‘Checks and balances’ has multiple meanings in the context of accounting. You’ve got the literal kind – i.e., paper slips used to issue payments and forms recording financial transactions – and likewise intangible ones that exist to mitigate risk. Today, we’re talking about the latter. Implementing Internal Controls in Dental Practice Accounting is a difficult but ultimately pivotal task every clinic must make a priority when handling financial matters. Keep reading to learn more about the what, why, and how of doing it right.
Why Accounting Necessitates Controls
While accounting for dental practices is unique from accounting for med spas, law firms, and other businesses in that its industry-specific challenges require tailored solutions, the fundamental need for robust internal controls remains universal. Dental practices handle a complex mix of insurance claims, patient payments, and operational expenses that create multiple points of potential error or fraud. The dual nature of dental practices as both healthcare providers and businesses introduces additional compliance requirements that must be carefully managed through proper accounting protocols.
Canada Revenue Agency (CRA) requirements for GST/HST collection and remittance, and privacy laws such as the Personal Information Protection and Electronic Documents Act (PIPEDA) or provincial equivalents like British Columbia’s Personal Information Protection Act (PIPA) are just a few examples.
Dental practices must also navigate Canada Health Act considerations when determining which procedures qualify as insured services under provincial health plans versus private insurance or direct billing. Regulatory compliance and financial transparency are the bedrock of business sustainability no matter how large or small operations may be.
Implementing Internal Controls in Dental Practice Accounting
As if financial management wasn’t enough of a burden as-is, implementing internal controls in dental practice accounting can’t be neglected for its importance to process accuracy. You’re essentially wasting time and resources without proper measures against risks like fraud and error in place. The challenge lies in creating systems that are robust enough to safeguard assets while remaining practical for daily operations.
We recommend starting with these basic steps:
Separate Financial and Accounting Duties
Ensure that no single employee has control over all aspects of financial transactions. For example, the person who receives payments should not be the same person who records them in your accounting system. This separation creates natural oversight and significantly reduces fraud risk. In smaller practices, consider involving the practice owner or manager in regular review processes if full separation isn’t feasible.
Overview Wire Transfers
Implement a dual authorization process for all electronic fund transfers above a predetermined threshold. Require documented approval from both a designated staff member and the practice owner before processing. Keep detailed records of all transfers, including purpose, recipient details, and supporting documentation to create a clear audit trail.
Reconcile Deposits and Payment Activity Daily
Match end-of-day payment reports from your practice management software with actual deposits and payment processor records each business day. This daily reconciliation quickly identifies discrepancies before they become difficult to trace. Train front desk staff to produce daily summary reports that account for all payment methods—cash, credit cards, insurance, and patient financing.
Review Bank Accounts Monthly
Conduct thorough monthly reviews of all bank statements and financial records. Look for unauthorized transactions, unusual patterns, or unexpected fees. This review should be performed by someone independent from daily payment processing. Consider using an external professional dental accountant for periodic independent reviews to provide additional oversight.
Verify Every Employee Who Handles Money
Implement rigorous background checks for all staff members with access to financial information or payment processing. Establish clear written procedures for cash handling, provide comprehensive training, and conduct regular audits to ensure compliance. Create accountability through systems like individual login credentials for your practice management software and point-of-sale systems.
Establish Clear Documentation Protocols
Document all financial policies and procedures in a comprehensive manual that serves as both a reference and training tool. Include step-by-step instructions for daily financial tasks, authorization requirements, reconciliation procedures, and reporting schedules. Keep this manual updated as processes evolve and ensure all staff members understand where to find this information. Requiring staff to sign acknowledgments after reviewing policies creates accountability and demonstrates compliance efforts in case of external audits.
Implement Regular Financial Audits
Schedule both internal and external financial audits at consistent intervals throughout the year. Internal audits might occur quarterly, conducted by the practice owner or manager, focusing on adherence to established protocols and identifying potential process improvements. External audits, performed annually by accounting professionals with dental industry experience, provide an objective evaluation of your financial controls and compliance with regulatory requirements. These regular examinations not only deter fraudulent activity but also identify inefficiencies and opportunities for process optimization that can improve your practice’s financial health.
Implementing Internal Controls In Dental Practice Accounting for You
Delegate the responsibility of implementing internal controls in dental practice accounting to the people best qualified to do so – accountants. The team at Dental Tax is exclusively committed to serving dental professionals across Canada. Our specialized expertise means we understand the unique financial challenges your practice faces and can implement tailored internal control systems that protect your assets while optimizing operational efficiency.
Contact our team today for a complimentary consultation.
Adam has an MBA from the Richard Ivey School of Business in London and also holds a Chartered Investment Manager designation.
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