Every business has to worry about losses — from fire, natural disasters, other destruction of property. But the most frequent losses that businesses suffer are from 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 they are most likely to come from internal sources, such as employee theft and embezzlement.

Most internal control procedures have to do 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 over 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, both to “cross train,” as well as to keep one person from retaining control of a vital process.

• Managing by walking around. Managing by walking around (MBWA) keeps you informed about what your staff are doing, and lets them know you are watching them. Some people might resent your watchfulness, but you might ask yourself why this person is so resentful — is it because he or she has something to hide?

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

1. Require vacations. If someone refuses to take a vacation, demand that 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, including petty cash. People who embezzle usually start out 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 would be defeating the purpose of having two signature.

6. Keep unused checks in a lock box, and verify all check numbers, even voided checks. Don’t allow someone the opportunity to take a “void” check and write it to him/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 another excuse to steal.

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

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

10. Don’t hesitate to call the police if you think someone is stealing from you. By waiting, you not only make it more difficult for the police, you have in essence condoned the activity, and you may find it harder to prosecute.

Remember that 10 percent of people would never steal under any circumstance; 10 percent would steal at every opportunity, and 80 percent would steal given the right motive. You can keep losses to a minimum by following these principles:

• It’s up to you as the business owner to control the environment in your practice. You set the ethical tone of the company by the way you communicate your management philosophy and operating style, and the ethical expectations you establish for employees.

• Assess your risks. The discipline of risk management is a process of reviewing all business risks, analyzing them to determine which have the highest probability and severity, and setting up a plan for how these risks should be managed.

• Communicate your expectations of employees. Tell prospects and new hires that you expect the highest levels of honesty and ethical behavior. Let your staff members know what you expect of them, the importance you place on their adherence to rules. Encourage them to communicate concerns with you.

• Monitor. Set up a system to monitor all employee activities, and to periodically evaluate the effectiveness of your efforts at risk management.

Start your practice by following these principles and remembering the internal control rules.

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