In this episode of The Business of Practice podcast, Marsha Heinke, DVM, EA, CPA, CVPM, talked about how equine practices can safeguard their hard-earned money with internal controls.
“Every single practice is probably being stolen from,” said Heinke, with theft of time being most common. Time theft occurs when employees misrepresent the hours they are working, especially overtime. The most recent Association of Certified Fraud Examiners (ACFE) fraud survey estimated that most organizations lose 5% of their revenue due to embezzlement and fraud. This loss of revenue can have a huge impact on cash flow and practice value, and the longer the theft goes undetected, the greater the impact becomes. A particular scheme by a bookkeeper in a small animal practice who processed refunds to her personal credit card netted about $2 million over 40 years, Heinke said.
Internal controls are risk management tools that divide responsibilities among staff members, Heinke explained. For example, a person who isn’t involved in record-keeping manages bank deposits. It is particularly important to control access to practice assets such as cash, accounts receivable, inventory, time, and equipment by creating systems employees in these areas must follow.
Prevention from theft beyond internal controls involves “setting the tone that theft will not be tolerated,” Heinke advised. The ACFE found that discovery of fraud in most cases came from internal tips from other employees, followed by a tip from a vendor or client.
Three things must come together for fraud to occur. The first is the thief’s rationalization of their behavior. The second is a need for additional money, such as when an employee has an addiction or a sick family member. The third is opportunity, which is the employer’s responsibility to prevent through systems and controls.
Heinke outlined a number of specific steps practice owners can take to tighten their operations. The new 2024 edition of her book Practice Made Perfect has an entire chapter on accounting measures, which is an excellent resource for practices.
Learn more about the ACFE survey here.
Learn more about Heinke’s accounting firm at www.vpmp.net.
About Dr. Marsha Heinke
Marsha L. Heinke, DVM, Enrolled Agent (EA), Certified Public Accountant (CPA), Certified Veterinary Practice Manager (CVPM), graduated from The Ohio State University College of Veterinary Medicine and was a full-time mixed animal practitioner for 14 years, with special interests in companion animals and horses. After gaining additional education and credentials, she began a career serving her colleagues as a consultant and accountant, working for Owen E. McCafferty, CPA, for over a decade.
In 2003, Heinke founded her own accounting firm, serving veterinarians, veterinary practice managers, practices, and industry supporting the veterinary profession. The firm services include business consulting, valuation, planning, taxation, accounting, bookkeeping systems, internal control reviews, onsite reviews, strategic planning, and group facilitation, with an emphasis on integrity, common sense, client service, and quality work product.
In addition to veterinary conference speaking and VMG study group facilitation, Heinke writes articles for various trade publications. She is the author of Practice Made Perfect: A Complete Guide to Veterinary Practice Management, which I highly recommend. She is also the author of the Chart of Accounts for Equine Veterinary Practices, available through the American Association of Equine Practitioners.
Heinke was a 2010 recipient of the Alumni Recognition Award from The Ohio State University Veterinary Medicine Alumni Society, in recognition of her contributions to the enhancement of the veterinary medical profession. When she takes a breath from her busy schedule, she enjoys her cats, chickens, horses, and conservation practices on her Ohio Farm.
Related Reading
- 6 Ways to Improve Equine Practice Profitability
- The Business of Practice: Retirement Plans for Small Equine Practices
- The Business of Practice: Veterinary Inventory Control
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