6 ways to prevent embezzlement at your veterinary practice
Embezzlement could never happen at your veterinary practice, right? Wrong. No matter how much you trust your employees, it's imperative to protect yourself against theft before it threatens your practice's financial health.
By implementing internal controls, you can build a culture of organization and accountability that remains intact even after staffing changes. Smaller companies are ripe candidates for theft and fraud, since most don't have tremendous resources dedicated to theft prevention. Here are some basic internal controls you should have in place at your practice, courtesy of consulting firm Lacher McDonald and Co.
1. Segregate duties among team members. This is similar to the government's checks and balances system. For example, one team member handles the cash at the register and prepares the nightly deposit. A different team member then takes the deposit to the bank and verifies the deposit amount with the daily totals from the register.
Inventory is another area of your practice where segregating duties will greatly reduce the risk of theft. If the person responsible for ordering inventory also receives the inventory and enters it into your computer system, there's no one to verify whether the amount recorded matches what was ordered. So if 12 cases are ordered and received but only 10 cases are entered into the inventory system, no one will notice that the other two cases ended up in your inventory person's trunk.
2. Limit check signing duties to a practice owner. Checks submitted for signature should have the supporting invoices provided along with the check. Don't just sign blindly—compare the check to the invoice.
3. Reconcile all bank accounts monthly. A huge red flag for fraud is a bank account that has not been reconciled for several months. A practice owner or manager should reconcile the practice’s accounts by the 10th of the following month.
4. Review payroll before you submit it. Fraud schemes often involve adding hours to an employee's pay or increasing the hourly rate. A quick review by the practice owner or manager provides a valuable control to minimize risk.
5. Reconcile inventory. Keeping accurate inventory counts is an important internal control. Items that can be easily sold are especially vulnerable to theft. For fast-turning and valuable inventory, be sure to perform regular counts of physical inventory and reconcile what's on the shelf to what's in the computer.
6. Limit access to company credit cards. For employees who need a card to keep the business moving, set reasonable spending limits. A $20,000 limit for the person ordering paper clips does not qualify as reasonable. A practice owner or manager should reconcile all credit cards monthly.
By implementing these basic internal controls, you'll protect the assets of your business. As your team members understand that these controls are in place, the risk of them taking liberties with your practice's assets decreases exponentially.