A continuing series of practice management columns to educate OFP's on effective financial management.
By Judy Capko
Poor financial record keeping and blind trust are invitations for embezzlement. Clever thieves lure you into a false sense of security and complacency. They gain your trust, test the waters and then go in for the kill. Don’t be the culprit of an embezzlement scheme that has your practice financing someone else’s vacation home.
Family physicians work hard for their money and need to protect it! You need to start by making sure you tighten the ship. Here are a few examples of handling finances that are an invitation for the perpetrator:
Cash is loosely kept in drawers and not reconciled to practice records before it hits the bank deposit.
Bank statements are only looked
at by the office bookkeeper
or manager.
Computer system has a poor
audit trail.
No policy or oversight for adjustments on patient accounts.
Payroll records are not scrutinized.
Financial reports are not studied.
I’ve determined that embezzlement is often the result of a casual attitude toward handling finances, general neglect or perhaps “too much” trust. Embezzlement opportunities may
lurk throughout the practice. It can
be at the front desk, the insurance department, the payroll or the accounts payable. It can be the manager or a clerk, it can be a longtime employee or a new hire. There are plenty of opportunities
to go around.
It starts small. It can begin by borrowing $10 from the cash drawer for lunch, but if it doesn’t get repaid and goes unnoticed the waters have been tested. The thief now has permission to take the next step. Diversity and Accountability
It is important that multiple people be involved in finances, creating a separation of duties. You don’t want the same person to audit the cash drawer, post the charge and payment and take the money to the bank. Nor, do you want the person who prepares the checks to be
the one that reconciles the
bank statement.
You should create financial role diversity by requiring anyone handling finances to rotate out of their position for a period of at least two weeks each year. If someone has something to hide, they sure don’t want someone else doing their job for two weeks. This discourages the thief, but it is not full proof. Clever employees can sometimes find ways to outsmart the system or clean up their act during the weeks preceeding their time off.
Develop procedures for clear and appropriate documentation to support all financial transactions: money in and money out. This is your audit trail. It enables you to spot-check and verify that financial processes are being followed.
Looking over someone’s shoulder occasionally helps keep them honest. Some physicians turn to an independent source such as the accountant or consultant to conduct period audits. Twelve Simple Rules
Here are some simple rules you can put in place that will go a long way in protecting practice finances.
Use an automated check-writing system that prints checks and leaves no room for alteration.
Have a bank drop box for receiving payments on
patient accounts.
Audit the cash drawer daily.
Never borrow from the cash box (or others will).
Get rid of signature stamps with the same names as the signers on bank accounts.
Have bank statements come to
the home of one of the physicians and have someone that neither
writes the checks or makes
the bank deposits complete
the reconciliation.
If a non-owner of the practice is permitted to be a signer on the bank account, limit the dollar amount approved.
Audit payroll records semi-annually for unauthorized raises, bonuses or overtime pay.
Conduct past references on all employees before you hire them.
Obtain an insurance bond on the bookkeeper and the office manager, but keep in mind that does not cover your neglect.
Conduct periodic financial audits.
Listen to your instincts. If you become suspicious, start digging.
Financial matters should not be left unspoken. The new employee orientation should include a discussion of your commitment to safeguard practice finances. Emphasize that you will not tolerate deceit, fraud, theft or a disregard for the importance of finances. Too many physicians
that have been the victim of embezzlement fail to prosecute.
Let your staff know you would!
Establish strong financial practices in your office and adhere to them. It’s a matter of sound business principles and no one should be offended.
Judy Capko is a healthcare consultant with more than 20 years experience. Her focus is practice operations, staffing, finance and marketing. Judy is a national lecturer and has participated in ACOFP conferences. She is based in Thousand Oaks, CA and can be reached at (805) 499-9203 or e-mail: judycapko@aol.com
