We all know of practices that beat their associates with each month's computer printouts and average client transaction (ACT) comparisons. They compare income centers between doctors and everyone has "faults" in the boss' eyes. Inversely, a caring mentor builds on strengths. To pick on weaknesses causes a high veterinarian and/or staff turnover rate. The practice that routinely compares "income centers" often ignores the corresponding expense centers, so profitability is never examined. The case load mix is seldom, if ever, assessed. Even when comparing a satellite to the flagship facility, some level of "conformance" is expected, regardless of practice history, client variances, or doctor preferences. This is a type veterinary practice where "the perfect match" will never be attained.

We can destroy a new associate or team member by an uncaring manner, just by limiting their professional development, or expecting them to have the same level of client bonding, or client acceptance, as the doctor, who has bonded the existing clients to the practice. While most general practices schedule less than one percent of the gross into continuing education, we have seen a few progressive practices schedule as much as five percent into team member training commitments.

Developmental motivation of healthcare staff and professionals should come into play in any "comparison" scenario. For our purposes, the qualifications of the applicant must match the commitment of the practice to develop the individual, as a healthcare provider, as a client relations specialist, as a manager/coordinator, and as a community leader, as well as an important member of the practice team. This is called a commitment to leadership!

Evaluating team compatibility is critical in a healthcare delivery setting. If your practice is progressive and uses nurse technicians for wellness physicals, client education, and follow-up communications, then any new associate must be able to trust others. Beyond this, the new associate must be willing to develop others to a higher level of excellence on a daily basis. Continuous quality improvement (CQI) is based on developing individual pride in daily performance and empowering each team member to make changes to better client and patient service. The evaluation of the "team fit" must include an evaluation of the new veterinarian's ability to interact in a positive manner with the staff. The smart practice has at least a one to four-week temporary hire program, before entering into any contract with any veterinarian.

Client and patient needs are unique. There are practices that have a retired population in excess of sixty percent of their clients. These practices do not need evening hours, they need mid-day hours. A new staff member or new associate needs to understand the elderly and their needs to be happy in such a practice.

There are some practices that exist in an upper-class environment, with gardeners and maids bringing in the "status symbol" pets, charging the services against a trust fund, and caring less about any of the client education efforts of the practice. If this pet ownership style is an affront to an "animal rights" associate or staff member, nothing will ever make it right.

These are extremes, but please remember, each practice has the clientele it deserves. Some practices deal in lower prices, cross-selling, and volume sales, while other practices in the same community are lower volume and higher net, offering "high-tech, high-touch", with higher fees. Each practice attracts it own kind of staff and clients, with their own specific needs and characteristics, and have built a healthcare delivery team that is designed to meet those client needs. A new associate must fit the practice, a new staff member must accept harmony as a term of employment, and that means cherishing the existing clients at their level of healthcare access, personally striving for a better "team fit" on a daily basis, and caring for the patients in the manner the clients and providers desire.

The last parameter is the actual compensation negotiations (see the VCI® Signature Series Monograph Compensation Plans). In today's market, providing flex-time is a benefit that can often sway negotiations. In fact, when hiring new graduates, we talk of the duty schedule, perhaps a four-day work week, before we address compensation. We often use an in-practice schedule that provides two, three-day weekends each month, and no one ever works more than four days in a row once every two weeks.

We recently built a three-doctor practice a new two-doctor schedule, due to a seven-day access philosophy and an owner's desire to slow down. With the new schedule, he works only twenty, eight-hour days for every thirty-five days of the practice doctor's schedule.

The factor of money is always an issue, with the new doctor wanting enough money to pay off $60,000 to $100,000 of education debt, and the practice owner only being able to afford twenty percent of the doctor's personal production, which is minimal in the first six months of a new graduate's employment period. The VCI® Signature Series Monograph Compensation Plans provides samples of performance-based fiscal formulas for staff at all levels, from animal caretaker to tenured associate doctors, and to provide a practice with a starting point to develop one that fits its practice.

Signal Flares Exist to Warm You

Most cash loss is due to trusted employees. If you didn't trust them, they wouldn't be handling the cash!" - Dr Cat

Internal controls in most veterinary practices are as weak as the internal controls in any family setting. This is to be expected. Most veterinary staff are paid as if they were adolescents on an allowance. It isn't a retirement wage. Most people are hired onto the staff because they are nice people. They are trusted, because that is the most common element in the veterinary practitioner's way of life. Veterinarians don't see their practice as a small business and do not approach the cash flow as if it needed to be controlled. They just want more cash flow.

Several practices we have followed have discovered staff theft, misappropriation, or other forms of embezzlement. Here are the facts as we know them:

1.  A very busy one-man practice, which had no itemized receipts and everything, was "trusted." We established a super bill and a "one-write" receipt log. The trusted receptionist was found taking receipts home, because she could no longer just skim cash.

2.  A solid two-veterinarian practice with a great receptionist, who wrote personal checks into the cash drawer and taking the cash. When the check, was returned as insufficient funds, she handled the "case" personally for the bank and practice, thereby saving her from the review process, until the doctor started to look at the reconciliations.

3.  A struggling two-veterinarian, companion animal practice, after establishing the charting system, discovered they spent more money on pet food than they took in. Accountability for movement of the food was assigned to the technicians and nothing could leave the retail stock area without being logged onto a clipboard for later practice adjustment, to boarding costs or staff and doctor sale. The practice now operates in excess of thirty percent profit monthly.

4.  In an emergency practice, the computer sales balanced perfectly to the cash drawer every morning. I asked the staff how they could do that so consistently in such a crazy environment. They showed me their secret. Underneath the desk blotter pad, was a large cache of bills. When they had an overage, they put the excess money under the blotter pad. Inversely, when there was shortage, they took some money from beneath the blotter pad and added it to the till. Ergo, they always balanced and the owners were happy.

5.  A predominantly companion animal, mixed practice had very little net, and they did not know why. After assessing the practice fee compliance and scope of services, we addressed the deposit process. Daily deposits were not being done, so collections from multiple days were co-mingled, which was the first problem. Then we looked closer. No cash had been deposited -- ever! The owner said his wife was accountable for deposits, and we asked her about the cash collections and deposits. Seems she was using that money for her horse habit. When we told her she had a potential audit problem, she said she was ready to crash the software to hide her skim. When we told her cash deposits were now required every day, she said she worried about the IRS catching the change in deposit mix, so she should keep skimming the cash. We turned the issue over to the practice owner, her husband, to resolve.

6.  We had a very dedicated lead receptionist in a very low net practice, over one million annual sales. She was so dedicated she came in on her days off to close the day and make the deposits. She also drove a Cadillac and went on three to four-day cruises regularly, telling the front team to hold deposits until her return. Based on her obvious dedication, we moved her to bookkeeping as her new full-time job, behind the scenes, and introduced a segregation of function for end-of-day (EOD) close-out and deposits. The income immediately rose $10,000 per month, with no transaction variances, and she quit within ninety days. Amazing coincidences do occur, but not when skimming is stopped.

7.  A large mixed animal practice has a computer system with no internal audit trail and very poor summary software. There was $40,000 missing and blamed on computer error. As part of the consult, one of the veterinarians was assigned to start monitoring the cash flow system, to include establishing a paired chart of accounts system, and he got the "loss" down to $5,000. The daily close-out system, with nightly deposits into the bank, had never been fully implemented. Everything was stuffed in a drawer and left to the morning for someone else to balance. Known cash overages did not appear on the deposits, thereby alerting owners to the skimming. This new awareness reduced the "loss" to pennies per month, and sometimes, overages.

Trust Everybody, But Cut the Cards

After an embezzlement, answers routinely provided to the insurance company include:

 The lack of time and/or business experience of the doctor.

 The limited number of employees, precluding segregation of function.

 Money was handled only by the receptionist team, yet there was only one receptionist.

 The lack of generally accepted accounting practices (GAAP).

 And in most practices, the failure of the accountant (CPA) to be involved in the internal controls and variance analysis of the practice's fiscal operations.

Given these "excuses" and the potential most every practice has for lost cash, watch for these "signal flares", which indicate danger:

 The receptionist operates with an open cash drawer (no receipts).

 Receipts are made after the client departs, when there is "more time".

 The receptionist never takes a vacation and is very protective of her/his turf.

 The cash handling person displays unexplained wealth, expensive vacations, new clothes, new jewelry, etc.

 The petty cash fund, or worse, the change fund, has IOUs, instead of receipts. Personal checks are also a warning sign here.

 The money handler never asks for raises, takes a long time to cash paychecks, or never needs to leave early during close-out on days when she/he works alone.

 Invoices or records are rewritten, allegedly for neatness, often working overtime after everyone else has left.

 Accounting records are not up-to-date, or must be taken home by an employee to close out the period.

 Clients complain about errors in their statements, or about a lack of a statement following a procedure/service.

 Cash, as a percentage of total revenues, decreases each month, most often in direct relationship to the slowed practice growth.

 The billing person gives vague reasons for writing off uncollectible accounts, or client accounts require more adjustments for error than in the past.

 Staff members are not required to close out the change fund and balance against the daily receipts before departure. Shortages and overages are accepted variances in daily activities.

Any of the above could exist in any practice. It could be a normal occurrence. On the other hand, one or more could be a warning, a signal flare of danger. If one or more are detected, a close and thorough review of your cash collection system, billing system, and product procurement and distribution system is in order.

In God We Trust - All Others Pay Cash

Internal control is a system based on "segregation of function", OR the inability for any one person to have control of all the steps in the process. For instance, when someone orders supplies, a different person receives the items, checks off the shipping documents as received, and gives the annotated documents to the doctor for transmittal to the person who pays the bills. In cases where there is a computer, every client should be logged through the appointment log, even walk-ins, assigned a circle sheet, or travel sheet, for the visit, even if only for over-the-counter sales, then logged out through the computer. If there isn't a computer, a one-write receipt system should be in effect to serve a similar purpose.

Security cameras are inexpensive, easy to place, and an effective deterrent for staff, who have moments of weakness in the food storage area, near the pharmacy, or near the cash drawer.

Your accountant may be able to assist you in determining an appropriate internal control system, using a common sense, staff-dependent, and segregation of function. If the accountant can't, or won't, or wants to charge an extra fee, call a practice consultant who specializes in veterinary practice management, knows the American Animal Hospital Association's (AAHA) chart of accounts, and can help establish a practice-specific internal control system. The peace of mind alone is worth the investment. The quality veterinary practice consulting resources will usually offer the initial telephone consultation to a veterinary practice owner at no cost. There is no reason to remain at risk. Act now, before it is too late for someone you trust.

Without a yardstick, there is no measurement. Without measurement, there is no control. Without control, there is no business expectation for the practice. Without a business expectation for the practice, there is no way to measure practice business excellence.