Regardless of the size of your professional practice, implementing proper internal controls is crucial. Some might argue that laying out a clear process for internal controls is even more important for small dental or medical practices.
With that in mind, let’s start with the fundamentals. What are internal controls, exactly?
[Related: Bookkeeping Tips for Healthcare Practices]
What Are Internal Controls?
Having internal controls over operating assets and cost management promotes efficiency and helps minimize loss.
Specifically, internal controls are the procedures that management establishes to achieve their practice’s financial goals. A successful internal control process can help your practice achieve key steps:
- Helping the accuracy of financial information
- Protecting assets from accidental loss or fraud
- Identifying deliberate or accidental misstatements
- Promoting efficient and effective operations
- Achieving compliance with federal, state and local operational laws
- Creating peace of mind for medical and dental practices
- Note: With internal controls, practices can feel confident that all streamlined processes are mitigating financial risk as best as possible.
Furthermore, creating an effective internal control structure for your medical or dental practice is vital to its success. By establishing and putting into practice certain internal control policies, you can feel confidently you’re doing what you can to meet your objectives.
Next, let’s list those specific internal control policies.
[Related: The Importance of Healthcare Accounting]
1. Separate Financial and Accounting Duties
Although putting this step into practice at a small dental or medical office might be challenging, you should do what you can to separate financial and accounting duties.
For example, the person approving invoices shouldn’t be the person writing checks, and the person handling bank deposits shouldn’t be reconciling bank statements.
Separating financial and accounting duties can reduce your risk of fraud or even accidental human error. It’s a simple step you can take in the internal control process.
2. Assign Responsibility for Petty Cash
While they might not be as commonplace nowadays, petty cash accounts are still highly susceptible to error and misuse. That’s a good reason to monitor them closely.
Practices should assign an independent employee to be in charge of deposits and withdrawals and require receipts for all transactions. Your practice should also set clear policies and guidelines about using the petty cash account (limiting cash withdrawals over a certain amount, etc.).
[Related: The Best Dental Accountants: What To Look For]
3. Overview Wire Transfers
Another step in a strong internal controls process is keeping a secure overview of your wire transfers. You should initiate wire transfers only through written and signed authorization. Additionally, make sure you receive copies of banking resolutions from whatever bank processes a transfer.
4. Reconcile Deposits and Payment Activity Daily
Reconciling your bank account deposits and other payment activity every day can help prevent fraud and embezzlement. You should account for and post even small transactions into your system on the day they occur.
Making sure everything adds up daily can prevent small mistakes from getting out of hand — and save you a lot of trouble in the future.
5. Review Bank Accounts Monthly
In addition to reconciling transactions daily, it’s best practice to review and settle all bank accounts monthly. This step is especially important if you’re tracking electronic funds transfers, sending payments or waiting for incoming transactions (like insurance payments).
[Related: The Best Accountants for Medical Professionals: What To Look For]
6. Verify Every Employee Who Handles Money
One of the most important steps you can take to implement a strong internal controls process is to vet every employee who handles money in your practice. For practices that handle cash (especially large amounts), it’s critical to invest in background checks on all employees.
Moreover, make sure only verified employees handle money or financial details. For even stronger safeguards, ensure you have a paper trail of who processed what in case of human error.
Safeguard Your Revenue and Partner With a Professional Healthcare CPA Like Martin, Bircher, Thompson PC
Having the right internal controls in place for your medical or dental practice can be challenging. Nonetheless, you can take it one step at a time.
Implementing the steps in this checklist can help you bolster your financial safety and stability — and promote your practice’s success.
If you’re looking for assistance with your medical or dental practice’s finances, Martin Bircher Thompson can help. We’ll handle the details so that you can focus on what matters most: caring for your patients and growing your practice.
Check out our services for dentists and physicians and see how we can help your practice thrive.
Are you interested in achieving your financial goals and building a profitable practice? Learn more about our firm, or contact us today to get started!
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