Cash management is critical to running a successful veterinary practice, ensuring financial transparency, and preventing theft or fraud. VetBooks clients receive monthly account reviews from our team to keep their finances on track, but how well you manage your cash and bank accounts between our visits impacts efficiency. Here, we explore simple ways you can implement financial best practices and streamline your bookkeeper’s job.
Cash drawer basics
A good rule of thumb for veterinary practices is to keep at least $100 in the cash drawer at all times and double that amount in your change bag, but each clinic has unique needs. If you aren’t sure, review the last quarter’s transactions to determine the amount of cash you need, which could be more than $100 for high-volume, emergency, or specialty facilities. The cash drawer’s primary purpose is to provide change for large bills, so it should mainly contain small bills and coins.
Once you’ve established a standard amount to keep in the cash drawer, you must put processes in place to reconcile the drawer to the penny daily. Minor discrepancies, such as unaccounted-for change, may seem insignificant—but can add up to hundreds or thousands of missing dollars over time. Use your PIMS to print end-of-day reports and count the drawer each evening, noting discrepancies in a log for your bookkeeper. For example, if a client leaves without taking their change, you can note this in your records to explain the overage in that day’s deposit. Alternatively, if you can’t make change, apply a credit to the client’s account and document it.
Petty cash best practices
Petty cash is a small fund for incidentals, such as a team member purchasing supplies to refill the coffee station or throwing your staff a party. Petty cash should be managed separately from the main cash drawer and reconciled regularly. You may replenish petty cash as needed but you must maintain receipts and ensure the balance matches the original amount each time you use the fund. Failing to account for petty cash properly makes theft easier and loosens your grip on the practice’s overall financials. Alternatively, you can avoid petty cash confusion by issuing employee credit cards or adopting reimbursement models.
The importance of daily reconciliation
Daily reconciliation is vital for promptly identifying and addressing problems. If your practice doesn’t do this or forgets to account for every penny, you’re left in the dark about your financial status. Not resolving or investigating discrepancies on the same day makes your bookkeeper’s job more difficult and reduces the chances you’ll recover missing funds. Trips to the bank for deposits can be made as needed, but a deposit slip should accompany each day’s transaction amount.
A note on theft and fraud
While you should hire team members you believe are trustworthy, robust processes and oversight are necessary to prevent theft and fraud. The most effective way to ensure money doesn’t go missing is to put checks and balances in place, ensuring more than one person has high-level access. For example, the receptionist can reconcile the drawer, the manager can review it, and a different person can make the deposit. Additionally, ensuring each team member has a unique PIMS login helps to maintain accountability.
How many bank accounts do you need?
Opening too many bank accounts can complicate cash management and reconciliation, increasing bookkeeping time and costs and amplifying the risk of forgetting to transfer funds or defaulting on accounts. For most practices, the VetBooks team recommends opening three accounts: checking, savings, and a separate online pharmacy account. However, a few exceptions to this rule include:
- High-grossing practices may need more than three accounts to ensure full FDIC insurance, which maxes out at $250,000 per account.
- Online pharmacy systems that bill monthly rather than daily may not necessitate a separate account.
Effective cash management is essential for your practice’s financial health and paves the way for efficient bookkeeping. Managing the cash drawer meticulously, reconciling all cash to the penny daily, implementing multilevel oversight, and organizing bank accounts help reduce discrepancies and contribute to overall veterinary practice success. For more tips on keeping your practice financially healthy and implementing best bookkeeping practices, schedule a meeting with our VetBooks team.
