Inventory is one of the most significant expenses in a veterinary practice, second only to staff wages. Managing it effectively can have a major impact on both profitability and cash flow. Yet it’s also one of the trickiest areas to get right. Order too much, and you tie up money and risk expired products. Order too little, and you face stockouts, frustrated clients, and last-minute rush orders.
One of the best ways to bring structure to inventory management is by tracking your inventory turnover rate. This metric gives you a clear picture of how efficiently your practice is using its inventory.
In this blogpost, we’ll explain what inventory turnover is, what the ideal rate looks like for veterinary practices, and how to calculate it. We’ll also cover how to set reorder points and show how software like ezyVet can automate much of the process.
Key takeaways
Monitor your inventory turnover rate to ensure stock moves efficiently, balancing cash flow and availability.
Set accurate reorder points based on historical usage and adjust for storage capacity or seasonal fluctuations.
ezyVet can help automate reordering, track inventory, and maintain accurate margins, saving time and reducing errors.
What is inventory turnover?
Inventory turnover tells you how many times you sell and replace your inventory in a given period, usually a year. It’s a simple but powerful measure of efficiency.
The formula is:
Inventory turnover = Cost of goods sold ÷ Average inventory value
COGS: The total cost of the products sold over the year.
Average inventory value: (Beginning inventory + Ending inventory) ÷ 2
Example
Let’s say:
Beginning inventory (Jan 1): $40,000.
Ending inventory (Dec 31): $50,000.
Average inventory: $45,000.
Annual COGS: $450,000.
Turnover = 450,000 ÷ 45,000 = 10.
This means the practice sold and replaced its inventory value 10 times in the year.
What’s the ideal inventory turnover rate for veterinary practices?
For most veterinary practices, the sweet spot is 8-12 turns per year. That means you’re selling your average inventory value roughly once every one to one-and-a-half months.
Too low (under 6 turns): Inventory is probably sitting too long. This can tie up cash flow, create storage problems, and increases the chance of expired medications or wasted supplies.
Too high (over 12 turns): You’re likely cutting it too close. Stockouts, last-minute orders, and gaps in patient care become real risks.
Of course, the right rate depends on the type of practice. General practices tend to fall comfortably around 8–10. Emergency or specialty hospitals, which run through medications and supplies at a faster pace, may sit on the higher end.
It’s also important to remember that not all product categories behave the same way. For example:
Pharmaceuticals: High-use items should turn quickly to stay fresh.
Pet food: Bulkier and slower-moving, but still needs to move steadily to avoid taking up too much space.
Consumables (syringes, gloves, bandages): These often move quickly but require safety stock to avoid shortages.
Tracking turnover by category can give you a sharper picture of where improvements are needed.
How to calculate and track your turnover rate
The math is straightforward, but the value comes from consistently tracking and reviewing it. Here’s how to do it in practice:
Gather your numbers: Pull your beginning and ending inventory values and your annual COGS. See how to do this in ezyVet!
Run the calculation: Use the formula to calculate your turnover rate and days in inventory.
Set a benchmark: Compare your results against the ideal range (8–12 turns).
Review quarterly: Trends matter more than one-off numbers. If your turnover is dropping, it may point to over-ordering or slower sales. If it’s rising too high, you may be under-ordering or not keeping up with demand.
Regular tracking helps you catch issues early. A steady drift outside the healthy range is usually a sign that your reorder processes need adjusting.
Setting reorder points: preventing stockouts without overordering
Knowing your turnover rate is the first step. The next step is controlling how and when you replenish stock. That’s where reorder points come in.
A reorder point marks the level at which it’s time to restock an item to keep inventory running smoothly. By planning ahead based on historical usage, practices can avoid stockouts and reduce excess inventory. Modern practice management systems can even automate this process, placing orders automatically when items reach their reorder threshold.
To establish accurate reorder points, look at your past usage data rather than simply relying on previous purchase quantities. This ensures your calculations reflect actual demand.
Smaller clinics with high inventory turnover often face space constraints that limit how much stock they can keep on hand. In these situations, it’s crucial to adjust both reorder points and order quantities to fit available storage. For example, rather than ordering a month’s supply of consumables at once, you might place orders every two weeks to better match your storage capacity.
Automate stock ordering with ezyVet
A key advantage of using practice management software for inventory is the ability to automate stock reordering. The system keeps track of inventory levels, alerts you when items fall below a set threshold, and can even generate purchase orders automatically once stock reaches a designated point.
ezyVet goes further by letting you set varying reorder points for each month, helping you manage inventory more efficiently through seasonal fluctuations. Since ordering inventory is one of the most repetitive tasks in a veterinary practice, automating it can free up your team’s time for higher-value work.
ezyVet also integrates with leading product suppliers, enabling you to send purchase orders, track inventory movement, and receive invoices directly within your practice management software. Certain integrations can even automatically update inventory prices, helping you maintain accurate margins and reduce the risk of revenue loss.
In addition, ezyVet can automatically refresh the cost price of items across all integrated suppliers. This direct connection ensures that your markups, margins, and cost prices stay accurate across thousands of products, keeping your inventory and financials fully up to date.
For more information, download our FREE guide to inventory management!
FAQs: Inventory turnover for veterinary clinics
1. What is a good inventory turnover rate for a veterinary practice?
A healthy inventory turnover rate for most veterinary practices is 8–12 times per year, meaning your inventory sells and is replaced roughly every 1–1.5 months.
2. How do I calculate inventory turnover in a veterinary clinic?
Inventory turnover is calculated using the formula: COGS ÷ average inventory value. This shows how many times your inventory cycles in a year.
3. What are reorder points and why are they important?
Reorder points indicate when you should place a new order to avoid stockouts. They help maintain optimal inventory levels, prevent lost sales, and reduce expired products.
4. Can veterinary practice software automate inventory management?
Yes. Practice management software like ezVet can track inventory in real time, automatically generate purchase orders, set reorder points, and update cost prices across suppliers.
5. How can practice management software help reduce revenue loss in a veterinary practice?
By automatically updating inventory prices, maintaining accurate margins, and tracking stock movement, practice management software minimizes errors and ensures your markups are always correct.
Conclusion
Inventory turnover may sound like a financial metric reserved for accountants, but in reality, it’s one of the most practical numbers a veterinary practice can track. By aiming for 8-12 turns per year, you ensure your shelves are working for you - not against you.
The key is to calculate your turnover regularly, set reorder points for your most important items, and adjust as your practice grows. While you can do this manually, software like ezyVet makes the process faster, more accurate, and far less stressful.
Ready to take control of your inventory? Book a demo of ezyVet today and see how easy inventory management can be.