Steps to Safeguard Your Practice against Embezzlement

Note from the editor:

In our first issue of Solutions Magazine, we published an article entitled "Steps to Safeguard Your Practice against Embezzlement."
As our research staff continues to discover that this issue is still prevalent with doctors nation-wide, we are re-visiting this same article with additional advises.

Minimize the Risk

More than likely, you've heard some horror story about a colleague who had a trusted employee embezzle money from him/her. There are steps you can take to minimize the risk of embezzlement.

The following procedures are recommended by an accountant and should be part of your normal routine as safeguards against embezzlement:

Cash Handling:
1.Firm policy that every patient/client gets a receipt whether they pay or not.

2.Cash handling and cash record-keeping duties need to be segregated. Have one person collect patient/client portions over the counter and another person post balances. Have a third person do bank deposits. As owner, play an active role in monitoring sales and cash if you have too few employees to fully separate the duties for handling cash and collections.

3.Each month, compare the amount of your collections that was cash. There will be some fluctuation, of course, but if it goes low one period, it is suspicious.

4.Start a patient/client sign-in sheet where patients/clients simply sign-in. Compare this on a daily basis to an over-the-counter-collections report (and day-sheet or equivalent), looking for inconsistencies such as patients/clients who are on the sign-in sheet but not listed on the day-sheet report. Spot check by phone call to patients/clients who are reported to not have paid a portion due that day. This can be done as a "quality control" call to the patient/clients. Of the questions asked one might be something like, "It's our policy that all patients/clients who pay any cash on the day of service receive a receipt. Did you receive a receipt today for any cash paid?" Implement this policy in writing and DO IT. This will make it far more dangerous to attempt embezzlement.

5.Have a written policy to conduct unannounced checks of petty cash and other cash accounts on a regular (bi-weekly or monthly) basis. Conduct these checks without fail.

Accounts Receivables and Statements:
6.Review your accounts receivable aging report monthly. Look for changes from the last month's report that don't make sense. Scrutinize any balance over sixty days old as its existence normally does not make sense and minimally means a dropped ball by someone if not hanky-panky on collections.

7.Have a written policy that no balance write-offs or account adjustments are permitted without written Doctor approval. If possible, consider a 'lock-out' (in your computer software) to allow ONLY the owner the ability to write-off balances.

8.Spot check day-sheets against patient/client charts, ledger cards (or patient/client account records) and the schedule book at least once a quarter, looking for any discrepancies. That you do this - sporadically - should be overtly promoted to the staff.
9.Routinely check with visiting patients/clients who have balances over thirty days old - and with past-due patients/clients you are calling - to ensure they've received a statement from you. The idea here is to look for incidents of the collections person throwing statements out versus mailing them in order to cover a payment embezzlement.

10.Become suspicious if you find you are all of a sudden paying a lot of refund checks to patients/clients.

Accounts Payables and Purchasing:
11.Ensure all expenditures are authorized (via written request) and documented.

Safeguarding Records and Miscellaneous:
12.If using paper day-sheets, then remove these day-sheets from the office each quarter, and store them at home or in a safe deposit box.

13.Always change the locks immediately when a key-holding employee leaves employment.

14.The last thing to remember is to assume that if someone can rip you off, they will - and take steps to prevent it; and if your antenna goes up on some circumstance, you carefully check into it.

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