Also often referred to as the separation of duties, the segregation of duties (SOG) can assist dental practices in safeguarding their hard-earned profits by avoiding conflicts of interests. Segregating responsibilities for the various steps in the procurement process (from order to payment) mitigates risk by eliminating the opportunities for theft or fraud that lay within the purchasing cycle.
Splitting the functions related to buying between various employees ensures no single person has excessive control over buying activities.
Standard practice is to separate responsibility for:
- Purchase requests
- Purchase approvals
- Receiving of orders or confirmation of work completed
- Invoice approvals for payment
- Inventory counts and reconciliation
- Authorization to dispose or discard of inventory or assets
- Physical discarding of inventory or assets
What Can Happen Without Proper Purchasing Controls?
Mitigate your risks by evaluating your distribution of duties for the purpose of identifying the combining of critical tasks with conflicting interests that may arise and open the door to financial losses.
Below are some examples of the possible risks that lay within the procurement cycle:
- Processing purchases and payments for unnecessary, unauthorized, or fraudulent purchases
- Issuing a payment to a fictitious vendor
- Initiate and issue payment for a fictitious invoice
- Theft for resale or personal use
To further clarify, the employee responsible for issuing checks for payment to suppliers should not be allowed to, or be responsible for, the issues of POs and the receiving of goods upon delivery as this would present an enormous opportunity for fraud. For example, the employee could create a fake vendor, confirm undelivered supplies as received, and issue a payment to the said fake vendor.
Where the elimination of conflicting duties through SOD is not possible due to a lack of necessary personnel or resource limitations, then mitigating control procedures may be implemented. These controls should:
- Ensure full transparency and visibility on all transactions performed by employees with conflicting duties.
- Audited with enough regularity to ensure fraud or theft is not taking place, with proper documentation of audits.
- Ensure all transaction documentation, either by hard copy or electronically, is maintained.
Learn More About Dental Supply Purchasing
Here are other best practices that ensure you hold suppliers accountable to agreements, maintain ethical buying practices that protect your reputation and your prices, and drive informed and effective decision-making.