Medical devices · Pharmaceutical and life sciences
Consignment and loaner stock for medical device companies, reconciled to every case
Much of a device company's inventory sits in hospitals, with dealers or in loaner sets moving between operating theatres. We reconcile that stock to usage and billing. Revenue is then not missed, and the inventory in the books is the inventory that exists.
In one paragraph
Medical device manufacturers and importers — implants, surgical instruments, disposables and consumables — usually turn over ₹15–300 crore and sell through dealers and directly to hospitals. In this trade, sale and usage are separated. Product is placed in advance, consumed during a procedure, and billed only once someone reports that it was used. Owners and finance heads, often with the sales operations lead, end up accounting for stock they cannot see.
Managing director or finance head, often with the sales operations lead
The economics
How the money moves in this trade
Implant and surgical device businesses commonly place consignment stock at hospitals and send loaner instrument sets for individual procedures. Revenue arises when a hospital reports consumption, which may be days or weeks after the case. Each set carries many sizes, and most come back unused. Every movement in and out of a hospital is a chance for stock to be lost, damaged or used without being billed.
Sales run through a mix of dealers, distributors and direct hospital accounts, each on different margins, credit terms and claim arrangements. Coronary stents carry a ceiling price, and the price regulator has at times capped trade margins on other devices. Imported devices also carry currency and customs cost. Product-family margin is therefore hard to read until every dealer claim, consignment shortage and freight charge is attached to the product that caused it.
The problem
Where the numbers usually break down
Consignment stock is counted rarely
Stock at hospitals is verified once a year, if that. Items used and not reported, expired or damaged go undetected until the count, when the loss is written off in a lump.
Loaner sets lose items between cases
Instrument sets come back incomplete and the missing pieces are replaced quietly from stock, so the cost of running the loaner programme is never measured.
Usage reports lag billing
Hospitals report consumption late or in batches, so revenue for a month is understated and the next month overstated, and some usage is never billed at all.
Dealer claims are settled on the dealer's figures
Price-difference, scheme and return claims from dealers are paid against the dealer's statement without being matched to the original sales and terms.
Service contract revenue is booked when invoiced
Annual maintenance and service contracts for capital equipment are billed in advance and recognised immediately, overstating the year in which they are sold.
What we do
The work, and the result each part produces
Consignment reconciliation by hospital
Stock placed, reported used, returned and on hand reconciled for each hospital on a fixed cycle, with variances investigated.
Consignment stock in the books matches what sits on hospital shelves.
Loaner-set tracking and costing
Each set's issue, return and missing items recorded by case, with replacement and sterilisation cost charged to the programme.
The real cost of supporting a procedure is known.
Usage-to-invoice matching
Hospital usage reports, case records and invoices matched so every consumed item is billed in the period it was used.
Revenue is complete and lands in the right month.
Dealer claims testing
Claims for price difference, schemes and returns matched to the original invoice, scheme terms and stock position before settlement.
Claims are paid on evidence rather than on the dealer's statement.
Product-family and channel margin
Contribution by product family and by dealer or direct channel, after claims, freight, consignment losses and import cost.
You can see which families and channels earn their working capital.
Service contract accounting
Maintenance and service contracts tracked by machine and recognised over the period of cover, with service cost set against them.
Service income is reported in the period it is earned.
Where we start
The first steps of an engagement
Placement, case and claim records
We ask for consignment placements by hospital, loaner-set issue and return logs, sales-team case records, hospital usage reports, the dealer claim register and the stock ledger.
Reconciliation at the largest hospitals
Starting with the hospitals holding the most value, we reconcile stock placed, reported used, returned and on hand. Each difference is traced to a case, a missing report or a loss.
Usage matched to invoice
Each case record is matched to the hospital's usage report and an invoice in the same period. Unbilled usage is raised, and every loaner-set return is checked against its contents list.
Consignment and claims report
The first report shows consignment stock reconciled by hospital, usage not yet billed, loaner-set losses, and dealer claims tested against the original sales and terms.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Consignment stock reconciled, by hospital
- Loaner-set losses and replacement cost
- Usage reported and billed within the month
- Dealer claims raised, tested and settled
- Contribution by product family and channel
- Deferred service revenue and service cost by contract
Who it suits
Written for, and not the right fit for
- You need help with device registration, licensing or classification; that sits with your regulatory team and the licensing authority.
- You need a statutory audit or tax-audit report for the device business on its own — that is signed by an independently engaged CA.
- Implant, surgical instrument and disposable device makers selling through dealers and hospitals.
- Importers and distributors of devices carrying consignment and loaner stock.
- Device businesses preparing for investment or a new manufacturing facility.
Services
Services this work draws on
Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗Costing and profitability
What each product, line and customer really contributes.
Explore service ↗Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗Internal audit
Independent process review that closes findings rather than filing them.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
How often should consignment stock be counted?
More often for high-value implants than for low-value disposables. A rolling count that covers the expensive items every month and the rest each quarter is usually enough to keep losses small and visible.
Will our sales team's case records do as evidence of usage?
Usually, yes. The case record is often the best evidence of usage. The work is in matching it to hospital reports and invoices consistently, not in creating a new form.
Do you help with device registration or licences?
No. Registration, licensing and classification sit with your regulatory team and the authority. We handle the finance side — inventory, claims, margin and controls.
5th Quadrant performs inventory reconciliation, costing, control and reporting work. Medical device registration, licensing, pricing compliance and quality-system matters are the responsibility of the manufacturer or importer and the relevant authorities. Statutory audit and prescribed certification are performed by independently engaged licensed professionals. Full detail is on our Professional Scope page.
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