You’ve already learned how to understand your financial statements in our article here. Now it’s time to use these statements to check where you are at financially and guide important decisions for your practice.
Remember the phrase garbage in, garbage out? When inaccurate or fraudulent data goes into your financial statements to begin with, inaccurate or fraudulent data is what will be reported.
Accurate statements will aid in the analysis of your business’ financial wellness and in tax planning and preparation. However, they won’t necessarily show if you are being embezzled, something one in four dentists will deal with over the life of their practice.
Your CPA can spot unusual bookkeeping postings and discrepancies from year to year and variances from industry benchmarks. As you become comfortable reviewing your own statements, you will be able to spot similar items.
While you may not be able to spot fraudulent data in your financial statements right away, here are a few safeguards every dentist should have in their practice:
- Your practice’s bank statements should always be sent to your home. Scan each statement for discrepancies on checks or signatures, unauthorized transfers, and debit and re-occurring debits.
- Set secure passwords for QuickBooks and other audit software. Strong passwords should include letters, numbers and special characters. Be sure your password is still easy to remember, and never write it down. The best way to create a secure and memorable password is by substituting numbers and/or special characters for letters in a word or phrase.
- Monitor and implement a system of recording the cash received from patients and reconcile this to the practice deposits.
- Be aware of excessive accounts receivable patient adjustments and whether or not they were authorized.
- Monitor credit card payments through accounts payable for anything that does not seem business-related.
- Look for changes in the percentage spent on dental supplies each month. Significant increases might indicate that dental supplies are being sold over the internet or being returned for cash.
- Look duplicate payments in your accounts payable. The vendor may be returning refund checks to a perpetrator who opens the mail and keeps the checks.
- Make sure all employees take regular vacations and cross-train them on each other’s duties.
- Make deposits daily.
- Be the shining example of honesty and integrity for your staff. Never pay for personal expenses using practice resources.