Embezzlement can happen to anyone—even small health care practices, and even by people who have been trusted staff members for years. But there are signs and warnings to watch for.
Posted in Articles on Thursday, July 27, 2023
In small practices, managers often have access to various assets, making them potential perpetrators or accomplices in thefts involving cash, checks, supplies, and in some cases, medications. Internal controls play a critical role in safeguarding your practice's assets, ensuring financial integrity, and protecting against fraud, errors, and finances.
While internal controls are commonly associated with safeguarding company assets, they serve a broader purpose. They also protect the practice's financial integrity by ensuring accurate and complete financial records and effective workflows. Even innocent mistakes like data entry errors can have significant consequences, and these controls are designed to catch and rectify such errors promptly.
Internal controls can be categorized into broader areas within the accounting workflow: accounts receivable, accounts payable, payroll, and inventory. You can implement systems to mitigate potential threats by reviewing these workflows and identifying risks.
Four Red Flags
There are often indicators that your assets have been compromised. Things that may indicate potential issues within a practice include:
- Irregularities in cash flow
- Unexplained high payroll costs
- Excessive supply orders
- Sudden changes in employee behavior
By paying attention to these indicators and cultivating a culture of responsibility and accountability, you can stay vigilant and detect potentially fraudulent activities early on.
Developing a process is just the beginning; ongoing monitoring and evaluation are essential. Regularly reviewing and adjusting controls to adapt to changing technology and workflows is critical. Policies and procedures must be enforced and routinely audited to ensure their effectiveness.
Trust Your Staff—But Make Smart Choices
Three pillars of internal controls are access, recording ability, and monitoring. Ensuring that these responsibilities are divided among different individuals minimizes the risk of fraudulent activities. Trusting a long-term office manager can sometimes prevent a doctor from implementing stringent controls, but responsible asset management and due diligence are vital to managing a healthy practice. While trust is essential, it is crucial to prioritize the protection of your practice’s assets. Openly discussing the need for efficient processes and improvements can be framed positively, making employees understand the importance of internal controls without feeling personally targeted.
Implementing effective internal controls is vital to manage risks, protect assets, and ensure financial integrity. By establishing and continuously monitoring internal controls, you can safeguard your practice and minimize the risk of internal threats, ultimately contributing to its overall success and sustainability.