Following up on yesterday’s deposit reconciliation post, today we present a strategy for a more comprehensive policy to ensure that your funds get from point A (the payor) to point B (your bank account) without interruption. A system of good collection controls is not paranoia. It isn’t draconian. This is simply a strong business practice employed by the best small, medium and large sized businesses. Obviously, there are a number of ways to protect yourself. We’ve adapted the processes described below for orthodontic and dental practices and have found excellent success with them over the years.
The process has 4 parts to it. While no part has a dollar cost, it may require a time investment for you and/or a trusted member of your staff. But once this becomes part of the daily routine, you will find that this occupies a lot less of your time than originally thought. And, with the comfort it provides, engaging these processes should be time well spent.
Let’s get to the process:
1. Divide deposit duties – Have one person prepare the daily deposit by printing the deposit information for the day and filling out the deposit slip. A second person not involved with collecting cash – usually the doctor – recounts the pieces of the deposit and makes sure that the deposit slip, individual components of the deposit (cash, checks, etc.) and printed report from the practice management software all reconcile. That person should then take the deposit to the bank. This is why we generally suggest that the doctor handle this part. Here, you are mostly trying to protect against any mistakes made rather than criminal activity. For example, you may collect 50 checks during the day, but when the deposit is handed over to the doctor, only 49 checks are in the package. This is probably just a simple error and can be corrected before the deposit goes off to the bank.
2. Run your deposit reconciliation – We discussed this in detail in our last post. Again, run this at least monthly, if not more frequently. Not only will you be able to identify errors, you’ll also be able to reconcile credit card payments, electronic deposits (like insurance checks), autodrafts and other payments not generally collected at the front desk. This process should ideally be run by someone not involved with the collection process to maintain another check and balance. We’re certainly not suggesting that a practice hire enough people to comply with Sarbanes-Oxley, but if the process can be handled by a trusted third party or an automated process, you add an additional level of security and safety.
3. Send patient past due statements – Aside from this being a good practice for managing receivables, it does enable a good cash control. Here’s the possible theft scenario: a patient pays $100 in cash and an unscrupulous person collecting money decides to pocket the cash. The amounts don’t show up on a deposit report or deposit slip. The perfect crime. Or is it? When a patient gets a past due statement, he or she will wonder why they haven’t been credited with the cash payment and will almost certainly call in to discuss. This should initiate an investigation into what happened because a red flag has been raised. If your practice has a stated policy at the front desk to tell patients to make sure they get a receipt at the time of payment, you add security and protection. That’s because now you have a paper trail to help you track down the payment.
4. Control any downward adjustments – Here’s the scenario you want to prevent: a patient makes a $100 cash payment. The person collecting the cash pockets the money and then issues a $100 discount in the practice management software. Now, not only does the money not show up in a deposit report, it doesn’t show up on a past due statement because the charge has been wiped out. The control is simple: don’t allow the person collecting cash to enter any downward adjustments. A number of practices will require the doctor or a trusted person not involved in cash collection to enter a password before any downward adjustments are approved.
In addition to this, you should review downward adjustments above a certain amount on a monthly basis to ensure that they make sense. Some larger practices don’t have the time to review hundreds of adjustments. So, review the aggregate amount or amount as a percentage of production to make sure that the amounts are consistent with previous months.
On top of the 4 steps laid out here, there are a number of other things that can be done. For example, after seeing an article about this person, intercepting checks at the front desk, you could evaluate having checks sent directly to a lockbox (for a nominal bank fee), electronic cash deposits, modified remote deposits and the like. Identify cash collection duties so that you know who is accountable if money comes up missing. Restrict payment types (to prevent theft, some practices do not accept cash). Some have even gone to security cameras. You can certainly get deeper into controls, separation of duties and other protections if you wish.
Over the years, we’ve had several people try to walk off with money and adhering to these 4 processes above has proven to be an effective deterrent and system for identifying those engaged in extra-legal activity.
But of all the processes, nothing, but nothing beats simple common sense as a control. For a doctor that monitors results and understands what is going on in the practice, his or her simple reasoning that something doesn’t look right can prove to be extremely useful in protecting the legitimate flow of funds.
If you have any questions, comments or help implementing a cash control system, please feel free to contact us. Doesn’t cost anything to communicate with us.
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