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Inventory management rarely tops the list of priorities for veterinary practice owners, yet it consistently presents one of the biggest opportunities to improve profitability, cash flow, and operational efficiency. While it’s often viewed as a necessary administrative task, inventory influences nearly every financial and operational outcome in a practice.
From cost of sales and overhead to purchasing habits and reporting accuracy, how inventory is managed can have a far greater impact than most owners realize.
Inventory decisions influence multiple financial levers at once. Ordering too much ties up cash and increases the risk of expiration or spoilage. Ordering too little can lead to backorders, delays in care, or rushed purchases at higher prices.
Inventory also feeds directly into cost of sales and supply expenses. If items are not logged correctly when purchased or consumed, the resulting reports can paint a misleading picture of profitability. Practices may feel like margins are shrinking without realizing that inaccurate inventory data is part of the problem.
Inventory management isn’t one-size-fits-all. Purchasing patterns vary by practice type, geography, and even climate.
Large animal practices may need to stock up heavily in the spring, while other clinics must plan well ahead for winter deliveries to prevent product loss during transit. Supplier constraints and bulk discounts also play a role, creating a constant balancing act between taking advantage of pricing and avoiding overstock.
The past few years have only added complexity. During the height of supply chain disruptions, many practices intentionally carried higher inventory levels to avoid running out of key items.
Now, with rising costs and tighter cash flow, many are trying to operate leaner—sometimes without a clear plan for what happens when something runs low or goes on backorder.
One of the most frequent challenges we see is outdated or messy inventory data. It’s not uncommon to find SKUs with negative balances, zero balances, or items that haven’t been stocked in years but still live in the system. These issues don’t usually come from neglect; they come from busy teams trying to juggle patient care, staffing, and administration.
The good news is that meaningful improvements don’t always require a massive overhaul. Assigning clear responsibility for purchasing and inventory oversight, ideally to one person or a small, trained group, can make a noticeable difference. Even small, consistent efforts to clean up data and monitor usage can help bring order to what often feels like a moving target.
Accurate inventory starts with knowing what’s actually on the shelves. While the traditional full shutdown for an annual count is unpopular for good reason, practices are increasingly adopting rolling counts throughout the year. Breaking the process into manageable segments allows teams to maintain accuracy without disrupting operations.
Physical counts help align what’s in the building with what’s recorded in the practice management system. That data then feeds into accounting software, supporting more reliable financial reporting, benchmarking, and planning. Clean data also reduces surprises at year end, when inventory balances must be reported.
A common misconception is that making a large inventory purchase automatically creates a tax deduction. In reality, inventory sits on the balance sheet until it’s used. The deduction occurs when the product is consumed in the practice, not when it’s purchased.
Another misunderstanding is the belief that cash-basis taxpayers don’t need to track inventory. The IRS requires inventory to be recorded regardless of accounting method, recognizing its importance in industries like veterinary medicine. Practices are also required to account for outstanding bills related to inventory, making accurate tracking even more important.
Inventory will always be a moving target in a veterinary practice. Patient volume, pricing changes, and supplier availability all play a role. The goal isn’t perfection—it’s visibility and control.
If inventory feels overwhelming or perpetually out of control, stepping back and approaching it more strategically can shift how it’s viewed. With clearer ownership, better data, and more intentional purchasing habits, inventory can become a lever for stronger financial performance rather than a recurring source of frustration.
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