Financial Tips for Small Businesses in the Health Care Industry
NOTE: This article was co-authored by Susan Arrieta, CFE, CPA, In-House CPA at Adler Giersch.
As a small business owner, it’s important to protect your hard-earned money. Unless you are a Certified Public Accounting (CPA) or have experience in accounting practices, you may not know how best to protect your assets. It’s crucial that you take preventive and proactive measures in order to protect your business’ financial well-being.
Small businesses are more likely to be victims of occupational fraud than larger businesses. Occupational fraud is fraud that is committed against a business by officers, directors or employees. Small businesses usually have a small number of employees that have greater control over operations than would a business with more employees. One person in a small business may have control over the bank accounts, issuing checks, and negotiating prices with vendors whereas these three separate duties are often split up between different departments in a larger organization. This means that not only is there usually more trust granted to an employee in a small business but also there exists the opportunity take advantage of that trust for personal gain.
The Association of Certified Fraud Examiners (ACFE) recently published the 2018 Report to the Nations Global Study on Occupational Fraud and Abuse. The data compiled in this survey reported the median loss due to occupational fraud in health care organizations was $100,000.00. The report also found that within the health care organizations the top four reported frauds were corruption (including collusion, bribery, and/or conflicts of interest), billing schemes, noncash misappropriation (including stealing inventory), and expense reimbursements.
So what can you do to be proactive? Some examples include:
- Do not hand over all the responsibility to one person. Make sure you are still in control of some of the finance functions or exercise oversight over the finances. This could include checking bank accounts on a monthly basis when bank statements arrive. Have printed bank statements sent to your house instead of the office or download them online and review them on a monthly basis.
- Mandatory vacation. Require employees to take vacation. Not only is this important for personal well-being, this also ensures your business does not rely solely on one individual and that they do not have complete control of a process.
- Perform background checks when hiring. Be proactive when hiring and perform state and national background checks as a condition of employment. There are companies that perform background checks at a very reasonable price.
- Make use of the IRS W-9 form. Fill out a W-9 form for your business and provide this to entities who issue payments to your business. What is a W-9 and why is it important? This is a form that provides pertinent information to those who issue payments to your business. It includes items such as the business tax identification number, the business name as filed with the IRS, business address, and provides the signature of an authorized representative of the business. This ensures that those who make payments to you correctly report this information to the IRS during annual 1099 reporting. Also, providing W-9’s to your vendors helps ensure timely payment on your invoices, reducing outstanding receivables.
- Make the investment and hire a CPA. CPA’s may have a variety of specializations including financial advisor, retirement planning, and tax preparation. CPA’s with advanced training and sub-specializations are usually individuals who:
- Will be up to date with respect to laws in their area of specialty;
- Can be a trusted advisor when making important business decisions (e.g.: Should I expand to a second office?);
- Payroll questions (Should I outsource payroll processing?);
- Help businesses plan for the long term (How can my business be part of my retirement savings?);
- Serve as an advocate if your business is ever selected for an audit at the state or federal level; and
- Help make prudent financial decisions that could have tax implications (Should I continue to rent or buy an office?).
Keep in mind it is best to consult your CPA before making a decision and not at year end after the fact. Do you need help finding a CPA? Try the search tool provided by the Washington Society of Certified Public Accountants: go to https://www.wscpa.org and click “Find a CPA.” This tool will allow you to filter by industry, type of services, city and even language.
Trust is important to having a good relationship with employees. By the same token, and especially when it comes to financial matters trust but verify. Be involved in the financial operations of your business. Educate yourself about the risks posed to small businesses and make use of the financial resources available to you as a business owner.