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Plug the leaks in your bottom line! (Proceedings)

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Aug 01, 2009

Internal controls are a system of checks and balances that help ensure clients pay for the goods and services they receive, and the practice's assets are safeguarded. Internal controls are necessary to deter employee fraud, embezzlement, and theft, as well as fraud and dishonest behavior against the business from the outside. In short, internal controls are designed to minimize errors. In accounting, internal controls are the ounce of prevention that are worth a pound of cure.

Who hasn't noticed money mysteriously disappearing from the practice? Or noted exceptions in the controlled-drug log? Wondered if inventory periodically walks out the back door? Seen a large number of adjustments, discounts, and write-offs on year-end reports? Veterinary practice management consultant Mark Opperman, CVPM estimates that one out of 10 veterinary practices lose $10,000 or more each year from embezzlement. There are only two types of veterinary practices: those that suffered embezzlement – and those that know they suffered embezzlement.

You're a prime target. Small businesses, with their inherent risk of embezzlement attract thieves. Large business can more easily establish checks and balances by distributing tasks among employees. In a large company, the employee who mails the monthly client invoices isn't the same person who opens the mail, and posts payments to the accounts receivable system. Yet another person writes-off accounts receivable. Achieving this segregation-of-duty in a small business is far more challenging.

The practice manager who insists on implementing a solid internal control system, and on all employees following that system, contributes greatly to the success of his/her practice. That manager will quickly note discrepancies that merit further investigation, help ensure that the practice invoices for all delivered products and services, and discourage theft/embezzlement. That manager will abolish internal control weaknesses, thus steering the practice away from harm. The practice manger failing to implement and follow an effective internal control system does a disservice to pets, pet owners, the practice owner(s), and all other health care team members. He/she is an accident waiting to happen. Surely his/her practice will under-perform – falling well short of its potential. Implementing strong internal controls need not be costly, difficult, or time consuming.

Basic internal controls

Mark Opperman, CVPM estimates conservatively that each doctor fails to charge for more than $64,000 each year. And since it takes $5 gross to yield $1 net, each doctor is effectively giving away $320,000 of production! His book, The Art of Veterinary Practice Management includes many outstanding forms (including the three mentioned below) your practice might find useful. See "For More Information" below for ordering.

Use a manual travel form. Ideally, an exam room assistant can complete this form – and not the attending doctor. The exam room assistant should circle or highlight everything done in the exam room.

Use an in-hospital tracking form. Attaching this form to a clipboard hung on the pet's kennel will increase your odds of invoicing for services rendered and products delivered to hospitalized cases.

Use a surgical usage sheet. With nonelective procedures, substantial income is often lost in the surgery suite. Omitting charges for suture material, additional anesthesia, fluids and drugs adds up.

Theft/embezzlement

Think your practice is immune to embezzlement? Don't be so sure. Security experts estimate that as many as 30 percent of all employees steal and that another 60 percent would steal if given sufficient motive and opportunity. Consumer shoplifting pales in size to employee theft. But despite the prevalence of employee theft, many practice owners and managers take a lackadaisical approach to internal controls. While internal controls cannot prevent theft/embezzlement, they can discourage or mitigate theft/embezzlement.