Preventing Fraud in Your Veterinary Clinic. Think it Can’t Happen to You? You’re Not Alone.

July 1, 2012 | Fraud |

With a hint of irritation in his voice, Mike Robbins1 recalls the instances when his Veterinary clinic was affected by internal fraud.

“We had an incidence of internal theft back in our early days when we were just starting out,” says Robbins.  “one of our employees was cancelling invoices when food was sold for cash.Another time, there were several days in a row when our daily cash balance was short by round number figures.  And when you’re short by even numbers, you have reason to be concerned someone is stealing from you.”

After investing his valuable time and energy conducting some informal investigating, Robbins discovered a number of suspicious circumstances that pointed to internal fraud. One of the most disturbing was the fact that he kept finding receipts for pet food that customers had paid for in cash that were nowhere to be found in the business’s computer system.

With some additional legwork, Robbins was able to identify the employees responsible for the thefts.  “Once i determined we had the right individuals, we let them go pretty quickly,” says Robbins.  “And that was when we started to get serious about implementing
a more robust cash management system to help prevent being adversely affected by fraud in the future.”

Now, Robbins is eager to share his experience with owners of other veterinary clinics to let them know how easily fraud can occur, how difficult it can be to identify and how prevention is the best approach.

Fraud’s hefty price tag

Fraud is a serious problem that affects companies large and small.  In addition to the financial losses, there are associated implications, including the cost and time to find the fraud and the cost of external professionals to deal with it (e.g. forensic accountants, computer experts, lawyers, etc.).  Those left behind after a trusted colleague has taken funds are often devastated and at a loss of who to trust anymore.  And in some cases, fraud can negatively impact a business’ reputation.  According to a recent survey by PricewaterhouseCoopers, one of the top three reasons for committing fraud is ‘insufficient
internal controls’.  When an employee realizes there are loopholes to exploit within the business, it can present an opportunity that’s too tempting to resist.  And findings from the association of Certified fraud examiners show that fraud can continue up to 18 months before being detected.

Experts estimate fraud can erode up to 6 per cent of a company’s annual revenues.  Because it can be so difficult to detect, it’s essential that companies know the warning signs
and establish clearly defined fraud prevention procedures –particularly in relation to anyone who handles cash.

Preventing fraud in your veterinary clinic

While fraud can originate from outside your business, it’s often perpetrated by individuals within the organization.  There are a number of ways to help minimize the potential for fraud and its effects on your practice.  One of the first steps is to understand the different types of fraudulent activity and educate yourself and your employees on how it occurs and
how to identify it.  From there, you can incorporate a system of checks and balances to help prevent fraudulent activity.

“There are some simple but effective things owners of veterinary clinics can do to help reduce the likelihood of fraud in their businesses,” says Dana Goldhawk, Cash management
specialist with RBC Royal Bank.  “These include establishing authorities that clearly separate the duties of staff members, reconciling bank statements on a more frequent basis and safeguarding your client records and financial data.  We also recommend clinic owners sign up for electronic reporting services that allow multiple users, but require
individual password access.  This can help management to clearly identify who can do what – from ‘read only’ to actual disbursement authorities.”

Goldhawk also says that when they’re hiring new employees, owners of veterinary clinics might want to consider conducting background or criminal checks on prospective employees.  “It’s a good idea to contact personal and professional references, to conduct a check for known criminal activity and to consider bonding associates who will be handling funds,” he says.

Hard wiring accountability into the system

In the wake of his run-ins with fraud, Robbins implemented a number of changes to the way he operated the business.  After a thorough review of his accounting practices, he
implemented a number of new fraud prevention measures and closed a number of loopholes.  Thanks to those changes, the type of fraud committed by his former employees would be virtually impossible to pull off in the business today.

“Our new practice management system has an audit trail feature so if an employee cancels an invoice, for example, we can go back and track that,” says Robbins.  “And every employee has their own computer code in our cash management system.  They can’t make a sale without using their code, which they’re prohibited from sharing.  So there’s accountability hard wired into every sale that takes place.”

Robbins also keeps a close eye on his online banking account, watching for any unauthorized fund transfers.“We also review the use of credit cards on a regular basis and keep our corporate chequebook very close to the vest,” says Robbins.  “That’s a level of authority we would never grant to anyone else.”

To help fraud-proof your veterinary clinic, the wisest and simplest approach is to engage the Cash management experts at your financial institution, who will be able to review all the collection and disbursement processes carried out within the office and determine the best options to help you protect your business.

Bottom Line:This article describes how fraud can occur in a veterinary practice and what can be done to prevent it.

The information contained in this article is for informational purposes only and is not intended to provide specific leasing, financial, business, tax, legal, investment or other advice to you, and should not be acted or relied upon in that regard without seeking the advice of a professional. Your advisor can help to ensure that your own circumstances have been properly considered and any action is taken on the latest available information.

1 – Names have been changed to protect the identities of the individuals in this story.

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