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Why spend matters

Nov. 1, 2020
How a procurement technology solution can drive financial results for multilocation dental practices

Your goal: increased profitability and continued growth. For years, dental practices have faced headwinds that have made it increasingly more challenging to achieve that goal. Rising costs, compounded by the financial impact of stagnant or declining insurance reimbursement rates; increased competition; and high employee turnover are only a few of the obstacles faced by the vast majority of practices. As the number of locations grows, so do the challenges. Adding insult to injury, the current pandemic has only proven to exacerbate these trends.

Many organizations prioritize revenue growth to improve financial performance, often leaving procurement process improvements, best practice implementations, and other cost-reduction initiatives further down their to-do lists. By waiting, however, these organizations sacrifice opportunities that have the power to make every dollar of production more profitable.

Lowering expenses through cost savings, process-improvement efficiencies, and budget control mechanisms should be the foundation for profitable growth, while providing valuable insight into where your hard-earned dollars flow. However, procurement software designed for Fortune 500 companies is costly, complex, and has left dental practices spinning their wheels, needing a dental-specific solution.

Fortunately, there is good news on the horizon. Newly developed, dental-specific procurement software is now available to help practices automate and simplify the procure-to-pay cycle. This cycle begins with inventory management and extends into vendor selection, purchase orders, order approval processes, product receiving, payments, and budget controls.

Improved profitability through cost reduction

Although single-office dental practitioners have much to save, the impact for multilocation practices is significantly greater due to the opportunities to leverage greater buying power and the possibility for greater labor efficiencies. Focusing on cost reduction is likely to supercharge your practice’s profitability because, unlike a dollar in incremental revenue, a dollar in savings goes straight to your bottom line.

This raises the question, how do we implement practices that produce real savings? Many practices take the important first step of negotiating with their suppliers for reduced rates. Unfortunately, we often find that as many practices shift their focus to other areas of their business, those hard-won concessions begin to evaporate. It’s so common that the phrase “price creep” has been coined. This price creep often begins gradually, but over time, it systematically erodes the practices’ “savings.”

Realizing more stable cost reduction opportunities relies on three methods. First, your entire team must understand and adhere to established guidelines involving best practices in how they buy products. Second, your processes need safeguards in place to protect against price creep and to ensure negotiated prices are maintained. Third, you need a mechanism that allows your business to continually evaluate pricing being offered by competing suppliers in real-time as orders are being placed.

Many offices stumble in the implementation of these three methods. Without a tool to streamline the work required to support these steps, the effort exceeds the benefit for many practices. A user-friendly interface and consumer-like shopping experience are critical for the frontline team members, for whom ordering supplies is part of a long list of other responsibilities. Every employee involved in the procurement process benefits from an easy, efficient solution that allows them to quickly adapt to changing market conditions.

The right tool for process improvement

The goal of procurement is to buy the right things, in the right quantities, at the right time, for the best possible price. It sounds easy, but without a technological tool and standardized processes, it is all but impossible to implement procurement best practices. Many offices rely on a combination of emails, phone calls, whiteboards, and spreadsheets, complicating the procurement process and making visibility and tracking difficult, especially when scaling across multiple locations. To remain competitive, dental practices need an effective tool to guide process improvement.

The tool your organization selects should include:

  • A simple and efficient inventory management system with barcode scanning
  • A universal dental catalog with real-time pricing and availability
  • The ability to create electronic request for proposals (RFPs) across multiple suppliers
  • Tools to enforce compliance on negotiated prices
  • The ability to view real-time pricing from multiple suppliers
  • The ability to order from multiple suppliers simultaneously
  • Real-time budget visibility before orders are placed
  • Approval processes that provide safeguards at the time of purchase
  • An electronic receiving process with barcode scanning
  • An accounts payable three-way match process
  • Robust reporting functionality

30% process cost reduction due to procurement transformation

Practices are often surprised to learn how much money is unnecessarily sitting on their shelves. For this reason, a disciplined approach to inventory management and order processes can improve profitability and strengthen cash flow. The need to maintain inventory controls was spotlighted for one oral surgeon when he was presented with a bill for $10,000 in implant purchases, at a time when he already had nearly $100,000 of implant inventory sitting on his shelf.

Oversight and visibility are key

An effective procurement process moves purchase decision-making from a postmortem “what went wrong” approach to a proactive controls environment, assuring budget fidelity and improved financial visibility. During the order approval process, managers need to monitor how suppliers are selected, have the ability to make modifications to what is being ordered, and inquire about why certain purchases are necessary.

From inaccurate pricing, incorrect quantities, and missing packages, invoicing inaccuracies are widespread and can drain profitability. Unfortunately, many practices lack a formal accounts payable three-way match process. A three-way match is at the heart of the oversight every practice needs to ensure they are paying the correct price per unit, receiving the correct quantity of each product, and finally, that the invoice accurately reflects both of those data points. During a recent conversation with a large dental service organization, it became clear that the lack of these controls was costing the organization tens of thousands of dollars per year.

While it’s common for practice owners to place their full trust in their teams, taking the next step with segregation of duties adds an additional layer of security. By designating certain team members as responsible for each step in the three-way match process, you mitigate the potential for any one person taking actions that could harm your business.

We can only manage what we measure

To drive sound financial results, key performance indicators (KPIs) should be implemented, improvement objectives quantified, and an action plan for success set in motion. Managing supply purchases and the subsequent financial implications plays a huge part in your ability to service your patients and maintain a well-run, profitable practice.

For multilocation practices, both the opportunities and challenges of a singular practice grow exponentially larger. Resolving those challenges and capitalizing on the opportunities requires precise analytics and reporting. These tools will help unearth problematic trends and patterns as well as shine a light on successes in the procurement process that can be replicated across multiple locations.

Yet, as a multilocation manager, you can’t be everywhere at once. A singular holistic view of the data for every location under your umbrella gives you the power to:

  • Easily identify the trends and patterns on both an enterprise and location basis
  • Make informed business decisions based on up-to-the-minute data
  • Improve budget control through analytics and forecasting
  • Boost formulary compliance
  • Gain insight into supplier performance
  • Identify opportunities related to product usage, product alternatives, and inventory position
  • Report on the impact of cost savings initiatives and procurement strategies
  • Iteratively adapt your procurement strategy

The final piece of the procurement process provides data, trends, and analysis that can be used to create actionable insights into the performance against your key performance indicators. Those insights then feed the iterative improvements the organization can implement in its procurement process.


  1. Levin R. It’s all about production: Findings from the 2019 Dental Economics–Levin Group Annual Practice Survey. Dental Economics. October 7, 2019. https://www.dentaleconomics.com/practice/overhead-and-profitability/article/14068097/its-all-about-production-findings-from-the-2019-dental-economicslevin-group-annual-practice-survey

DANIEL M. TRAUB serves as vice president of product at Method Procurement. Widely regarded as an expert on procurement technology and process optimization, his experience spans over 25 years. Prior to joining Method, he founded a procurement analytics provider, led one of the nation’s first e-procurement programs in higher education, and held leadership roles with Ernst & Young, Cap Gemini, and Jaggaer. For more information about Method Procurement, visit methodusa.com, call (800) 742-2100, or email [email protected]

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