The Many Ways DSOs May be Leaking Profits: The Big Impacts of Small Costs

September 18, 2020

Updated 12/22/2022

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

It’s an old adage that still rings true today. Large dollar amounts consist of many pennies, and significant losses are often made up of a series of minor hits. By focusing on where the pennies may be falling through the cracks, leaders can make significant long term impacts but with a fast ROI, and create the framework for efficient, scaleable procurement.

Although it’s true that the more you scale, the bigger the challenges, there’s also more opportunity for improvement. Due to their high volume, even small-dollar MRO items (maintenance, repair, and operating supplies), may seem inconsequential but can, in fact, have a significant impact on your dental organization’s bottom line.

For large DSOs with many locations, and thousands or even tens of thousands of transactions processed through their facilities on a yearly basis, leveraging technology to implement best practices enables you to quickly drive out unnecessary costs.

Leveraging digitization to standardize procurement best practices across locations can help you stack up substantial savings- fast. Here’s how.

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Price Discrepancies

Just as your internal administrative processes may be lacking, so maybe your vendors. Many manual processes still exist within the supply chain, leaving plenty of room for human error to impact your profits. Prices and validity periods are often quoted but not adhered to, for example.

Here are some more cracks in administration processes (both internal and external) that may be costing your organization and damaging your outcomes.

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. For example, a box accidently left behind on a truck may still be invoiced and paid for.

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. And, of course, accurate PO prices are part of the procurement best practices of digital procurement platforms such as Method.

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.

By leveraging a digital procurement platform to enable and govern best procurement practices, DSOs can ensure accurate POs while also ensuring negotiated prices are fully taken advantage of for maximum cost savings.

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. But 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 quotes, ensuring a true “apples to apples” comparison. For tighter control and to ensure invoices don’t go over paid, any extra charges should be included on purchase orders.

Redundant Invoices/ Dual Payment

Your office may receive multiple copies of the same invoice, vendors could invoice the same shipment twice in error, or perhaps an employee simply missed noting a payment was made — any of these scenerios may cause redundant payments.

Ensuring you pay once and only once for the items you receive 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 orders, each of which must be thoughtfully managed through every step of the Procure-to-Pay (P2P) process. However, we are all susceptible to human error. The similarity of products and SKUs, variability in packaging from supplier to supplier, short shipments, and backorders all cause extra confusion and leave plenty of room for costly profit-eating mistakes.

As simple as it may appear, procuring the supplies you need, when you need them, in the most economical quantity, and at the best possible price isn’t easy. At least, not without the right tools.

Luckily, today, DSOs have the option to automate the entirety of their P2P process and leverage automation to implement best practices that stop profit leakage and maximize margins with smarter, scaleable procurement.

Learn More About Dental Procurement

Method Procurement Technologies gives independent dental practices and DSOs the inventory management and procurement capabilities they need to succeed. With our full, end-to-end solution, ordering dental supplies is straightforward and hassle-free.

Ready to learn how Method Procurement's spend management solutions can improve your bottom line? Get in touch with our team today or request a demo to see it for yourself.

Ready to Grow Your Dental Practice?

Method Procurement Technologies gives independent dental practices and DSOs the inventory management and procurement capabilities they need to succeed. With our full, end-to-end solution, ordering dental supplies is straightforward and hassle-free.

Learn how Method Procurement's spend management solutions can improve your bottom line. Get in touch with our team today or request a demo to see it for yourself.