Internal controls are systems and procedures put into place within an organization to safeguard assets, prevent fraud, ensure accuracy and compliance, and support operational efficiency. A strong system of internal controls is essential for your practice to thrive and remain financially healthy. This article highlights important internal control strategies and the areas of your practice for which we recommend you implement these controls.

Internal Control Strategies

• Segregation of duties: Segregation of duties is a fundamental internal control that applies across many areas of an organization’s operations. This strategy involves dividing key responsibilities within a business process among multiple employees so that no single individual has too much control over any one process. By separating these functions, you can significantly reduce the risk of fraud, misuse of resources, and unintentional errors within your practice.
• Authorization processes: Authorization processes ensure that financial transactions are sent through the proper channels for approval.
• Reviews and reconciliations: Regular reviews of transactions help to detect errors and misuse of funds. Account reconciliations—or comparisons between two sets of records—are a critical internal control strategy that can be utilized within multiple operational areas.
• Clear procedures for recordkeeping and documentation: Establishing guidelines for documentation of your practice’s policies, processes, and transactions promotes consistency, cohesion, and clear expectations within your practice.
• Physical controls: Physical controls over your practice’s tangible assets are also key for secure operations. Physical controls include locked storage for inventory, safes for cash and sensitive documents, and security cameras.

Key Areas to Implement Internal Controls with Examples

Financial management: Regular reconciliations between bank statements and your practice’s books and PIMS, double-checking invoices, separation of duties within financial processes (i.e., authorizations, recordkeeping, custody of assets, reconciliations).

Inventory and purchasing: Locked storage for inventory, physical inventory counts, formal cycle counting procedures and schedule, comparing actual inventory counts against records, vendor checks, authorization processes for purchases, dual signature policy for checks over a certain threshold, segregation of duties between employees making and approving purchases.

Client service: Transparent billing, standardized procedures.

Human resources and payroll: Authorization processes for salary changes, timecard approvals, segregation of duties between employees processing and approving payroll, reconciliation of payroll bank accounts, access controls for payroll software.

IT: Robust access controls for practice software, password policies, two-factor authentication, other cybersecurity measures.

How RBT Can Help

RBT CPAs’ veterinary accounting team is available to perform internal control reviews for your practice. We’ll assess the procedures you have in place, identify potential risks, and make recommendations for strengthening your internal control system. Contact RBT CPAs today to request a review of your practice’s internal controls—or for assistance with any of your other accounting, tax, audit, and advisory needs. Together, we can be remarkably better.