How should a dental or medical office manage vendor invoices and equipment purchase documents (non-clinical)?

Which pile does each arriving document belong to?

Decide the destination the day a document arrives, by what it will later be needed for:

The IRS's Publication 583 says supporting documents for expenses should show the amount paid and that the amount was for a business expense: the invoice shows what the amount was for, and the payment record (the canceled check or, without one, the bank or card statement) shows it was paid. The IRS's Form W-9 page describes the form as how a vendor gives its taxpayer identification number to the person who is required to file an information return with the IRS. Where a practice has several locations or owners, mark each document with its location, or "shared", at intake.

When does a purchase open an equipment file instead of going to the month's folder?

Route on what was bought and how, not on its accounting treatment. Open an equipment file when any of these is true:

• The item is equipment or furniture expected to last more than 1 year.
• It is financed or leased.
• It comes with installation, a warranty or registration, or a service contract.
• It has a serial number that a service visit, insurer or buyer will ask for.

The one-year line is from the IRS's Publication 946, which lists among the requirements for depreciable property that it must be expected to last more than 1 year; the routing uses only that length. Opening a file does not decide whether the cost is expensed or capitalized; the owner settles that with the accountant under the practice's written policy.

Never file the quotation, agreement, warranty or installation record with the invoice in the month's folder: scattered by period, the set cannot be reassembled when the item is serviced, insured or sold.

How can the office manager approve invoices without the owner?

Put the authority in writing. The owner, or all partners, sign a one-page delegation stating:

• What the office manager approves. These might be repeat supply orders from vendors on file, invoices under registered agreements at the current price, and utility bills.
• What only the owner approves. The owner alone approves equipment, new vendors, new or changed agreements, and anything that matches no order or agreement.
• Any amount ceiling. The owner sets the amount above which even a delegated class goes to the owner.
• Who stands in. The delegation names who approves when the office manager is away.

Before approving, match the invoice to the order or agreement behind it, to delivery evidence (a packing slip or service ticket signed by whoever received the goods or saw the work), and to the agreed price and quantity. Utility bills have no order or delivery evidence: match them to the account number and service address on the vendor file and compare the charge with recent months. Compare each invoice with its own order, never only a batch total; whoever releases a payment run compares each payment with its approved invoice. Show the approval on the document: initials, date and the matched order or agreement number, stamped on paper or entered in the software's approval field.

An invoice with no matching authorisation is neither approved nor paid. It waits in an "unmatched" folder while the office manager asks who ordered it; if no one did, it is not paid, and the owner reports it to the FTC at ReportFraud.ftc.gov. The Federal Trade Commission warns that scammers send fake invoices to businesses for products or services they never ordered, and tells small businesses to make sure their procedures are clear for approving purchases and invoices from vendors they actually work with.

The owner's check must not depend on the office manager. The California Dental Association advises having the bank send statements to the owner's home or personal email address and reviewing them regularly for unusual accounts-payable names or inconsistencies, requiring supporting documentation for every check the owner signs, and separating the jobs of reviewing bank statements, entering online payments and preparing reconciliations. Each month the owner compares the statements with the office manager's list of approvals and asks about any payment missing from it.

A form, notice or invoice that adds or changes where a vendor is paid is not entered or paid by the office manager: it goes to the owner, unpaid, and how such a change is confirmed is covered in How should a small business manage and automate its accounts-payable vendor-invoice and document workflow?

What goes in an equipment file, and how is it tied to the asset?

Give each item an asset number when its file opens, write it on every document in the file, and record it with the serial number and location on the item's line in the practice's asset record, which names where the file is. If the practice keeps no asset record, set one up first.

The IRS's Publication 583 says you must keep records to verify certain information about your business assets, and that they should show when and how you acquired the asset, purchase price, cost of any improvements, section 179 deduction taken, deductions taken for depreciation and for casualty losses, how you used the asset, when and how you disposed of it, selling price and expenses of sale. The file holds the acquisition, use and disposal evidence; the accountant works out the deductions, and the practice keeps a copy of each year's depreciation schedule with its asset record, on the same asset horizon.

Use this standing intake checklist for every acquisition:

When equipment is financed or leased, the file also holds any insurance the agreement requires and the end-of-term terms, such as buyout, return or renewal, and each payment is approved against the schedule. Whether a lease is rent or a purchase on the balance sheet, and how a loan-financed purchase is recorded, are decisions for the owner and the accountant; the file keeps what either answer needs.

How do you keep service agreements current?

Keep one agreement register, one line per agreement, showing:

• Vendor and what is covered
• Where the current version is filed
• Current term end and whether it renews automatically
• Notice period and the last date to cancel or renegotiate
• Current price and when it last changed
• Who reviews it before that date

File each renewal, amendment and price-change notice with the original and mark which version governs; a signed original alone shows terms that may no longer apply, so the practice cannot show what it owes. Put notice dates on the practice calendar early enough to review before renewal. Approve invoices under an agreement only at the current price; any other price goes to the owner. Leases and warranties go on the same register.

What should happen to a vendor document that lists patients?

45 CFR 160.103 defines a covered entity as a health plan, a health care clearinghouse, or a health care provider who transmits any health information in electronic form in connection with a transaction covered by the HHS rules those definitions apply to. For a covered entity, 45 CFR 164.514(d)(2) requires identifying the people or classes in its workforce who need access to protected health information to carry out their duties, the categories each needs and any conditions on that access, and making reasonable efforts to limit their access accordingly. A finance folder that everyone handling payables can open is no place for documents that identify patients. The steps below do not set out the privacy obligations, federal or state, that attach to patient information; they only keep documents that identify patients out of the finance flow.

Handle a vendor document that names or otherwise identifies a patient, such as a lab invoice itemised by case, in this order:

1. Send the itemised original straight to the access-limited place where the practice keeps patient information, then delete every other copy of it in the finance flow, including the shared practice mailbox and any scan or download folder. Mark it with its tax year and keep it there at least until that year's period of limitations has run, as for any routine invoice.

   Under 45 CFR 164.530, a covered entity must designate a privacy official responsible for developing and implementing its policies and procedures; that person (in a practice that is not a covered entity, the owner) decides where this place is and who may open it.

2. Have someone already entitled to see the itemisation, such as whoever sent the cases, check it against the practice's case records and confirm the work was ordered and received.
3. Put a summary with no patient detail into the finance flow: vendor, invoice number, date, total, that confirmation, the approval mark and where the original is kept.
4. Ask each vendor that itemises by patient to send itemised invoices only to an address or portal the privacy official (in a practice that is not a covered entity, the owner) designates, and to send the shared practice mailbox a statement showing totals without patient detail.

If an identifying document lands in the finance folder or the shared practice mailbox, move it, delete the remaining copies and tell the privacy official.

Which documents can be retired after the period, and which must stay?

The IRS's Publication 583 says you must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code, which generally means keeping records that support an item of income or deduction on a return until the period of limitations for that return runs out. It defines that period as the time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax; the practice's tax adviser confirms when it has run for a given year. Three horizons follow:

• Period. Routine invoices, bills, their approvals and the payment records that show them paid support one year's return and can be retired once that return's period of limitations has run.

• Asset. Publication 583 says to keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition, so an equipment file stays while the practice has the item and until that period has run for the disposal year.

  Publication 583 adds that if you received property in a nontaxable exchange, you must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. When an item leaves by trade-in or exchange, ask the tax adviser whether it was a nontaxable exchange before closing its file; if it was, keep the old item's file with the new item's file, marked "open until disposal" of the new item.

• Agreement. An agreement or lease supports every return that includes a payment under it, so it stays until the period has run for the last of those returns; a lease treated as a purchase follows the asset horizon.

Before discarding anything, Publication 583 says to check whether you have to keep records longer for other purposes, noting that your insurance company or creditors may require you to keep them longer than the IRS does. Mark each file with its trigger: the tax year, "open until disposal" or "open until final payment".

How do you catch a missing document and hand the routine over?

The office manager runs this check monthly, and the owner reviews it with the statements in hand:

1. Match every payment on the bank and card statements to an approved invoice on file, and ask the vendor that week for a copy of anything missing.
2. Compare each regular vendor's statement with the invoices on file.
3. Confirm every recurring charge other than utility bills has a registered agreement at the price charged.
4. Check each equipment file opened that month against the checklist.

Write the routine down: the delegation, classes and destinations, approval mark, agreement register, equipment checklist, patient-document steps, monthly check and where each file lives. Keep documents in practice-owned folders and a shared practice mailbox, not one person's inbox. Have someone else run the monthly check at least once a year; the California Dental Association notes that illicit activity often surfaces when the perpetrator takes extended leave and another employee fills in.

Only the owner creates logins that can order, approve or pay, and the owner keeps the list: bank and card access, the payables or approval system, vendor portals with saved cards, and the recovery email and phone on each. When the office manager's access ends, at once for a departure on bad terms, the owner changes or removes every one of them at that moment, including shared passwords and sign-in codes sent to the manager's phone, cancels any practice card in the manager's name and, if the manager handled checks, counts unused check stock against the last check number in the bank's records. The successor's first monthly check starts from the bank, card and vendor statements, not the predecessor's records.