Implementing Cash Controls to Mitigate Employee Theft

Implementing Cash Controls to Mitigate Employee Theft

Embezzlement is of particular concern to medical providers because this manner of theft often goes undiscovered for months (or years) at a time. Theft can substantially reduce office revenues, or in some cases, can even drive a business into failure. Below, we’ll cover a few essential steps for minimizing the risk of loss and ensure your office’s internal financial controls are properly documented, reported and verifiable.

Ensure Third Party Accountability

Whether small cash transactions or invoice fulfillment, ensure more than one individual has control over payments received. Typically, theft is engaged in by individual parties; tasking multiple staff with verifying payments drastically reduces the risk of improper handling. Adding a second or third party to sensitive payment processes is wise. If applicable, owners may also involve themselves personally in payment processes. An owner need not devote large amounts of time to this task; simply making it known that a system of checks and balances is in place is often sufficient to dissuade any potential mishandling of payments.

Ensure more than one individual has complete control over each separate step of your cash handling and invoice collection process. Mandate signing and dating of all deposit slips, transaction summaries or other documentation to ensure participants are clearly evidencing their review.

A  that can be easily addressed include:

  • Individuals with custody of cash coming into the business should not be the same party recording cash receipts into the office’s bookkeeping.
  • Individuals who reconcile bank or other financial accounts should not also issue checks and/or process transfers into or out of financial accounts.
  • Individuals entering transactions into the office’s bookkeeping should not also handle bank deposits.

By instituting a second party at each stage, providers can establish accountability at every level of the internal financial process with minimal extra labor.

Stay Involved in the Process

Providers, owners or other executive positions should contribute at least some of their work hours to involvement in the financial controls of the office. As providers wishing to care for our patients, we can sometimes forget that we are also part of a business. Accordingly, higher-level stakeholders must ensure that financial controls are not neglected, or worse, delegated to a small or lone party with little oversight. Staff must be aware that the financial processes of the office are being paid attention to at every level of the organization.

Provide Training

Cash handling procedures should be a part of training for all office staff and routinely audited to ensure best practices are being maintained. Providers may wish to make adherence to these practices as part of periodic performance reviews, exemplify staff who properly utilize best practices and hold accountable staff who improperly implement the organization’s financial procedures. Providers should determine what consequences should be used in the event of theft and act accordingly if wrongdoing is suspected. Some offices may choose to institute a whistle-blower policy, encouraging staff to hold one another accountable and rewarding individuals who discover or prevent theft.

Periodic Audits

While many offices take advantage of audits to reconcile suspected theft, instituting a process of audits can also help prevent it. Periodic audits, whether standardized or random, put employees on notice that their payment records will be frequently checked. Poor or negligent recordkeeping enables theft and ensuring records are frequently checked for accuracy and completion will go a long way in preventing potential problems.

Similarly, performing a  is useful for discovering or, ideally, preventing theft. While many offices neglect to inventory because it is a distraction from normal business, it is otherwise difficult to ensure office property is being properly used. As a side benefit, periodic inventory processes can often contribute insight into office management: large excesses or shortages of certain items may mean something is amiss in the office’s supply chain.

Reduce Opportunities for Theft

In that same vein, diligent providers should evaluate what other processes may inspire potential theft. Bank deposits, petty cash drawers or even non-monetary property such as office equipment are vulnerable targets without proper safeguards. Ensure high value property is secured and consider extending access to high risk goods only to a small group of employees. Some providers may wish to implement a surveillance system in-office such as a simple CCTV camera system. For cash deposits, tamper-proof bags, properly installed security drop boxes or a third party deposit service may be useful to prevent possible loss.

Make Policies and Procedures Clear

Your employee manual should contain a clear, understandable and comprehensive section on the expected financial controls for employees as well as the expected consequences if procedures are not properly followed. If your office is just beginning to institute improved internal controls, ensure all employees in addition to new staff are provided with the updated procedures and provide staff with ample opportunity for questions. For long-time staff, new policies or procedures can sometimes be difficult to acclimate to; ensure your entire team is on the same page by making management available to provide training, answer questions or address concerns about new policies.

Use a Third Party for Checks and/or Payroll

Large practices will frequently require in-house payroll but providers should be aware of the high risk for fraud. Many offices with payroll departments delegate check issuing and direct deposits to an outside party, such as a CPA or professional bookkeeper, or they may even use a third party to handle payroll entirely. As a firm rule, the person who records and/or reports payroll should usually not also sign and issue checks. Additionally, payroll staff with authority to issue checks should typically not also be the signatory on the check; alternately, consider requiring two signatures from two parties on each check.

While the expense may be higher than processing every step of payroll in-house, the risk of fraud or theft is substantially lower by using a third party, often saving money in the long run.

Hire a Professional

As fraud, theft and embezzlement continue to serve as serious risks to providers, many accounting firms are beginning to specialize in security auditing. Your accountant may be able to provide or refer you to a professional skilled in evaluating internal financial controls and make recommendations applicable to your office. While the above tips are helpful for preventing theft or fraud, ultimately only a well-designed and periodically maintained suite of internal financial controls can truly mitigate the risk of loss.

By following the above tips, providers can drastically reduce the risk of loss due to theft, fraud or embezzlement. Ultimately, internal financial controls are most effective when they are clearly communicated, allow multiple layers of accountability at each step of the process and include the involvement of owner(s) or similar high-level stakeholders.

This is not always an easy or straightforward process to set up and enforce in the office. When you hire an external firm to handle your practice’s accounting functions, it may be easier to have more checks and balances in your financial system. It is imperative that you hire a trustworthy firm that knows the business of ophthalmology.

Advantage Healthcare Consulting, a division of Advantage Administration, is a Management Services Organization (MSO) that helps practices do just that. They have created a network of ophthalmology providers that offer a wide range of medical products and services – including ophthalmology-specific accounting firms. This network is easily accessible by members of the MSO with the added benefit of significant savings. Because there are so many MSO members, the group buying power is helping practices across the country grow their bottom line.

To learn more about options for accounting support for your ophthalmology practice, contact Advantage Healthcare Consulting today.