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Don't delegate what you don't understand


Every year, my veterinarian clients keep getting younger.

Every year, my veterinarian clients keep getting younger.

I know this because my age certainly can't be advancing all that much; I feel about the same as I did 10 or 20 years ago. Nonetheless, more and more of the veterinarians who contact me for legal and/or consulting advice think in modern ways.

Many of their ideas are terrific, but a few are recipes for disaster.

The new diagnostic modalities open up new possibilities for care. So does the willingness to refer cases that can and should be evaluated by colleagues with special training. I am a great fan of online veterinary medical information sources (though I wish some clients would stop pretending to be experts after a 30-minute Web search.)

On the other hand, there is a disturbing trend among my young doctor clients in the area of practice ownership and management. What I see happening is the desire and tendency for veterinarians who have recently started or purchased a practice to "outsource," or delegate, virtually all ministerial tasks purely because these activities do not constitute the practice of medicine and surgery. Let me cite a couple of examples:

One doctor I know recently purchased a practice with full bank financing and immediately turned over all accounting and bookkeeping activities to a computer and a CPA. While the software was satisfactory and the accountant was capable, a significant problem soon surfaced.

The new young doctor/business owner never bothered to learn the distinction in his state between sales-taxable and non-sales-taxable transactions. Consequently, his CPA never filed required state sales-tax compliance documents and an audit ensued. The owner wound up having to pay fines and penalties in addition to the already substantial burden of monthly note payments.

In another case, a fairly recent graduate veterinarian started a practice which quickly began to thrive. From the start, he had a nice older lady friend doing the books, paying the bills, filing quarterly reports and the like. Then, unexpectedly and in the middle of summer, the bookkeeper had to go into the hospital for a protracted stay. The pets kept coming. The clients kept bringing in the money.

Busy and overburdened, Dr. Youngster had no place to go to take care of practice finances. The state didn't take long to notice that withholding deposits were late and inaccurate. The unemployment-insurance agency didn't think it was cute when an employee made a claim and no one at the practice responded to official inquiries.

The problem? Dr. Youngster had never filed a tax report or handled an unemployment claim in his professional life. And the mid-June heartworm season was a pretty lousy time to ramp up his knowledge to meet immediate compliance obligations.

New practice owners and entrepreneurial practice-starters, beware. It is a uniformly bad idea to delegate tasks to others of which you have no knowledge or experience in doing yourself. Just when you least expect it, your "people who handle that" may abandon you or – worse – take advantage of your ignorance.

Instead, I suggest that any veterinarian who anticipates buying or starting a new business set some time aside to take a small-business course at a local community college. A number of states and private firms also offer these classes.

I realize it is hard for some individuals with advanced educations to admit they are partly or totally ignorant of what is involved in the day-to-day operation of a small company.

For some, it is even more difficult to believe that it might make economic sense for them to take time away from their $50- to $80-per-hour, associate-veterinarian job to attend school to learn to do what others do for a third of that amount, or less.

Believe me, it is cost-effective in the long run. Veterinarians who hope or plan to be practice owners need to be at least somewhat familiar with the laws and formalities associated with worker-compensation insurance and injury-event compliance. It is incumbent upon them to be passingly familiar with federal and state income taxes, federal and state employee-withholding compliance, overtime law and similar details.

If a new practice owner fails to learn these fundamentals, all sorts of goofy and dangerous things can happen. Consider these scenarios from my file cabinet:

  • Local veterinarian fined by state tax authorities because uninformed bookkeeper never took notice of the fact that the state minimum wage had been raised above the federal minimum wage. Oh, and back wages had to be paid, too, after a mountain of calculations.

  • Veterinarian so outraged by the fact that a long-time, all-powerful, all-knowing bookkeeper had taken off with several years of tax deposits (after surreptitiously doctoring the obligatory forms) that she decided no one could be trusted. Doctor now does all her own bookkeeping, costing her thousands of dollars in lost practice time.

  • Practice owner who delegated all bookkeeping without any personal knowledge of it herself decides she wants to sell her practice. Sales contract prepared by her attorney includes standard warranties regarding prior and ongoing sales-tax compliance by the seller.

Suddenly, sales tax matters. In order to close the sale, an accountant must be hired to go through years of transactions to file the overdue outstanding sales-tax documentation.

And, don't forget – once one state agency smells a business with a lack of attention to financial details, other government bureaus may smell blood in the water, too.

As we all know, nothing says "good time" like having an on-site audit.

Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services exclusively to veterinarians. He may be contacted at (607) 754-1510 or info@veterinarylaw.com.

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