Andrew Clark offers some spot-on perspective discussing vendor discounts. We would add:
- Markup is a cost-based calculation while margin is a price-based formula
- Pricing and invoicing of dispensed items is a market-conditions discipline to remain competitive
- Free goods should be received at their unit value, not $0.00
Source: Is My Practice Healthy?, November 5, 2016.
Every practice has a pricing strategy related to drugs and supplies. We purchase drugs and supplies from distributors or manufacturers, then we apply a markup and then we sell the product to our clients either as part of our treatment of their animal or to take home and administer to the animal. The objective of the markup is to recoup your costs of ordering & handling the product and to generate profit on the investment made in the product.
INSIGHTS: Many practices set formulas for mark-up at the time they set up their practice management systems. It is a good rule to review those formulas at least quarterly. For dispensed items sold in more of a retail setting, every promotional purchase signals the need to review the pricing formula for that SKU.