performance Coaching Course Inventory Turns focus: Turnover Report Reports > Inventory > Turnover Report Sort by: Item Description or Class ID Relevant report fields include: Beg. QOH, Received, Adjusted, Returned, End QOH (includes Internal Stock Use and negative quantity invoices) Date Range: Choose a range for a 12 month period. Ranges are based on closed EOM periods. Based on the report findings, determine targets to use for the remaining lessons. Targets can be: classification of items location specific invoice items Once target is established, set goals that will improve QOH, cost, profitability and/or turnover. The following steps provide an example of action items that can lead to goal achievement: 1. Fix setup 2. Reduce the quantities on the shelves 3. Make sales price adjustments 4. Remove items from the shelves and stop selling those items or, possibly change your selling strategy 5. Do nothing (if desired metrics for quantity, cost, turns, margin is reached) Chapter Summary You learned these important concepts within this chapter: Importance of Accurate Inventory Management Experiences and Goals Inventory Performance Benchmarking Sources Inventory Cost and Quantity Workflow Overview Identify Performance Improvement Target Cornerstone* 8.1 Improving Inventory Performance Coaching Course Inventory Peformance Introduction Page 11

12 Chapter 2: Quantity Troubleshooting and Goals Chapter 2: Quantity Troubleshooting and Goals You ll learn these important concepts within this chapter: Item Setup Quantity Troubleshooting Checklist Quantity Troubleshooting Reports Page 12 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting and Goals

13 Cornerstone 8.1 Improving Inventory Performance Coaching Course Item Setup Invoice Item - Reorder Points, Buy/Sell Ratios, Exp. Date/Lot Tracking & Link Items Maintaining accurate quantities on hand is especially challenging. Maintaining a lean* inventory without running into shortages maximizes profitability. However attaining this goal takes careful and diligent monitoring. When quantities on hand are incorrect, one or more of the following factors need to be considered and reviewed: Item Setup Invoicing Ordering Receiving Internal Use Returns Adjustments Shrinkage * a 30 day supply on hand Cornerstone* 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting and Goals Page 13

14 Chapter 2: Quantity Troubleshooting and Goals Quantity Troubleshooting Checklist We ll use this checklist to... Area Guideline Explanation Item Setup Clear Descriptions Include the smallest sell unit in the description. For some, also include the normal sell package. Correct Buy and Sell UOM set up QOH Tracking Reorder and Overstock points Linking of QOH Items Not Invoiced Invoicing Incorrect quantities invoiced to client. Incorrect item invoiced to a client Client returned items not invoiced. Buy ratio set up incorrectly as 1 bottle = 1 tablet Items marked to maintain QOH are not being received into inventory but are being invoiced to a client. Single dose of flea preventative invoiced to client, but not entered on inventory receipt. Reorder levels and quantities based on incorrect buy/sell ratios, or sales history not used to determine ideal levels. PureVax Rabies dose is marked to maintain QOH, but dose is not linked to feline Rabies vaccination service. Common Trouble Categories or Invoice Items Heartworm / Flea Tick Prevention Pharmaceuticals Rimadyl 75 mg 90 ct bottle, Rimadyl 75mg tablet Receive a bottle of 1 tablet when actually 100 ct bottle. Receiving and ordering defaults to buy UOM. Common Trouble Items Items w/same strength, different sizes foods flea/tick/hw Pharmaceuticals Seasonal items allergy meds flea/tick Vaccine inventory linked to vaccine service injectables In-House Lab items 10 tablets invoiced as 1 Canned foods items sold individually and in bottle package Feline C/D 10 lb bag invoiced as canine C/D 10lb bag Returned items are not invoiced with a negative quantity. Species specific item size, strength flea, tick, foods Any item returned by client and resold; typical: can food, unopened flea/tick/hw Cornerstone Report Report > Invoice Item Invoice Item Setup Range: Type I Inventory Evaluation Report Inventory Counts Report View on inventory setup tool window Inventory Evaluation Report Inventory Linked Items report Inventory Sales (EOP) report Invoice Item report Invoice Item Sales Report (no species on sales reports) no report Patient Visit List/Saved Invoice Items are not marked as Performed on the Patient Visit List (PVL). Inventory details are not verified on the PVL. Saved invoices are not deducted from QOH. Any items when details do not auto-verify Inventory Open Audit Details report EOP - Patient Visit by Type List Page 14 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting and Goals

15 Cornerstone 8.1 Improving Inventory Performance Coaching Course Area Guideline Explanation Ordering Incorrect amounts placed on order Incorrect reorder and/or overstock points. Common Trouble Categories or Invoice Items Seasonal items Returned items flea/tick/hw, foods Cornerstone Report Inventory Evaluation report Ordering based on reported QOH Reported QOH is not current. Any item QOH tracking not set up or used correctly Inventory Counts Report Receiving Posted incorrect quantity on inventory receipt Receipts not posted. Receipts not entered in a timely manner. Posted 1 instead of 10 units. Posted to Sell UOM rather than Buy UOM. 1 tablet instead of 1 bottle of 100 tablets Receipts only saved, not posted. Note: only posted receipts update the QOH. Late entry of inventory causes incorrect counts. Any items that package size varies n/a n/a Inventory Receipt Report Inventory Purchase History Report Inventory Receipt Report Inventory Partial Receipt Report no report Internal Use QOH reports lower than on shelves. QOH reports higher than quantities on the shelves. Ex: Duplicate transactions entered. Ex: Items used internally not entered and/or communicated In-House QOH used items catheters fluids food medications Inventory Internal Usage report Incorrect quantities recorded. Mis-entered quantities, entry error. Returns Incorrect quantity returned. Ex: Returned 10 tablets instead of 100 tablets (defaults to sell UOM) b/s ratios incorrect Inventory Returns Report Incorrect UOM selected and quantity returned not changed appropriately Ex: Return qty defaults to QOH and Sell UOM. Changed to Buy UOM, and quantity not changed. Cornerstone* 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting and Goals Page 15

16 Chapter 2: Quantity Troubleshooting and Goals Area Guideline Explanation Adjustments Wrong quantity entered. Misentered qty to be adjusted Incorrect amount adjusted. Wrong cost amount adjusted Too many people w/access, not Multiple entries for same checking adj report priority item in period because multiple people are doing the same task. Shrinkage Unaccounted for QOH variances. Ex: items given to client without being invoiced, broken or damaged items not deducted from inventory, theft. Common Trouble Categories or Invoice Items Adjustments - any item can be issue Food flea/tick/hw Cornerstone Report Inventory Adjustment report Inventory Adjustment report (look at user ID) Internal Usage Report Page 16 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting and Goals

17 Cornerstone 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting Reports Discussion: Discrepancies - Is the reported QOH always too low or too high? TRAINER-LED DEMONSTRATION 1. Run the Inventory Counts Report. 2. Sort by Location ID, Class ID or Item Description. If QOH is Low - 1. Review the item set up, including linked items. Use the Inventory - Evaluation Report and the Inventory - Linked Items Report 1.1. Are items over linked depleting too much? Ex: Bordetella vaccine service is linked with both intranasal and injectable bordetella inventory items Are items marked QOH, but not being received into inventory? Ex: single dose, 6 ct. and 12 ct. Heartgard are separate invoice items, all tracking QOH, but only 6 and 12 counts received into inventory. 2. Evaluate use: 2.1. Sales - Returned items not being invoiced; invoicing correct product, but client given wrong product Ex: canine I/D, feline I/D Use the Invoice item Sales Information Report and the Audit Report (for linked items) 2.2. Purchases - Receipts are not entered, receipts are only saved and not posted, the wrong quantity was received. Use the On Order Report, Audit Report, Receipt Report 2.3. Internal Use - Duplicate entries exist and items are reported but not removed from the shelf Internal Usage Report Adjustments - Duplicate entries exist and incorrect adjustments were made. Use the Adjustment Report 2.5. Other - PVLs (also duplicate PVLs with invoice for same item already posted) with items at Performed status and Inventory Details were verified, or saved invoices with items that have verified inventory details are deducted from QOH, and should not be included in physical counts. Use the Open Audit Details Report (only items with verified details) 3. Make adjustments with the invoice item set up, enforce tighter protocols for entering of receipts, internal use and review of PVLs. Look before making QOH adjustments! If QOH is High - 1. Review the item set up, including linked items. Use the Inventory Evaluation Report and the Inventory Linked Items Report 1.1. Are items under linked not being depleted? Ex: Bordetella vaccine service is not linked with bordetella inventory item Are items marked QOH, but not being received into inventory. Ex: single dose, 6 ct and 12 ct Heartgard are separate invoice items however, all are set to track QOH, but only the 6 and 12 counts are received into inventory. Cornerstone* 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting and Goals Page 17

18 Chapter 2: Quantity Troubleshooting and Goals 2. Evaluate use: 2.1. Sales - Does the item have sales history? Use the Invoice Item Sales Information report Use the Audit Report (for linked items) 2.2. Purchases - Duplicate receipts entered, wrong quantity received. Use the On Order report, Audit report, Receipt report 2.3. Internal use - Items used but not reported. Use the Internal Usage Report 2.4. Adjustments - No unconfirmed or incorrect adjustments made. Use the Adjustment Report 2.5. Other - PVLs with items: not at the Performed status inventory details not verified saved invoices with items with unverified inventory details are not deducted from QOH Use the Open Audit Details report (only items with verified details) 3. Make adjustments With the invoice item set up properly you need tighter protocols for the entering of: Receipts Internal use Reviewing Patient Visit Lists Remember to look before making QOH adjustments! Chapter Summary You learned these important concepts within this chapter: Item Setup Quantity Troubleshooting Checklist Quantity Troubleshooting Reports Page 18 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Quantity Troubleshooting and Goals

19 Cornerstone 8.1 Improving Inventory Performance Coaching Course Chapter 3: Cost/Price Troubleshooting and Goals You ll learn these important concepts within this chapter: Cost and Pricing Common Issues Cornerstone* 8.1 Improving Inventory Performance Coaching Course Cost/Price Troubleshooting and Goals Page 19

20 Chapter 3: Cost/Price Troubleshooting and Goals Cost and Pricing Inventory cost is the second largest expense of veterinary hospital operations. Keeping costs down and creating pricing strategies that are reasonable in today s economy are critical. As costs increase, so must fees. When developing pricing strategies based on costs, it may not be generally known there are actually three components to cost: Unit, Ordering and Holding. 1. Unit cost - Is the price paid for item, plus tax and shipping when applicable. Cornerstone only uses the price paid in tracking cost. 2. Ordering cost - Is the labor cost to review, place, receive and document inventory. (15-20%) 3. Holding cost - Is the cost of keeping inventory until it is sold - property taxes, storage, insurance, anti-theft measures. (8-15%) Therefore, pricing should be based on total cost, not just unit. Holding and Ordering costs can add 25-40% to unit cost. The longer a product sits on the shelf, the higher the holding cost. When calculating Dispensing fees, and/or markup, consider these additional costs. Cost and pricing discrepancies can be allotted to: Invoice item set up Receipting Returns to vendor Adjustments Common Issues Common issues associated with the above factors are: Invoice Item Setup Prices are not updating based on new costs. Ex: Invoice items not set up with auto-calculate price and/or markup % Prices (client prices) are changed frequently. Ex: Price Change Allow settings Receipting Incorrect cost entered. Ex: Cost entered based on wrong UOM (sell vs. buy), receipt total is not verified before posting Last cost listed as zero. Ex: Items received at no charge were not marked as special price. Returns to Vendor Cost of returned product is incorrect. Ex: Higher priced items returned, cost not changed from default. (Default is the last vendor cost). Or: Returns default to Sell UOM. Changed to Buy UOM and changed the quantity, but did not update the return price for buy. Cost Adjustments Incorrect cost adjustment entered. Cost adjustment of $1.50 entered as total cost instead of average cost Use these reports: Inventory - Cost Report looks at Average Cost = Total Cost (QOH x average cost) / total QOH. Cost of Goods Sold report (an EOM report) lists the cost Page 20 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Cost/Price Troubleshooting and Goals

21 TRAINER-LED EXPLANATION Cornerstone 8.1 Improving Inventory Performance Coaching Course 1. Start with the Inventory - Cost Report (sort by Item description, Class ID, or Location ID) 2. Focus on the target item (set in range values) 3. Review the report for off-the-scale costs (extreme lows/highs). 4. Review the report for missing or low markup %** Negative costs will not appear on the report. ** The Inventory - Evaluation Report can be used to determine which items have the Auto-Calculate price feature turned off or on. The Auto-calculate price check box must be selected (Invoice Item Information s Info tab) for prices to auto-calculate based on cost and markup %. Discussion: Discuss found discrepencies. Cost High When received, $cost and/or UOM was entered incorrectly, special pricing was not used Cost Low Mis-entered on receipt by $ and/or UOM, item new to QOH tracking and only QOH adjustment made and cost never adjusted Negative Cost will not appear on report, regardless of QOH. Most likely due to negative QOH. Alternately, review the Inventory - Cost Report for off-scale costs for items that have been sold. The Inventory - Cost Report updates immediately after any QOH or cost adjustments. Perform Cost adjustments for average when QOH is verified to be correct. Cost Adjustments affect current month COG sales and inventory item profitability reports and will take at least one full EOM closing to normalize. The Inventory Item Profitability YTD column will take a year to normalize. The Invoice Item Price Information report can be reviewed to show when prices (base, dispensing or minimum) were changed. Sort Order is: Invoice Item Description or Invoice Item ID only. Chapter Summary You learned these important concepts within this chapter: Cost and Pricing Common Issues Cornerstone* 8.1 Improving Inventory Performance Coaching Course Cost/Price Troubleshooting and Goals Page 21

22 Chapter 4: Profitability/Margin Troubleshooting and Goals Chapter 4: Profitability/Margin Troubleshooting and Goals You ll learn these important concepts within this chapter: Profitability and Margin Factors Affecting Profitability Page 22 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Profitability/Margin Troubleshooting and Goals

23 Profitability and Margin Cornerstone 8.1 Improving Inventory Performance Coaching Course Inventory is an asset, and a practice needs to see a reasonable return on that investment. In order to maximize profits, costs must be kept low and items must be sold in a timely manner. Profitability is a key performance indicator that needs to be closely measured and managed. Two brief definitions: Profit is sales less cost. Margin is percent profit of sales. Factors Affecting Profitability Item Set up Allow Change Settings - items with smaller margins should be set to Never or Only Increases Price Change Reasons List set items up to track why prices are changed by selecting this option: Only with Reason Use the Standard Fee Exception report (an EOD report) to review reasons per price change, frequency, by staff Prices are not set up to Auto-Calculate Markup % / margins are not set appropriately Cost Receipts entered on a timely and are entered correctly for costs and UOM Cost adjustments Invoicing Discounts diminish profitability Manually lowering prices Quantities not accurate on invoice (Prescription qty 1 warning provides a good counter-measure) Notes: The Inventory - Cost Report lists Net Sales (less discounts, manually changed prices) and includes Dispensing fees Inventory - Items Profit Analysis Report lists Gross Sales (does not factor discounts, manually changed prices) includes Dispensing fees Cost adjustments affect profit analysis and COG sales reports. Items sold (invoiced) look at current average cost at time of invoice. Profit Analysis and COG Sales (current period) will update after EOD is processed. Example: o 20 tabs at current average cost of $1 are invoiced. o Cost adjustment afterwards changes average cost to $1.25. o COG sales for the current period after EOD run, cost for 20 tablets sold is $20. o Another 20 tablets sold. Next day s COG Sales report show cost for 40 tablets is $45 (average of cost of 20 at $1, and 20 at 1.25) TRAINER-LED EXPLANATION 1. Run the Cost of Goods Sales, by Class, Item report for last closed month (range of Class ID or Item ID) 2. Review for off scale costs, profit and gross margins Cornerstone* 8.1 Improving Inventory Performance Coaching Course Profitability/Margin Troubleshooting and Goals Page 23

24 Chapter 4: Profitability/Margin Troubleshooting and Goals Discussion: Discrepancy discussion points Quantities Fractional amounts for tubes, bottles, tablets, bags, etc. Possible workaround by staff of price change and discount restrictions Net Sales Includes dispensing fees, discounts (preset and manual) and manually changed prices Cost Off scale costs: very high, very low or negative Profit Sales less cost as a dollar value. Profit is impacted by skewed sales and/or costs. Gross Margin The percentage profit of sales. Skewed sales and/or costs will affect this calculation. Do not confuse with markup % on Invoice Item Setup. Ex: $100 in sales with $50 in costs (100% markup) is a 50% margin Percent of Gross Profit The percent of total profit for all goods sold Chapter Summary You learned these important concepts within this chapter: Profitability and Margin Factors Affecting Profitability Page 24 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Profitability/Margin Troubleshooting and Goals

25 Chapter 5: Turnover Troubleshooting and Goals You ll learn these important concepts within this chapter: Turnover Factors That Can Affect Turnover Rates Cornerstone 8.1 Improving Inventory Performance Coaching Course Cornerstone* 8.1 Improving Inventory Performance Coaching Course Turnover Troubleshooting and Goals Page 25

26 Chapter 5: Turnover Troubleshooting and Goals Turnover Inventory sitting on the shelf in not profitable. Inventory turnover is a key indicator of inventory performance. Turnover is calculated from processed EOM periods and is a culmination of all inventory functions: purchases, returns, internal use and adjustments. An accurate QOH (at all times) is essential to extract valid information from the Inventory - Turnover Report. Inventory Turnover is calculated based on these activities and compared from a beginning to ending period: Purchases QOH adjustments Returns to Vendor Internal Stock Use (deducted from ending QOH) Sales (deducted from ending QOH) As a goal, 8-12 turns per year is ideal. Not all items will achieve this turn rate as 20% of your inventories bring in 80% of inventory revenue. Less turns per year increases holding costs. More turns per year is not necessarily profitable as it increases ordering costs. Turn = How many times inventory completes a cycle of being received and sold. Turnover Equation: (Beginning QOH + Qty Received + Qty Returned to Vendor +/- Qty Adjusted Ending QOH) Avg QOH Avg QOH = (Beginning QOH + Ending QOH) / 2 Factors That Can Affect Turnover Rates Invoice Item Setup Tracking Quantity on Hand (QOH), is QOH being correctly deducted (single, 6, 12 example) Reorder quantity/overstock is too high purchasing quantity is too high Adjustments Errors in adjusted quantities Adjustments not confirmed Returns Returns not processed through Cornerstone Wrong quantities returned (UOM changed) Internal Usage Not utilized, items taken off shelves and not reported or invoiced Incorrect QOH entered, duplicate entries Invoicing Incorrect quantities are listed on invoices Invoices are saved without verifying inventory details PVLs that include items that are not performed or with inventory details not verified TRAINER-LED EXPLANATION 1. Run the Inventory - Turnover Report. 2. Sort by Item description or Class ID. 3. Use beginning periods and ending periods that would be a three month (quarterly) period. 4. Look at target items used throughout course, are turn rates at 2-3? (calculated by 8-12 turns year goal / 4). Page 26 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Turnover Troubleshooting and Goals

27 Cornerstone 8.1 Improving Inventory Performance Coaching Course Discussion: Discrepancies Turns too low: Large quantity during the month (bulk purchase) Seasonal variances look at items over a 12 month period Adjustments (increasing QOH) PVL/Saved invoices without verified inventory details Internal Use not recorded Voided invoices, returned items on invoices Turns too high: Frequent ordering (small quantities) Seasonal variances Adjustments (reducing QOH) Returns to vendor Receipts saved, not posted Chapter Summary You learned these important concepts within this chapter: Turnover Factors That Can Affect Turnover Rates Cornerstone* 8.1 Improving Inventory Performance Coaching Course Turnover Troubleshooting and Goals Page 27

28 Section 2 Wrap Up and Review Page 28 Cornerstone* 8.1 Improving Inventory Performance Coaching Course

29 Wrap Up and Review Common factors that affect all inventory transactions and reporting: Invoice Item Set Up Receipts Adjustments Returns Internal Usage Invoicing Cornerstone 8.1 Improving Inventory Performance Coaching Course Cornerstone* 8.1 Improving Inventory Performance Coaching Course Wrap Up and Review Page 29

30 Section 3 Appendix Page 30 Cornerstone* 8.1 Improving Inventory Performance Coaching Course

31 Cornerstone 8.1 Improving Inventory Performance Coaching Course Information Tab Invoice Item Setup List R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Invoice Item ID Type of Invoice Item (Inventory, Service, Group, Pick, Dispensing) Hospital Description Client Description Classification - Primary Classification - Subclass Default Revenue Center Sell Barcode Type: Status (Active or Inactive) The unique ID assigned to each invoice item ID. This ID can automatically be assigned by the computer or you can create your own using alpha and/or numeric characters. Categorizes the invoice items and controls which fields are now available for setup and modification. How do you want to look up this item and have it listed in medical history? How do you want this item to appear on an invoice, estimate or reminder card? If you leave the client description blank, it will automatically use the hospital description. Used for invoice item searching, reporting selection, travel sheet management, creating Pick Lists, mass markup selection for mass price/tax/discount/ dispensing changes, General Ledger manual extract, and staff commission exceptions Used for invoice item searching, reporting selection, travel sheet management, creating Pick Lists, mass markup selection for mass price/tax/ discount/dispensing changes, and staff commission exceptions Used during invoicing. If the invoice item doesn t have a default revenue center assigned, then Cornerstone looks at the invoice item s classification revenue center. If nothing is assigned there, then Cornerstone looks at the staff on the invoicing line. Revenue centers for invoice lines can be changed at the time of invoicing. Revenue centers are used in reports such as the monthly report Serv. and Inventory Sales by Revenue Center Class Desc. If you have a bar code scanner, list the barcode for the sell unit of measure. A Sell barcode can only be listed if the sell UOM differs from the buy UOM. Mark an invoice item as inactive only when you have discontinued use of the item and do not want it to display on lookup lists related to invoicing. R R R R R Selection Required (Choose One) R R R R R O O O O O R R R R R O O O O O O O O O O O O O O NA R R R R R Inventory Exclusive Field Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix Page 31

32 Appendix Information Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Miscellaneous Item Controlled Substance Hazardous/ MSDS Unit of Measure Minimum Price Dispensing Fee Omit Dispensing Fee Dispensing Only mark items as Miscellaneous if you want your staff to have the ability to overwrite the description while invoicing. Recommendation: Do not use for inventory items. Select Controlled Substance to track the item on the Controlled Substance Report. Select the Hazardous check box if the product is considered hazardous. If you select Hazardous, select MSDS if your practice has the product s Materials Safety Data Sheet required by law. Select the selling unit of measure from the Unit of measure drop-down list. If you don t want to use a unit of measure, then select [None]. If this item is marked to maintain QOH, the UOM should be the lowest unit administered or dispensed. If the UOM is not on the list of options, close out of the window, select Controls > Units of Measure. Type the minimum price to charge the client. This price appears on the invoice until the invoice item s (quantity x price) + dispensing fee equals the base price located in the Amount field to the right. Then the item is priced as usual. Included in the cost of the item when the item is invoiced. Select to only charge the dispensing fee once per invoice. Button to select an invoice item that is linked to another inventory invoice item record. Allows you to add an additional amount or percentage of price to an item. Item price and dispensing item price are combined as one on invoice to display only one item price. When a dispensing fee is selected, you ll see Dispensing O O O O O Inventory Exclusive Field O O O O O X O O O O O X R R R R R O O O O O O NA NA NA O X O NA NA NA NA X O NA NA NA NA Estimate Markup When you click on the Dispensing button, place a checkmark in the Allow All checkbox to allow staff to click Show All, which allows them to see all dispensing fees for selection when entering charges. Type the percentage used to estimate the high price range on estimates for this item. (leave example) O O NA NA NA Page 32 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix

33 Cornerstone 8.1 Improving Inventory Performance Coaching Course Information Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Auto Calculate Price If the vendor has increased your cost, the item will be marked up appropriately when the order is received. (The item will never be marked down.) If you have selected this option, specify to calculate by Percentage, or Dollar Amount. If an amount does not calculate evenly, select the amount to Round To. Type the price to charge the client in the Amount field based on the quantity listed in the Qty field to the left. Calculation: Cost x Markup + Cost = Selling Price Inventory Exclusive Field O NA NA NA NA X Base Example: A can of food is sold for $2.00 each but, if the client buys a case of 12 cans, they are charged $1.85 per can for the case. In the Base Amount field, the price would be $2.00; the next line would list in the Qty field with $1.85 in the Amount field. If the client buys 13 cans, the client would still be charged $1.85 per can. Note: If the client purchases a case of food and returns all but 1, the client may get back more money than they paid originally. Always allows the price to be overwritten. Never does not allow the price to be overwritten, unless the user has administrator security privileges. Only increases only allows the price to be increased, never decreased. Administrators are not limited by this price change reason. Only with reason allows the price to be changed, but a reason must be entered for the change. To use this option, you must create a list of price change reasons. When a price is changed the reason will print on the Standard Fee Exception Report, along with the staff who changed the price. Require change always forces the price to be changed. This safeguard is used in cases where the price fluctuates and ensures that the correct price is charged. The item price must be set to zero. Can be zero Can be zero Can be zero Can be zero Can be zero Allow Change Default: Always Default: Always NA NA NA Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix Page 33

34 Appendix Instructions Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Departing Instructions Prescription Instructions Pharmacy link Prints at the end of the invoice. Press F2 or double click at ID to select instruction. This instruction will display when creating the invoice but it can be changed on an individual basis. Prints at the end of the invoice. Press F2 or double click at ID to select instruction. Available with purchase of the Veterinary Pharmacy Reference Module. This is used to link the invoice item with the generic drug name in the module. The result is the ability to calculate dosages and receive interaction information. O O NA NA O O O NA NA O O O NA NA O Inventory Exclusive Field Reminders Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Reminders to Generate and Reminders to Satisfy When setting up an invoice item to generate a reminder postcard or a call back and to satisfy letter reminders use the Reminders tab. O O NA NA NA Inventory Exclusive Field Tax/Disc Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Sales tax to apply, Usage tax to apply, Discounts to apply If this is a taxable item, highlight the appropriate sales and usage taxes. If discounts apply to this invoice item, highlight all discounts that apply. When this invoice item is used, the sales taxes, usage tax and discounts will automatically be applied if the client is set up to accept tax or a particular discount. Tax and discounts can be changed at the time of invoicing. Note: Do not select Not Taxable. O O NA NA NA Inventory Exclusive Field Page 34 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix

35 Cornerstone 8.1 Improving Inventory Performance Coaching Course Inventory Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Inventory Exclusive Field NDC/DIN Code NDC is the United States National Drug Code. DIN is Canada s Drug Identification Number and shows that the manufacturer is able to distribute the drug. In both O NA NA NA NA X cases, it is a national number that describes the drug. Serial number This can be the vendor s product number. O NA NA NA NA X Maintain QOH Select this option to track this item in inventory. O NA NA NA NA X Track expiration dates Track lot numbers Buy/sell ratio Select this option to track expiration dates for this item. This is only an option if the item is set to Maintain QOH. Staff will be required to enter an expiration date when depleting a quantity of this item from inventory. Select this option to track lot numbers for this item. This is only an option if the item is set to Maintain QOH. Staff will be required to enter a lot number when depleting a quantity of this item from inventory. If maintaining the item s quantity on hand, select and enter the buy/sell information. O NA NA NA NA X O NA NA NA NA X Examples: 1 bottle = 200 tablets. Explanation: Set the buy UOM to equal the UOM that you purchase/receive. If you receive 1 bottle of 200 tablets, then the buy/sell ratio should be 1 Bottle = 200 Tablets and you ll be able to sell 1 tablet. O NA NA NA NA X Note: The Sell UOM is set in the Information tab; Item on Order will display when the item is on a Purchase Order only; it is not possible to change buy/sell ratios if this appears Buy Barcode If you have a bar code scanner, buy Barcode is used for the selling unit of measure. It is typically found on the label of the box/bottle/container. A Buy barcode AND A Sell barcode can both be listed O NA NA NA NA X ONLY if the buy to sell ration use different units of measure (ex. 1 box to 12 bottles; 1 case to 24 cans). Item Vendor Select this option for vendor information. O NA NA NA NA X Stock at locations list Highlight the locations where this inventory item is stored. Locations are setup in inventory. O NA NA NA NA X Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix Page 35

36 Appendix Inventory Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Reorder Information by Location Select Location From and To Reorder Pt. Reorder Qty. Overstock Qty. Set Dates, Reorder Points, Reorder Quantities, and Overstock Points for each location the item is stored. When the inventory module feature is configured to multi-location inventory, this field becomes available. If the item is seasonal, change the months the information is valid and enter the Reorder Pt, Reorder Qty, and Overstock Qty for each period. If the item is not seasonal, type the information for the Jan. to Dec. period that appears. The number of doses at which the reorder should be placed. How many units should be reordered. The number of units in inventory after which additional units would be considered overstock. Inventory Exclusive Field O NA NA NA NA X O NA NA NA NA X O NA NA NA NA X O NA NA NA NA X O NA NA NA NA X Link Items Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Link Items The Link Items tab helps you to maintain quantity on hand for inventory items that are associated with a service item or another inventory item. Linked items are removed from inventory totals as the result of a sale. Inventory Exclusive Field O O NA NA NA X Page 36 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix

37 Cornerstone 8.1 Improving Inventory Performance Coaching Course Special Actions Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Special Actions Add any special actions associated with this invoice item and when to apply from lists. Selections include: Feeding Guide Software Lab Request Mark as Deceased Prescription Label Print Document Rabies Certificate Sex Modification Update Microchip ID Update Weight. O O NA NA NA Inventory Exclusive Field Travel Tab R=Required Field; O=Optional Field; NA=Not Applicable Field Description/Explanation Inventory Service Group Pick Dispensing Travel Sheets Highlight travel sheets on which you want this invoice item to appear. This can also be accomplished through Lists > Travel Sheets. O O O O NA Inventory Exclusive Field Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix Page 37

38 Appendix 15 Steps to Inventory Setup 1. Classifications/Subclassifications (Lists > Invoice Item Class) Classifications and subclassifications can be used to categorize invoice items in order to generate more specific information in reports, markup or markdown entire groups of similar invoice items, narrow invoice item searches, and create pick lists to use in invoicing. Use this option to add, modify or inactivate classification and subclass information. 2. Departing Instructions (Lists > Departing Instructions) Use departing instructions to explain the patient care after treatment, surgery or after administering medications or vaccinations. These educational paragraphs recommend needed services and to advise when a return visit is necessary. Invoicing an item that has departing instructions linked automatically prints the departing instructions on the invoice. 3. Prescription Instructions (Lists > Prescription Instructions) Setting up prescription instructions includes creating a list of instructions and then linking a specific instruction to an invoice item. You can link one (1) prescription instruction per invoice item. 4. Units of Measure (Controls > Units of Measure) Units of measure are used to designate how invoice items are bought and sold. 5. Price Change Reasons (Controls > Price Change Reasons) Use price change reasons to specify if invoice item prices can be changed. If prices can be changed, your practice can set up codes to track the reasons prices were changed. 6. Vendor Setup (Inventory > Vendors) Set up vendors to manage the ordering source for inventory items, placed orders, and received orders. You can link vendors to an individual invoice item. 7. Locations (Inventory > Locations) Use this feature to designate areas where inventory is being stored (ex. Pharmacy, Central Storage, Refrigerator A). 8. Cost Center (Inventory > Cost Centers) Use cost centers to track inventory costs associated with specific areas in your practice for items used within your practice but not invoiced (ex. boarding/kennel, lab supplies, expired drugs, breakage, and truck). 9. Adjustment Reasons (Inventory > Adjustment Reasons) Adjustment reasons are used to track adjustments of quantity on hand (QOH) within inventory (ex. broken, cycle count, free sample, unaccounted for, expired, entry error). 10. Inactivate Invoice Items Not Used (Lists > Invoice Item) Inactivating items not used by the practice will help keep your lists smaller and more pertinent. To inactivate an inventory or service, from the Invoice Item List locate the item and click Update. Inventory items must have the Maintain QOH check box deselected to be marked as inactive. 11. Setup Inventory Items (Lists > Invoice Item) Setting up inventory items can take a substantial amount of time. Try to pick a category of inventory (Example: canned foods or antibiotics) and complete the setup of those items. Setup includes reorder information and marking the item to Maintain QOH for tracking purposes. Most of the details on inventory reports include QOH information. For step 11, consider using Tools > Inventory Setup to make mass changes at once or view multiple items at once. See Chapter 4: Inventory Setup Window Overview. Page 38 Cornerstone* 8.1 Improving Inventory Performance Coaching Course Appendix