Inventory & COGS: Protecting Your Margins During Busy Season
As veterinary practices move into their busiest months, most owners are focused on one thing: keeping up with demand. Appointment volume increases, patient flow accelerates, and revenue often rises alongside it.
But there’s a less visible trend happening at the same time, costs are rising too.
Inventory purchases increase. Lab fees stack up. Supply orders become more frequent. And without close monitoring, these costs can quietly erode your margins, even in months that feel financially strong.
If profitability is the goal, Cost of Goods Sold (COGS) needs just as much attention as revenue.
What COGS Really Represents in a Veterinary Practice
COGS includes all direct costs tied to delivering medical care, such as:
Pharmaceuticals
Vaccines
Medical supplies
Lab and diagnostic costs
Preventive products
In a well managed practice, COGS should scale intentionally with revenue, not unpredictably. When it’s not monitored closely, even small inefficiencies can compound quickly during high volume periods.
Why Busy Season Is When Margins Slip
Higher volume naturally drives higher spending. But the issue isn’t the increase itself, it’s the lack of control around it.
Common patterns seen during busy months include:
Overstocking to “stay ahead” of demand
Accepting vendor price increases without adjusting fees
Increased waste or expired products
Inconsistent pricing across services or providers
Because revenue is strong, these issues often go unnoticed until profitability doesn’t reflect the effort required to generate it.
Inventory Management: Control Without Constraint
Effective inventory management isn’t about limiting care, it’s about creating structure.
A few areas worth tightening:
1. Ordering Discipline
Avoid over purchasing based on assumptions. Instead:
Review historical usage trends
Set par levels for high-turn items
Align ordering frequency with actual demand
2. Visibility Into Usage
If you don’t know what’s being used, it’s difficult to control costs.
Track high cost items more closely
Identify patterns of shrinkage, waste, or overuse
Ensure proper charge capture for all inventory used
3. Vendor Oversight
Costs from suppliers shift frequently.
Review invoices regularly for price changes
Compare vendors where appropriate
Evaluate whether purchasing agreements are still competitive
Pricing Alignment: Don’t Absorb Cost Increases
One of the most common margin leaks in veterinary practices is failing to adjust pricing in response to rising costs.
If your supply or lab costs have increased, but your fees haven’t, your margins are shrinking even if revenue looks strong.
Consider:
When was your last fee review?
Are markup percentages consistent across products?
Are bundled services still profitable under current cost structures?
Pricing doesn’t need to change dramatically, but it does need to be intentional and responsive.
Key Metric: COGS as a Percentage of Revenue
Rather than tracking costs in isolation, evaluate COGS relative to revenue.
While benchmarks vary by practice type, consistently rising COGS percentage is a signal that:
Costs are increasing faster than revenue
Pricing may be misaligned
Inventory management needs attention
This single metric provides a clear, high level view of whether your margins are holding during growth.
The Compounding Effect of Small Inefficiencies
A few dollars of waste per appointment may not feel significant. But across hundreds (or thousands) of visits in a busy season, it adds up quickly.
Examples of small issues that compound:
Missed charges on medications or supplies
Slight overuse of materials per procedure
Expired or unused inventory
Minor vendor price increases left unaddressed
Individually, these are easy to overlook. Collectively, they can materially impact profitability.
Final Thought: Revenue Growth Shouldn’t Come at the Expense of Margin
Busy months should strengthen your financial position, not dilute it.
When inventory management, pricing, and cost tracking are aligned, increased volume translates into meaningful profitability. Without that alignment, practices often find themselves working harder for less return.
Taking a proactive approach to COGS doesn’t require drastic changes, just consistent visibility, small adjustments, and intentional oversight.
Because at the end of the day, it’s not just about how much you bring in, it’s about how much you keep.