Financial models for independent medical device distributorships
Commission plans with tiered accelerators, consigned inventory sitting in hospitals, rebate accruals against manufacturer tiers, and a cash forecast built around how slowly health systems actually pay. Built to order, checked before it ships.
How the money moves
Revenue is recognized case by case, in a hospital, often weeks before anyone invoices it, and then collected 60 to 120 days later from a health system that pays on its own schedule. Between those two dates sits consigned and loaner inventory that is on your balance sheet but physically in somebody else's cupboard, a rep who has already earned commission on the sale, and a manufacturer rebate that only lands if you cross a tier by year end. A distributorship can be profitable on every case it does and still be unable to make payroll, because the working capital is parked in trays and receivables.
A finished sample for medical device distributorships
Rep commission model
Commission accrued on the invoice date instead of the case date. Cases done in March and invoiced in May are a liability at 31 March, and an invoice-basis book does not carry them.
- $14,455
- Commission liability missing at 31 March
- $93,500
- Worst month the blended DSO gets wrong
- $7,939
- Commission on cases still not invoiced
Kestrel Ridge Surgical Partners is illustrative. The data is invented; the mechanics are not.
What we build for medical device distributorships
The workbooks this business runs on
- 01
Rep commission model
By rep, by product line, with tiered accelerators, draws against commission, splits on shared cases and the clawback when a case is credited. The version most distributorships run cannot answer what a plan change costs until the year is over.
- 02
13-week cash flow
Receipts driven by a collection curve per health system rather than one blended DSO, payroll and commission on their real dates, and inventory purchases on manufacturer terms.
- 03
Consignment and loaner inventory reconciliation
What is on the books against what is in the field, by tray and by location, with the aging that tells you which sets have not billed a case in six months.
- 04
Rebate accrual tracker
Purchases to date against each manufacturer's tier thresholds, the accrual at the tier you are actually going to hit, and the run rate needed to reach the next one.
- 05
Territory and product-line P&L
Contribution by territory and by line after freight, commission and the cost of the inventory that territory is holding — not gross margin, which flatters every territory equally.
Every one of these is a request on your board, not a project with a scope document. All of them are on the one subscription — there is no build type you have to move up a plan to reach.
Where these models usually go wrong, and what we do instead
Four mistakes a model makes when the builder has never seen this business
- 01
One blended DSO across every hospital, when in practice one system pays in 45 days and another in 110, and the mix is what moves the cash forecast
What we do instead. We build a collection curve per health system out of your own remittance history, so the forecast moves when the mix of who is buying moves.
- 02
Commission accrued on invoicing rather than when the rep earns it, which understates the liability for a whole quarter
What we do instead. We accrue on the case date against the plan as written — accelerators, splits and clawbacks included — so the liability lands in the quarter it was earned.
- 03
Rebates recognized at the tier you hope to hit instead of the tier the current run rate reaches
What we do instead. We accrue at the tier your run rate actually reaches, and show the purchase volume still needed before the next one is worth chasing.
- 04
Consigned inventory treated as one number rather than by location, so shrinkage shows up at the audit and not before
What we do instead. We reconcile by tray and by location with aging, so a set that has not billed a case in six months surfaces months before the count does.
When people call us
Usually one of these has just happened
- Adding a rep, or changing a commission plan and needing to know what it costs
- Taking on a new manufacturer line, or losing one
- Renegotiating a distribution agreement or a GPO contract
- A bank line renewal or a borrowing-base certificate
- Selling the business, or buying another territory
Want this built for your numbers?
Every workbook is recalculated with a formula engine, its checks are proved able to fail, and a second pass re-derives the headline numbers before it ships.
Not ready? Get a free teardown of a sheet you already rely on.