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Measures to take for Loss and Fraud Prevention

Employee Fraud. It does not depend on the size, type, location or industry of the organization, as every organization is prone to this problem. We would like to believe that our employees are honest and trustworthy but still there are many reasons and ways in which your employees may become the part of fraud. A Report presented to the Nation on Occupational Fraud and Abuse (Copyright 2014 by the Association of Certified Fraud Examiners, Inc.) suggested that 5% of the annual revenue losses of the typical organization each year due to employee fraud. Therefore, prevention and detection is important to reduce the loss. Thus, every organization should develop a plan to prevent fraud is prior rather than after being affected from the loss.

There are many forms of fraud but the main three categories are:

  1. Asset Misappropriation – This is least costly and made up 90% of all fraud cases. In this type of fraud, an employee either steals, exploits or misuse organization’s resources. Examples of asset misappropriation include fake reimbursement, stealing of non-cash possessions of the organization or cash before or after recording.
  2. Corruption – Corruption made up less than one-third of the total fraud cases and fell in the middle. Corruption happens when employees use the status or influence provided by the organization for their own benefit and violates the duty to the employer. Examples of Corruption include cases lie bribery, extortion, and conflict of interest.
  3. Financial statement fraud – This fraud type comprises of less than 5% of cases, but can cause median loss to the organization. In these kinds of frauds, employees intentionally misstate or omit the information in the financial reports of the company. This fraud may include fake revenues, hidden charges or liabilities or inflated assets.

Prevention 

The presence of preventative measures, whether the organization is large or small, is vital. ACFE 2014 revealed that the fraudulent activities, which were studied to make the report, lasted an average of 18 months before they got detected. This shows that the loss is greater as the employee of your company are committing fraud for a year and a half. Therefore, there is a need to minimize the fraud occurrences by implementing adequate procedures and controls to prevent fraud.

  1. Know Your Employees – The first step to preventing the fraud is knowing the employees. Fraud perpetrators display the behavioral traits which indicate the intention of committing fraud. Potential fraud risks can be thus minimized by observing the actions and listening to employees issues. Management should build a trustworthy relationship with the employees and have time to know them. An attitude change can give you the clues and can suggest inter-organization issues that should be resolved immediately to prevent loss. For example, an employee may commit fraud to take revenge from the angry or dissatisfied boss. Or a hard working employee who has been serving your company more than a decade and is now, having personal and financial issues, could be an indication of potential fraud risk. It is important to know about your employees and have a good conversation with them.
  2. Make Employees Aware of fraud and its consequences – Employees of the organization should be aware of different types of fraud and its consequences to the organization as awareness is key to avoid big loss.  And gives signal to the ones planning or thinking about to commit fraud. Also, the loyal and trustworthy employees who are the assets in preventing the fraud would have a enough knowledge about signs of frauds. According to the ACFE 2014 report, if there is a tip associated with report of fraud then they are easily detected (over 40%). The reporting system should be anonymous, and employees should be able to report fraudulent activity by keeping their identity safe.
  3. Implementation of Internal Controls – To safeguard the firm’s assets and to ensure the integrity of its accounting records, implementation of internal controls is a must. Internal Controls include Segregation of duties to help reveal any discrepancies in the system. The other internal controls include documentation to help reduce fraud. The Internal controls should be monitored and regularly updated to ensure their effectiveness. An expert is needed to analyze the company’s policies and procedures to recommend the appropriate programs and implementations.
  4. Monitor Vacation Balances –  If an employee has not missed a day of work in years, it could also be a sign that this particular employee has something to hide. It is also advisable to rotate the jobs of employees within the company. This may also reveal if there is any fraudulent activity going on as the second employee will review the operations of the first one.
  5. Hire Experts – Developing of anti-fraud policies can be helpful and these can be developed by hiring of professionals like CFEs (Certified Fraud Examiners) and CPAs (Certified Public Accountants). These experts provide services like internal audit and forensic analysis to extensive and primary consultations.
  6. Live the Corporate Culture – A constructive, positive and encouraging work environment can play a major role in preventing the employee theft and fraud. There should be clear policies and procedures along with a clear organizational structure. An open-door policy should be included to give employees the opportunity of communication and discussion with the top management and to prevent the fraud.
  7. Detection – With prevention strategies, the organization also needs detection methods to detect the frauds, and these procedures should be visible to the employees. The visibility of the preventive internal controls acts as one of the influential deterrents to fraudulent behavior. The fraud detection strategies need to monitor and get updated to ensure their effectiveness continuously. The plans take external information and then linked with internal data, the results are then used to enhance the prevention controls. The fraud detection strategies need to be documented along with the teams responsible for each task.  Employees should be made aware of the implementation of the screening plan; this makes them mindful of the fact that company is watching and will take disciplinary action if the employees are found to be committing fraud.

Conclusion

Every organization is vulnerable to fraud and the employees who are intended to do fraud would not think about the size of the company. These frauds can cause massive financial losses, legal charges and affect reputation of the company.

Having a proper plan and strategy can reduce the losses. Therefore, to implement the preventive measures and to make the employees aware of the company policy can significantly reduce the activities from occurring as the cost of prevention is less as compared to potential fraud to be committed.

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Best Practices in Financial Management for Medical Practices

Introduction

In today’s changing environment, a medical practice’s ability to ensure that revenue is maximized, and financial ‘leakage’ is minimized, is crucial to its economic success.  Maximizing revenue includes ensuring the appropriate level of payments against claims for every patient serviced.  Minimizing financial leakage is best achieved by implementing sufficient financial controls and oversight to ensure reconciled deposits across accounts and discouraging employee misconduct.  While most medical practices assume they have implemented the appropriate level of financial controls, independent analysis typically reveals a surprising level of losses stemming from not having the right checks and balances in place throughout the Service-to-Payment process.

Service –to–Payment Cycle

Figure 1 – Medical Practice Service-to-Payment Cycle – The service to payment cycle is the end-to-end process of servicing patients through to the receipt of payment for services renders from insurance companies.  The optimization of this process results in an overall increase in profitability to medical practices. The process can be optimized through the monitoring of defined control points throughout the cycle.

 

 The Service-to-Payment cycle is simply the end-to-end process of managing the receipt of revenues from services rendered to patients which includes:

Cash Payments Reconciliation – Practices which handle a significant amount of cash payments need to implement controls around the collection, recording, deposit, and reconciliation of funds.  Cash payments offer significant opportunities for funds to be mishandled or for employee malfeasance.   Best practices for handling cash payments include:Documenting each patient served through a sign-in sheet and recording the method of payment for service or co-pay.

  1. Documenting each patient served through a sign-in sheet and recording the method of payment for service or co-pay.
  2. Reconciling all payments collected by patients (Cash, Debit, Credit) against bank statements.
  3. Ensuring that all cash payments are totaled and reconciled daily with deposits at the bank. Cash payments should not be aggregated across multiple days to simplify reconciliation tracking for audit purposes.

Billing Assurance – Practices often miss filing insurance claims against all the patients serviced.  In larger practices, a 1 or 2% rate of missed claims can result in a significant loss of revenue.  These types of mistakes do not typically occur as a result of employee misconduct or malfeasance, but rather a natural error rate as a result of normal billing operations.     Charge differential, defined as the difference between standard pricing and charges for procedures issued below the pricing negotiated with individual insurance companies, also impacts a practice’s profitability.  This differential is typically difficult to monitor on an ongoing basis because it requires managing complex tables which track the billing agreements by current procedural terminology (CPT) code negotiated between the multitudes of insurance companies a practice interacts with.

Claims Assurance – Claims assurance is the management of claims from insurance companies to ensure that:

  1. All claims issued to insurance companies are paid.
  2. All paid claims are paid at the negotiated contract level with each Payer/Insurance company. This level is different for every Payer.

A critical area of claims assurance for medical practices is the analysis of adjustments on claims received from insurance companies.  Adjustments should reflect a standard discount received against a claim from a given insurance company and   should range from 20 to 50% based upon the CPT code.   A thorough analysis will typically reveal adjustments in the range of 75% or above, with a 100% adjustment meaning the insurance company has not paid anything against the claim.  Reasons for these high adjustments are multi-fold ranging from insurance company errors to rejection of claims due to input error from the practice’s billing staff.  While this information is available in the standard billing software utilized by medical practices, the rigorous analysis of the aging report and the ability to mine the data into ‘useful information’ is what proves more difficult for practice personnel.

Figure 2 – Claims Assurance Analysis – In this sample analysis of insurance adjustments, basic information has been analyzed using the practice’s billing software.  The $2.2M in revenue has been categorized into Patient Paid, Insurance Paid, Adjustments and Remaining Balance.  The $1.1M in adjustments have been further detailed into groups of <50%, 50-75%, > 75%, and 100% adjusted.  As can be seen from the table, the >75% and 100% adjustment buckets represent $732,798.

 

Rigorous Periodic Reporting and Analysis – Collectively, across the Service-to-Payment Cycle these shortcomings can add up to significant losses to practice ownership.  How does a practice address the collective pitfalls across the cycle?  Success is achieved through the thorough implementation of financial best practices across practice operations leading to effective management and corrective action.  Best practices include:

  1. Periodic (daily, weekly, monthly) exception reporting across the Service-to-Payment cycle to quickly identify issues and prompt corrective action.
  2. Independent oversight of controls to minimize conflict of interest.
  3. Periodic analysis and tracking of key performance indicators to establish performance baselining and to ensure their long-term results are being achieved.

 

Conclusion

Particularly in today’s fast-changing environment, medical practices and facilities need to challenge themselves to take a fresh look at their operations.  While office management may be reluctant to implement potential improvements, ownership clearly wants to increase operational efficiencies in order to mitigate the possibility of lost revenues.     While these conflicting interests between vested parties often create a reluctance to take a fresh, objective review of the current processes,    an independent analysis of operations can uncover and correct inefficiencies thereby increasing the practice’s profitability off of the existing patient base.

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Why Do You Need to Outsource Accounting?

Accounting outsourcing will help you in managing the accounting of your firm. Why does one need to outsource accounting? Read the article to find out.

Accounting outsourcing means to hire a firm or services for your business accounting rather than hiring full-time employees for that. Outsourcing some accounting portion of business is now a tradition especially for small and medium business. Hiring a full-time staff for receivable, payroll, calculation of taxes and paying salaries to them is more costly than outsourcing the section of the business or accounting and only pay for the accounting work.  The firms can spend their saved money on other important tasks like increased efficacy of the company and implement strategies to increase sale. Below are more benefits of outsourcing accounting:

  1. Reduced fraud: The chances of fraud increases in companies without CFO/controller. CFO/controller is a person who assesses and detects abnormal activity in the transactional data. Usually small business does not hire them, and the result is the fraud. Further, accounting controls are detected and prevent frauds up to 26%. After outsourcing, especially the small businesses can afford CFO/controller services can prevent loss.
  2. Reduced costs: Hiring a full-time accounting employee or part-time employees increase the cost and money spent on costly benefit packages. On the other hand, you only have to pay actual accounting fee it saves productivity and payroll costs. It is estimated that approximately 40% of the expenses can be saved per month after outsourcing the accounting.
  3. Save time for other important issues: Accounting itself is a complex and tedious process and looking after and checking for frauds etc. is another major task that needs time and energy. If you outsource your accounting, you will get enough free time for other tasks like bringing in new customers.
  4. Expert opinions: Outsourcing means that you are actually hiring experts for your business. They are well aware of all tax laws and other laws. They can accurately guide about tax information, full coverage to the accounting sections. Staffing options are also available on time when you need them. Companies to which you will outsource your firm’s accounting work will have qualified staff that can give you an expert opinion.
  5. A Professional Accounting: It is not always possible for one firm to hire many accountants and divide work among them. Accounting section deals with many issues like a tax return, cash flow, payrolls, etc. The chances of errors are always there. Outsourcing accounting means that you are hiring a decent team that double checks each other and ensure error free work.

 

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How to Save Time and Money by Hiring a Bookkeeping Firm?

Bookkeeping is a critical and challenging task. To save time and money, you can hire a bookkeeping firm, and they will handle all the bookkeeping tasks for you.

Bookkeeping is assumed to be a burdensome task for small business owners. They get nervous by the bookkeeping and also second-guess the knowledge and skills in fear of the Internal Revenue Service.  The bookkeeping is a crucial task, and you should not be intimidated or bored by the accounting. One quality of the successful business owners is that they do not view bookkeeping negatively and adopt a few procedures to stay on top of the paperwork. By this way, they manage to save time, money and a lot of stress.

Therefore, if you are looking for ways to improve the system, increase profit and reduce the expenditure of your business. Then one of the options is to hire a bookkeeping firm. We have mentioned below some of the ways in which bookkeeping firms save the time and money for you.

  1. Stay Updated on Business Spending

It is imperative for the business to stay up-to-date with business transactions and it can be very time consuming to catch up on neglected financial reports. Usually, the business owners are very busy with other aspects of managing the company that they don’t have time to do the monthly accounting, and their financial records are a mess.

So, bookkeeping firm by keeping records help the companies to stay consistent with tracking financial information regularly on a weekly or monthly basis.

  1. Tracking Business Write-Offs

Businesses need well documented expenses that fall within the category of write-offs, every year for tax preparations. As the tax time approaches every year, the bookkeeping firm can assist you to keep track of these expenses and prepare you to be ready for handing over the information to the tax preparer.

  1. Outsourcing of Payroll

The Payroll is an expense that adds up especially if you are spending the salary of an internal employee to handle the payroll processing. The bookkeeping firm helps business to save the time for other tasks by managing the outsourced payroll. Many streamlined systems are present and can be implemented to make the payroll outsourcing smooth and easy. These systems can be tailored according to the needs of your company to give you the professional service according to your requirements.

  1. Access to top systems

Outsourcing bookkeeping operations gives you access to the top systems and tools in the industry. Not every business can afford to pay for the expensive software or programs for their bookkeeping nor do they have enough time to keep up with changing laws and regulations. Bookkeeping firms purchase these tools and acquire the expertise in the knowledge of tool, so saving you the time and money. Moreover, these top tools create nightly backups and store the organized records and books for years.

  1. Scalability Option

Bookkeeping firms allows you to expand or cut back easily and quickly. If you want to grow your business or you want to cut down on the spending, you need to have a reliable team with effective plans and options to help you to achieve the goals. Bookkeeping firms providers provide the flexibility to quickly scale the business, thus saving the time and money for you.

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How to Hire the Right Bookkeeper?

Hiring the right bookkeeper is not an easy task. Here is a guide to help you in hiring the right bookkeeper.

Bookkeeper plays an important role the business. It keeps the record of your day to day transactions that include sales, salary, and expenses. Being a businessman, it is not always possible to have a sound knowledge of the process to manage receipts, expenses, and wages. Secondly, bookkeepers can guide you how well your business is growing. They can alarm you in any threatening situation.  Your bookkeeper also manages cash flow. A good accountant is responsible for advice, tax returns, and annual returns. So, hiring a good bookkeeper is fundamentally important. While hiring a bookkeeper, few things should be kept in mind. These are described as follows:

Understand your business requirement.

  • The first thing before hiring a bookkeeper is that you should understand your own business and its requirement.
  • If you are running a manufacturing business than the role of bookkeeper will be different as of service or retail companies.
  • You also need to evaluate the bookkeeping times. Many companies go for accounting software, so you must need an accountant well aware of these technologies.
  • Business reports are essential in every business. A bookkeeper can review these reports like profit and loss reports.

After understanding of the type of the business you are running and what would be the key responsibilities of your bookkeeper, you can look for a bookkeeper based on following tips.

Tips for hiring a bookkeeper

  • Firm or an independent bookkeeper? Understand your business: Booking keeping services are often offered both independently or by a firm. Based on your business requirements you can select a bookkeeper consultant or a outsource bookkeeping to a firm. You can also hire as full term employees your business needs.
  • Location matters!: If you are going for online accounting software, then you may hire a bookkeeper don’t exactly live nearby you, but yet you need to meet them off and on. So, it is important to decide the location before looking for a bookkeeper.
  • Friends can help you out: Your social network groups like LinkedIn can help you to find out a good, trustworthy bookkeeper or your friends can help you find the best firm or independent person.
  • Experience is the key: Bookkeeping don’t need any professional qualification like accountants, but certification is available. It is good if your prospective bookkeepers have done this under the professional governing body and have a substantial experience in working with a firm similar to you.
  • Choose the appropriate person for the company after checking all requirement qualifications and experience. You can also interview twice and select who fit for you. Do not choose only on the basis of qualification and expertise, here personality and qualifications skills also matter a lot.

Your bookkeeper would be like you co-pilot who fly your business with you. He/she is responsible for streaming your data coming from receipts, bills and other cash flow in your business and present it in a meaning full way.  They organize and properly file your data. They are the sailors and saviors of your business. So hire the right one and pay right.

 

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