Managing petty cash is no petty matter

Maintain a few simple controls so staffers don't develop sloppy fiscal habits.

Medicine may be moving toward the paperless office, but you still need paper money on hand. Otherwise, how can staffers pay the postage due on a package that's missing a stamp? And when Mrs. Jones hands them a $50 bill to satisfy a $15 copay, can they make change?

Most practices aren't very strict about office cash, but they should be. The management of these greenbacks sends a signal to employees about your expectations for all money matters—the bills they submit, the accounts receivable they chase down, the syringes they buy.

Here are the two types of cash funds your front office should have and some proven ways to run a tight ship.

Change fund. Employers are forcing employees to shoulder a larger and larger share of healthcare costs in the form of higher deductibles, coinsurance, and copays. This trend means practices are collecting more cash at the time of service. So you must be prepared to make change for patients who fork over real money. A change fund spares employees from having to hunt you down in an exam room to ask if you can break a $50 bill.

The natural place for your change fund is the front desk or cashier's station. Keep the amount as small as possible—$50-$100 in small bills (although high-volume group practices may need more). Too large a fund creates a tempting target for a would-be embezzler. Stash the money in a locked cash box, available from an office supply store, or a lockable drawer in the cashier's desk.

Set up the fund by writing a check to "cash" and noting "change fund" in the memo field. Greenbacks in small denominations—$1, $5, and $10 bills—will do the trick. Five $20 bills defeat the purpose. Balancing the fund at day's end is a simple matter of adding up all the money and checks in the cash drawer or box and subtracting the opening balance. The result should equal all over-the-counter collections, excluding credit and debit card payments.

Come sundown, your fund will have amassed some large bills. Have a staffer convert the large bills into smaller denominations when she takes the daily collections to the bank.

Petty-cash fund. Some practices cover minor expenses with money from cash collections, but that complicates the balancing process. It's simpler to have a second fund.

Assign one person as keeper of the petty cash—the office manager is a natural candidate—and have her keep the money under lock and key, perhaps in another cash box.

Like the change fund, the petty-cash fund should have only $50-$100 in it. You can fine-tune the amount by watching how often you write checks to replenish it. Practices generally cut checks twice a month to pay their bills. If you have to refresh your petty-cash fund more often than that, you probably should make it bigger.

The petty-cash fund is intended for small, occasional expenses like postage due, cab fare for a stranded patient, a chocolate cake to celebrate an employee's birthday, or emergency kitchen supplies. Explain to the staff that it's not for making loans or cashing personal checks. You and your fellow doctors, of course, need to abide by these rules if you expect others to take them seriously.

Guard the petty-cash fund from abuse and theft by requiring a receipt for each expense. The receipt should answer the five "W" questions of journalism. Who spent the money or authorized the expense? What was purchased? When and where was the cash spent? And why? You can buy a pad of petty-cash receipts at your local office supply store for a few bucks, or create your own. Have staffers record everything in ink. If the purchase generated a sales-register receipt, have them attach that to the petty-cash receipt.

To balance the fund, have the fund's custodian add the cash at day's end and the amounts on the receipts. They should equal the original balance. If the balance is off by a few dollars, don't automatically jump down your employee's throat. Maybe she got careless momentarily in the rush of the day but intended no mischief. Just gently remind her to shape up her bookkeeping, and conduct spot checks to make your point.

Likewise, you ought to periodically review petty-cash receipts to see how the money's being spent. Perhaps the fund has ballooned to cover expenses that don't qualify as petty—a new telephone, for example. You may discover that staffers are dipping into the fund for supplies that could and should be paid for by check or credit card.

Hawkish oversight of office cash is imperative, but don't let anybody construe it as mistrust. If you didn't trust your employees, they wouldn't be working for you in the first place. The message you want to spread is one of professionalism. You create financial controls because every transaction must be conducted thoroughly and accurately. As a businessperson, you care about the money—all of it.

The author is a management consultant with the Practice Performance Group, a practice management consulting firm in La Jolla, CA. This article is adapted from the firm's newsletter, UnCommon Sense.

 

Robert Lowes. Managing petty cash is no petty matter. Medical Economics Aug. 6, 2004;81:45.