How to transition your practice to external dispensing
Have you read Part 1: how do external dispensaries compare?
You’ve decided to take your practice fully online. After working through the pros and cons, you’re outsourcing prescriptions. The next step is planning a smooth transition from in-house to external dispensing.
From years of mentoring practitioners to help them transition the way they work, a common concern for those with large dispensaries is how to best dispose of stock.
Here are some simple steps to ease the transition to an external naturopathic dispensary.
Planning
- Create a timeline with a long lead time, ideally months rather than weeks.
- Review your current stock including the product name, quantity in stock and expiry date.
- Assess what you prescribe the most, products you can’t live without and those prescribed infrequently.
- Using your stock assessment, do some homework to find the external dispensary option that best suits you and your clients’ needs. Ideally identify a one-stop shop that supplies the supplements and the herbs you prescribe.
- In the lead up to the move, begin to shift your prescriptions to the dispensary of choice. Only restock minimum quantities of the bare necessities and use external dispensing when products are no longer on your shelf.
- Keep your clients updated about the transition and walk them through how to access external prescriptions.
Committing to the move
- Put aside any remedies you’re keeping for personal use.
- Do a final stocktake and valuation, estimating the cost.
- Remember to record any expired stock.
Disposing of unused stock
There are a couple of ways to recoup the cost of unused stock when closing your dispensary.
Option 1: Sell to practitioners
This can be the most lucrative option, getting actual money back on your initial outlay (versus a tax incentive). However it’s also the most time-consuming alternative.
Decide if you’re willing to sell per item or in entirety at a bargain, all-inclusive price.
Unless you don’t mind the hassle of packing and shipping, sell locally. Consider directly contacting practitioners you know, attending a nearby practitioner meeting (eg your local NHAA chapter) or get permission to share on your favourite online practitioner Facebook group. Add your locality and specify ‘pickup only’. Consider how long you’re prepared to invest in this process and set a cut-off date.
Ensure your stocktake spreadsheet includes expiry dates, wholesale cost including GST and your discounted sale price.
Be realistic with pricing, would you buy 300ml of an open bottle of herbs with an eight month expiry date at 10% less than the wholesale price per mi?
If registered for GST remember to include this in your “tax invoice” when selling (if not registered, an “invoice” is issued instead).
Option 2: Donate the lot and claim the stock loss on tax
In most cases you can write off the total amount of unsold stock on your annual tax return and donate it to a charitable clinic (staffed by qualified naturopaths). These clinics mightn’t be able to issue a tax deduction receipt for a donation in kind, so the asset write-off is usually the best option.
Ask colleagues for recommendations and research free or charitable clinics in your state.
A couple of options I’ve donated to are:
Melbourne: The Victorian Foundation for Survivors of Torture (contact Complementary Therapies Team Leader).
Sydney: Leichhardt Women’s Community Health Centre.
Some of the dispensary items the charities particularly appreciated included herbal teas and unused bottles for dispensing herbs. They were also happy to take some recently expired supplements but discuss that with them first.
Of course you can keep the remains of your dispensary for personal use and, as none of it is now for resale, still claim the tax write-off. However this often results in unused remedies expiring. Considering the resources required to create these supplements and the environmental concerns in disposing of them, it makes good sense to donate herbs and nutrients you’re unlikely use yourself.
Donating my dispensary to Foundation House
A note on GST and tax
Caveat: I’m not a tax professional so always consult with your accountant about stock losses, disposal of assets and GST rules.
Read the ATO guidelines for disposal of assets and rules for donating trading stock.
From the ATO website
The tax deduction you can claim is the market value of the trading stock on the day you donate it.
If you are not registered for GST (and not required to be) you do not need to adjust the market value.
If you are registered for GST (or required to be registered) the market value is reduced by the amount of GST credit you would have been entitled to if:
- you acquired the property at its market value at the time you donated it
- the purchase had been only for a purpose that GST credits would apply to.
You may also need to include the market value of your donated trading stock in your assessable income. If the trading stock is valued at more than $5,000, you can use our valuation as long as we valued the trading stock no more than 90 days after your donation.
Mentoring
As naturopaths, we treat the individual rather than the disease. Our own needs as a practitioner require a similar approach. There’s no one size fits all solution. It can help to drill down your individual circumstances before making a change and necessary supports in place for success. Mentoring can help you with this process and provide some unique solutions to make your business and life to run smoother.
If you are struggling with where to take your business, invest in a 1:1 exploratory mentoring session.
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