Does your hospital use general ledger codes (GL), or have you considered using them? We will explore several reasons why setting up GL codes will help transform your inventory and accounting. GL codes are typically specific numbers (or alpha codes) that are assigned to purchased inventory items that make accounting and budgeting easier by allowing the management staff to monitor spending and expenses by category.
If your cost of goods sold (COGS) as a percentage of revenue is higher than ideal, it may be difficult (kind of like a needle in a haystack) to determine where your area of opportunity is. That is why using general ledger codes break down the COGS into smaller categories to help make improvement easier. Each smaller category has a recommended range; although this will vary for each hospital and their specific situation. For example, by implementing general ledger codes, you may see that your category for diets is especially high (over the recommended percentage) so you are able to focus your energy in that category.
Typically, these can be managed through your distributor and vendors. Each item maintains a code. It can be helpful to monitor the following five different categories; drugs, supplies, over-the-counter, flea/tick/heartworm, and diets. Each item within that category can be assigned to that specific category. Another example, white gauze and aloe shampoo. Depending on the distributor, codes (either a number or a letter) will be automatically assigned to an item, or you can assign them depending on your preferences. Let’s say gauze has a code (500) or a letter (s) and shampoo has a different code (400) or a letter (o). Each time those items are purchased, the total dollar amount spent per category will be broke down. At the bottom of your invoice it would show:
- Code: S (or 500)
- Code: O (or 400)
- Invoice Total:
This would allow for the evaluation of the cost of goods by category. Each of those 5 above categories should have a benchmark % (of revenue) to stay at or below. This allows for easy identification if one of the categories is too high.
As I mentioned before, general ledger codes can be set up through your distributor so that this is automated. It may take a small amount of effort to set up, but once it is set up, it is so valuable in evaluation of where each dollar is going.
If you have any additional questions, or if you are interested in how Veterinary Care Logistics can help you gain back control and enjoy the benefits of increased profitability and streamlined inventory control, please don’t hesitate to contact me.