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Streamlining your practice buying procedures



Dealing with multiple suppliers can take valuable time and energy, but there are ways of mitigating this and saving your practice cash in the process. John Baldaro explains.

The average practice will be paying for services and products from between 50 and 150 firms and it can be difficult to keep track of your costs. But there are substantial financial gains from carefully managing your relationships with suppliers and this article will look at how to revamp your practice buying procedures.

1. Review your suppliers

Review the number of suppliers you have. This can be done by sifting through invoices from the past six months.

You will probably find you are dealing with an array of stationery companies, medical equipment suppliers, telephone providers etc. As a rule, a practice will have around 20 suppliers in each of the four largest expenditure categories: premises, administration, medical and staff.

Each of these suppliers will have its own invoicing arrangements, payment terms, ordering arrangements and representatives wanting to ‘stay in touch’. As such each supplier leaves their ‘footprint’ on the practice and requires managing to a greater or lesser degree.

2. Consolidate suppliers

For each expense category, select a single supplier or a small number of suppliers to work with. Then encourage staff to only use those preferred suppliers.

This will reduce the administrative burden created by your supplier base, and you will be able to command a better deal, minimise delivery charges and reduce the number of invoices the practice has to process.

3. Reduce invoice ‘touch time’

To establish how much time is spent processing orders, ‘attach’ yourself to an invoice as it passes around the practice and see how many times it is ‘handled’. Multiply that result by the number of invoices (typically several hundred per year) and it all adds up to a lot of lost productivity.

Reducing the amount of time an invoice flows around the practice can make a big difference to your bottom line. Encourage staff to check deliveries and annotate delivery notes or invoices at the point of delivery – payments can then be made straight away.

4. Go electronic

The use of cheques is in terminal decline and may disappear altogether by 2018. Electronic payments will reduce the need for cheques to be signed and posted with remittance slips and many practices recognise this and prefer to pay using credit cards, BACS, direct debits and standing orders.

5. Get a GPC

Although they have been around in the UK public sector for 12 years, the Government Procurement Card (GPC) is a largely unheard of within primary care, despite 127,000 cards being issued across the public sector in 2008.

The GPC offers two significant benefits over other electronic payment methods like BACS. Firstly, the practice is able to use electronic invoice information that comes from the merchant (supplier) processing the card transaction. This information can be seamlessly drawn into a practice’s software accounting package, saving many hours of inputting invoice transactions.

Secondly, it is possible to create expenditure reports showing business purchases by category, supplier or cardholder. Reports can be automatically generated and sent to those that need to see them. This is very useful for the updating practice finances at partnership meetings.

6. Encourage staff to use purchase orders

A purchase order provides a simple record of what has been ordered by the practice. A fax or email will suffice.

As well as providing an auditable record of what was ordered and at what price (useful when checking delivery notes), purchase orders allow the practice manager to track how much money has been committed and how much will need to be paid out.

7. Consider giving staff delegated budgets

If your HCA is responsible for ordering supplies for clinical areas, why not give them a budget?

Doing so will instil greater focus on controlling costs and value for money. Ask them to report actual spend against budget on a monthly basis. This will improve spend visibility and cash flow.

8. Build better supplier relationships

Appoint a single member of staff to manage the relationship with each of the practice’s main suppliers. That way, they will understand the contract terms (delivery charges, returns policy etc) and develop a better relationship with the supplier. This is in the interests of both sides.

9. Be aware of fraud

It may never happen to you, but during an economic downturn the incidence of fraudulent activity increases and purchasing is one area in which fraud regularly occurs.

Cosy relationships can develop if staff are left to manage a supplier for too long. Be open about offers of hospitality, free gifts, lunch etc. Also consider rotating staff that deal with suppliers at least every three years to reduce any opportunity to commit fraud.

10. Overcome personal preferences

Like many purchasers, I’ve often found myself at odds with colleagues whose priorities run contrary to my cost-cutting programmes.

As a professional, my job would be to get expenditure under control, achieving the best value for money spent on supplies and services, reducing cost and improving quality. Even with support from the top, this can be difficult.

Managers must overcome personal preferences for a particular product or suppliers that offer incentives. In others it is general resistance to change, which could be overcome by assurances that a change would be for the better. In any business there will always be some degree of professional conflict: managers and clinicians are no different. Such is the manager’s lot.

This is the second of a series of articles on practice efficiencies. John Baldaro is director at PracticeProfit, a firm of purchasing experts working exclusively with GPs. If you would like to receive a free information pack about how your practice could streamline invoice payments visit www.practiceprofit.co.uk/cards

Streamlining your practice buying procedures