Tips on Safeguarding Association Assets
I recently participated as a panelist in the white-collar crime presentation. Each of the five panelists could relate several, if not numerous, cases in which they had been involved as a professional of some manner, in the aftermath of an embezzlement of association funds. What struck me is that none of them were the same cases, meaning our group of panelists had knowledge of dozens of separate embezzlement cases. While this doesn’t mean that embezzlement of association funds is a widespread problem, it is still too common a problem to ignore.
Whenever I am consulted by a clinic that is new Houston Car Accident Lawyer to the challenges of hiring a chiropractic associate, one of the first questions I get is how to structure the compensation. There are many great ways to set up the pay and bonus structures so that it will optimally motivate your new chiropractic associate. In this article I will attempt to discuss some of the best compensation arrangements I have encountered and setup over the years.
Now I realize that in chiropractic, as in all professions and all areas of life, there are doctors that will take advantage of a chiropractic associate and visa versa. Nevertheless, upon further reflection it must be remembered that this is a free society. No one is forced to work anywhere and hence always has the ability to seek a better paying position elsewhere. In addition, supply and demand most often dictates what a chiropractic associate doctor is paid. This is out of our individual control. These are market forces at work, not the greediness of every chiropractic business owner.
If the average chiropractic associate’s base salary in a certain area is 4 thousand a month should I pay 6 thousand because I am a good guy? Not if I am a good business man I wouldn’t. Now, of course this does not take into account a myriad of mitigating circumstances. What is this particular doctor’s experience? Does he bring a patient base with him? Has he in some way demonstrated or do you have some assurance that the candidate can build up and manage a large patient base on his own – verses just wanting to show up and treat whoever is placed on his schedule?
A common scenario that I have seen arise occurs when a chiropractic associate has been working for a clinic for a good period of time, usually a few years, and they know the numbers that they bring in and the collections that result from their efforts, yet they do not feel their pay has grown relative to those numbers. In fact, in most situations where I see a disgruntled chiropractic associate this is usually the case. The underlying cause of this is often poor communication on the part of the owner (or fear of honestly communicating) and a lack of understanding on the part of the associate.
It is common for an owner to feel that “I Am The Owner” because well, he is after all, but because of that, the owner often feels that the employee shouldn’t concern him or herself with the business matters of the clinic. And, in many, but not all cases this may be correct. However, the associate is really not ‘just another employee’ and as such should not just be treated like one.
Failing to adequately communicate from the start often creates problems; especially as it relates to pay structures. There obviously are reasons for why the pay and bonuses are valued at what they are. One reason could be because the owner ‘carried’ the chiropractic associate for quite a number of months (or years) while the associate built a practice. And when the success of the chiropractic associate finally comes the owner may now feel he is entitled to reap the rewards of taking on those risks and extending those early efforts. In reality, that is a valid standpoint on the side of the owner; however, the chiropractic associate needs to realize that from the beginning of employment.
Another observation regarding chiropractic associates is how often they will come up with a number in their head that they think the owner should make off them. I will often hear an associate say something like “… I can understand the clinic making about 5K per month, but I’m bringing in 20K, it’s not fair!… ” The issue here is not the deal, the issue again is communication.
When a chiropractic associate starts bringing in a substantial amount of income (keep in mind, these are patients he has fostered over time, not those that were handed over to him when he first started at the clinic) in many instances he becomes more like a partner; regardless of ‘ownership’. And, when the associate is really good, and he is making the clinic a good deal of profit, then perhaps a partnership of some sort should be considered at that time. After all, you don’t want to lose someone who makes you money – this is where greed or ego can ruin a good thing!
One solution to help get the chiropractic associate’s skewed view back into focus is for you to somewhat ‘open the books’ to him. Especially when hiring a new graduate as an associate, they will often have no concept of what it takes and what it costs to run a busy practice. That chiropractic associate may think very differently about his $20K contribution when he finds out that the clinic costs $80K per month to operate. I have found that sometimes you actually have to show the chiropractic associate the numbers, show them the bills, the payroll, etc. It is way too common for them to overlook all that it takes to run a practice and incorrectly assume that the money they are bringing in just goes right into your pocket.
Another common scenario also concerns the new graduate. As is true with most of us when we first graduate, it is common to think you can do better than the establishment, or the perceived status quo attitude of the ‘older’ doctors. A new chiropractic associate/graduate with this mindset will see that $20K per month and think, “I could open my own practice for $3-5K per month overhead and start pocketing $15K per month!” A good owner will recognize this green attitude and over time educate the chiropractic associate on the realities, the risks and often the hardships of owning a business.
Protection of association assets is one of the primary responsibilities of the treasurer and board of directors of every association. As associations and the financial markets become more sophisticated, many more associations have now adopted investment policies to insure that association funds are protected from the risk of market losses. However, simply due to their size and nature of operations, many associations do not, or cannot, take adequate steps to protect association funds from physical theft.
First, many small associations use volunteer board members to actually run the association. There are no employees, nor is there an outside management company. The entire burden of association fiscal matters resides with the volunteer officers. At that point, the safety of association funds depends almost entirely on the honesty and integrity of the individuals involved.
Second, another type tends to be mid-size associations who hire professional management companies to oversee their operations and report on association financial transactions. This arrangement works very well for the vast majority of associations. But this often removes the board members from active participation, so they act more in the role of passive overseers of financial transactions. For associations in this category, the best actions that a board can take to assure the safety of associations funds is to sign all checks and carefully review all financial reports, bank reconciliations, and transactions that are processed by the management company.
Third, many larger-scale associations hire their own employees to act as on-site managers and accounting staff. It is rare that there will be enough employees to allow for a complete segregation of financial duties. In other words, simply due to a limited number of people involved in the accounting function, there will be an inherent conflict of duties performed by certain of individuals within the accounting function. As an example, the association’s controller or bookkeeper may send out member assessment invoices, make deposits, prepare bank reconciliations, write checks, and file paid invoices. If that person also records all transactions in the association’s general ledger, then they effectively have total control over association funds. The only activity not under the direct control of that controller or bookkeeper then becomes the actual signing of checks. Since there are many conflicting duties being performed here, there are opportunities for that person to misappropriate funds. The board should, in this situation, carefully review all financial records and also design the accounting system so that opportunities for misappropriation of funds are reduced