Why Dental DSOs Should Focus on Indirect Spend Reduction to Boost Bottom Line Growth

The last couple of years hit the dental industry hard.

Over the past twenty years, Dental Support Organizations (DSOs) have emerged as a highly sought-after investment opportunity. Their success and growth can largely be attributed to the essential support they offer to dental practitioners. DSOs assist with non-medical business operations within a dental practice, such as accounting, billing, human resources, compliance, IT, marketing, procurement and equipment and facility upkeep.

Increasing labor costs, staffing shortages, and record inflation are still making it difficult for DSOs to gain traction and keep their bottom lines healthy. Collectively they must look at ways to grow their top line revenues without increasing expenses and overhead, and one area often overlooked is indirect spend. By focusing on reducing indirect expenses for things such as printer ink and toner, DSOs can enhance their financial health without compromising service quality.

Fortunately, one great way to improve your chances of achieving optimal profitability comes from applying a simple procurement technique to boost your cash flow — indirect spend management - as this procurement strategy can help your dental practice add significantly to your bottom-line health.

Indirect Spend Management for Dentists

Indirect spend encompasses all non-clinical expenses necessary for the day-to-day operations of a dental office. This includes costs related to office supplies, equipment, utilities, and more. While these expenses might seem trivial compared to clinical supplies, they can add up quickly and eat into profits. Indirect spend management involves analyzing procurement data to identify potential cost savings opportunities, negotiating better prices with suppliers, and ensuring that all purchases are made in line with organizational policies.

By focusing on indirect spend reduction, dental DSOs can gain visibility into their spending patterns and take advantage of cost savings opportunities. This can help them keep costs under control while also improving operational efficiency. Concentrating on areas such as purchasing, inventory management and operating costs helps DSOs allocate more resources that can be put toward more impactful revenue-generating initiatives such as patient care and business expansion.

For example, one group of researchers studied the spending habits of thousands of practices and found that overhead in dental offices is typically running anywhere from 4% to 6% higher than it needs to be. For an emerging DSO generating $5M in revenue, that equates to an overspend between $200K and $300K — which can make a significant impact to your bottom line. To keep costs in check, consider these tips:

• Bid Out Your Supplies

Bidding out your office supplies can be a great way to save money and time. Not only will you have access to the best prices on the market, but you'll also be able to get exactly what you need in a timely manner. Bidding out your office supplies allows you to compare different suppliers and find the best deal for your business. You can also take advantage of bulk discounts and other incentives that may not be available if you purchase directly from a single vendor, ensuring that you get the best value for your money while still getting quality products and services. When applying this strategy, be sure to reevaluate your vendor pool on a regular basis and re-bid as necessary.

• Remember That Small Things Do Add Up

Don’t think that certain costs are “too small” to make a difference. Purchasing is a key area to focus on when attempting to reduce indirect costs. Dental practices should prioritize high-quality, cost-effective products when making purchasing decisions.

For example, buying a high-quality less expensive toner can be a great way to save on bottom line costs for your dental practice. The cost of toner is often one of the largest expenses for any business, and by reducing the cost of your toner cartridges, you can reduce overall costs and improve your bottom line. Larger practices can also consider buying in bulk to further reduce the cost of toner cartridges, or partnering with a strategic supplier to help drive down costs using your annual usage of your printer cartridge supplies. With these cost savings, dental practices can put more money back into other areas such as patient care, expanded services, or marketing.

• Proper Inventory Management

Inventory management is also essential for reducing indirect costs. It’s important for dental practices to keep accurate records of both products and supplies in order to avoid unnecessary replenishment orders and remove items from the budget that are no longer necessary. Additionally, setting aside an allotted budget for inventory control can help ensure that costs are kept within reasonable limits.

By focusing on these areas of, DSOs can reduce their overhead expenses meaningfully while freeing up funds that they can reinvest in other activities designed to grow their business - from increasing marketing efforts and investing in new technology tools - DSOs have plenty of options available to boost revenues through indirect spend reduction strategies.

At Quality Imaging Solutions LLC, we thrive on helping our DSO clients find simple ways to control their indirect spend by providing efficient and cost effective solutions in their day-to-day business. For example, our selection of sustainable remanufactured printer ink and toner cartridges can save on average 40% over OEM brand name products, and are guaranteed to deliver the high level of performance and satisfaction your practice requires to keep things running smoothly.

Ready to make a bottom-line saving change? Contact us today and let’s get started!