Top Asset Protection Procedures Every Medical Practice Should Know

In an obstetrics and gynecology practice, the practice manager observed a patient handing over cash to the billing manager. Later, the practice manager noted that no cash was deposited for that day. What happened?  The billing manager pocketed the cash and wrote off the patient account.  She stole $90,000 before finally being caught.

How can you prevent a similar situation happening in your practice? It may be time to consider reviewing your internal controls. Internal controls are policies and procedures that, if put into place, are designed to prevent theft, fraud and clerical errors that can compromise a practice’s assets and accuracy of its financial information.

The following is a list of some basic controls designed to assist you in preventing and detecting theft, fraud and/or clerical errors:

  1. Checks & Balances
    1. Ensure no one person has control over all parts of a financial transaction
      • For example: Writing and signing checks, Recording cash receipts in accounting software and depositing them at the bank, Purchasing and payment functions
    2. Require supervisor(s) to approve employee time sheets before running payroll checks
    3. Require accounting department employees to take vacation allowing someone else to temporarily take over
  1. Bank Accounts
    1. Bank reconciliation should be performed by someone not responsible for recording bookkeeping transactions – if practice is too small, require an independent check by another designated employee or outside accountant
    2. Reconcile bank statements monthly
    3. Examine bank statements and cancelled checks to ensure expenditures are legitimate
    4. Make sure checks are not issued out of sequence
  1. Protect petty cash
    1. Employee reconciling the petty cash fund should not have access to the key for the locked box or drawer
    2. Keep cash in a locked box or drawer and restrict access to the key
    3. Require receipts for all petty cash disbursements with date, amount, purpose and name of employee
    4. Reconcile petty cash fund on a monthly basis
  1. Protect cash/check collections
    1. Individual receiving cash and checks should not be the same individual preparing the bank deposits
    2. Issue receipts for cash collections using a pre-numbered receipt book
    3. Ensure that all cash and checks received are immediately recorded
    4. Ensure that all cash and checks received are deposited on a regular basis
    5. Individual receiving cash/checks should not be the same individual in charge of crediting patient’s account.
  1. Protect checks
    1. Limit access to checks
    2. Do not write checks payable to cash
    3. Store blank checks in a locked drawer or cabinet
    4. Require supporting documents, such as vendor invoices, to accompany the check
    5. Require two signatures on checks if over a specified amount
    6. Mark invoices paid and write check number on them
  1. Protect assets
    1. Have premises safeguarded by installing security cameras and safes
    2. Restrict access to access codes
    3. Use passwords on all computers, laptops and other mobile devices and change passwords regularly
    4. Install firewalls and other security on all computer devices
  1. Company credit cards
    1. Limit number of users to whom company credit cards are issued
    2. Ensure credit card use is for business purchases only
    3. Set account limits with credit card companies
    4. Require users to submit original receipts for all purchases
    5. Have credit card statement reconciled on a monthly basis by someone who does not have access to a company credit card

Good internal controls ensure that your practice is running effectively and efficiently.  Owners should look at their practice and determine whether their internal control procedures are adequate and are designed to minimize the risk of theft, fraud and/or clerical errors.   If you have questions or concerns regarding your practice’s internal controls do not hesitate to contact your accountant. Professional accountants play a leading role in ensuring that risk management and internal controls form an integral part of an organization’s governance system.

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