10 ways to minimize loss

Every business has to worry about loss — from fire, natural disasters, or other destruction of property.

But, the two most frequent losses businesses suffer from are theft and embezzlement.

Your chiropractic practice, like all other businesses, must establish internal controls as soon as you open. Internal controls are those measures businesses use to guard against waste, error, and fraud.

Losses can come from external sources, such as robbery and burglary, but are most likely to come from internal sources, such as employee theft and embezzlement.

Most internal-control procedures deal with safeguarding cash, which is the easiest asset to steal.

Internal accounting controls are based on two rules of thumb:

• Division of duties. No one person should have control of any one accounting process, nor should one employee handle all aspects of a transaction. If one staff member writes checks, another should reconcile the bank account.

Switch duties every month. Switching duties allows everyone to cross-train and keeps one person from retaining total control of a critical process.

• Managing by walking around. Managing by walking around (MBWA) keeps you informed about what your staff members are doing, and lets them know you are watching them.

Some people may resent your watchfulness, but you might want to ask yourself why this person is so resentful — is it because he or she has something to hide?

10 WAYS TO MINIMIZE YOUR LOSSES

Here are 10 more ways you can minimize losses from employee actions:

1. Require vacations. If someone refuses to take a vacation, demand he or she do so, and then check that person’s work carefully.

2. Don’t allow staff members to take work home. Both from a compensation and wage laws standpoint, and from the standpoint of monitoring activities, it is not a good idea to allow people to work at home.

3. Deposit receipts daily. Make no exceptions. Include as much detail as possible about checks and other deposit items.

4. Keep a backup record of every transaction in the practice. Include petty cash.

People who embezzle usually start by taking small amounts, often from petty cash. Watching over these small transactions can help keep the big ones from happening.

5. If one staff member writes checks, have someone else sign. This is another of those “two people for every task” items.

Some practices require two signatures on checks. Don’t do this and then sign a batch of checks without checking what you are signing. That defeats the purpose of having two signatures.

6. Keep unused checks in a lockbox. And verify all check numbers, including voided ones.

Don’t allow someone the opportunity to take a “void” check and write it to him or herself.

7. Treat staff members fairly. And pay them as much as you can afford.

While this may not sound like an internal-control issue, people who are dissatisfied or have a grudge against a company often justify their theft on that basis. Don’t give someone an excuse to steal.

8. Check all employee references before hiring. You can also do a search on convictions (not charges), and don’t hire if you have questions.

9. Use monthly financial statements as an internal-control check. Review receivables, payables, and expenses. Watch for unusual amounts.

10. Don’t hesitate to call the police. If you think someone is stealing from you, call the police.

If you wait, you not only make it more difficult for the police, you also condone the activity, and you may find it harder to prosecute.