Using an accountant to manage the pharmacy’s bill paying and payroll can help the pharmacist/owner free up time to devote to other aspects of the business. An accountant needs to be a trusted advisor, and there have been cases where pharmacist/owners have asked friends or acquaintances to fulfill this role without due diligence, and dire consequences resulted that legal action could not solve (Tennessee v. Blaskis). Hiring the right accountant for the pharmacy business is important. Even with the right individual on board the pharmacy team, the pharmacist/owner needs to maintain vigilant oversight and review of the businesses financial documents on a regular basis. What steps might a pharmacist/owner take when looking at hiring an accountant?
First consider the person’s qualifications. Accountants may or may not be certified. All certified public accountants, or CPAs, are accountants but not all accountants are CPAs. In many states, anyone can call himself/herself an “accountant.” In order to become a CPA almost all states require that an individual meet educational, experience and ethical requirements and pass the Uniform CPA Examination. The Uniform CPA Examination is offered by the American Institute of Certified Public Accountants (AICPA). While the AICPA does not set the CPA requirements, it seeks the highest possible level of uniform certification and licensing standards while promoting and protecting the CPA designation. CPA requirements generally include: completing a program of study in accounting at a college or university, passing the Uniform CPA Exam, and obtaining a specific amount of professional work experience in public accounting. As a result of these requirements, CPAs are more experienced, but that is not a guarantee that their work will produce better results than a traditional accountant. The pharmacist/owner should undertake due diligence in asking the right questions, and seeking experiences from peers can be helpful.
Questions that should be asked of prospective CPAs include:
- Is timely service delivered? The owner should be able to access financial information quickly, easily and on a timely basis, generally within 10 to 30 days.
- If hiring a firm, rather than an individual, ask if the business will be assigned one CPA for it’s work.
- Inquire how the CPA can assist the business in becoming more profitable, for example control expenses or reducing taxes.
- Ask about the CPA’s technical savvy and what type of software they will use to provide services.
- Learn who the CPA’s other clients are and ask for references. Having other pharmacy clients is a big plus. Be sure to contact the references.
- Ask the account why the pharmacy should use them.
- What are normal business hours and what is the accountant’s after hours policy.
- What is the accountant’s mode of contact and turnaround time to respond to an inquiry?
- How are the accountant’s fees calculated? Agree upon a detailed fee structure to avoid problems later.
- Ask if there is something the pharmacist/owner can do to help keep work moving efficiently, and fees to a minimum.
- Are there any conflicts of interest, for example, does the accountant work for a competitor?
Asking peers for recommendations may provide a good list of potential candidates. So may a review of the exhibitor list from national pharmacy meetings. Regardless of the source or referral, conducting a thorough review to ensure the right fit for the pharmacy business is critical.
Tennessee v. Blaskis in Brief
The pharmacist/owner of two large-volume pharmacies located near each other in Tennessee. The first pharmacy was opned in 1993, the second a few years later. In 2003, the pharmacist/owner expanded his relationship with his personal tax accountant, with whom he had become personal friends, to include managing the two pharmacy’s books. They agreed on the process that would be used to pay bills and payroll, which included the accountant electronically transferring money out of the owner’s checking account in the amount necessary to cover the bills. These funds would be placed in the accountant’s escrow account, from which checks with her stamped signature would be issued. A statement of the accountant’s activities was issued after each billing cycle, which was up to 2 months later.
The system began and by the end of the first month, the bank called the pharmacist/owner to report an overdraft on the checking account. The owner was stunned, because the business was doing fine. A called to the accountant had different excuses for the problem. Continued review by the owner of the accountant’s report showed discrepancies in the amount of payroll he reported to be paid and what the accountant eventually paid. Within six months, the owner was concerned enough to enroll in online banding. Continued problems caused the owner to ask the bank to monitor accounts. The bank reported that the withdrawn funds from the pharmacy’s business checking account went into the accountant’s escrow fund. The owner put a stop order on the account to stop the accountant from accessing the bank account.
When the owner confronted the accountant, she became defensive and had a number of excuses about the problem, but said she would research it and correct it. The owner also learned the accountant’s business was not insured to cover such losses, although the accountant had told him otherwise. The owner asked for all his files back. Eventually the accountant returned some, but not all the documents. The pharmacist/owner kept calling to no avail. The documents were finally returned when the accountant declared bankruptcy and the bankruptcy court returned them.
At the end of the day, the owner filed a lawsuit against the accountant. An independent expert witness accountant hired by the owner found the pharmacies were out a total of $415,000. Complications in the case arose because of other charges against the accountant in West Virginia. While the accountant was going to spend time in prison, the pharmacy’s lost funds were never recovered.
Tennessee v. Blaskis, Slip Op No. M2009-01154-CCA-R3-CD (December 8, 2010), 2010 Tenn Crim App Lexis 1033.