Michael Moore, Esq. Director McKenzie HR Solutions Printer Friendly Version

Policies For Handling Money

In recent weeks, I have seen a real upsurge in calls from client doctors who have learned employees have been stealing from them.  I have come to the conclusion that the economic stress on everyone is causing folks to do some things they may never, in other circumstances, have done. Doctors need to understand that those employees in which they have put complete trust are not immune.

In the “worst-case-scenario” category, consider the situation of Dr. G from New York. Dr. G is the third generation in his practice. His mother for many years was the office manager and handled all the money. In the last decade, she was assisted by Pam. When Dr. G’s mother died, Pam took over all the bookkeeping, money handling, and deposits. As the years went on, she gradually assumed more and more responsibility. Dr. G eventually gave her the checkbook and his stamp. He then turned over his collections to Pam, paying her a percentage of what she collected.

Things were uneventful until recently, when Dr. G’s female friend who was helping out with some computer issues happened on the audit trial function for his office system, and learned of substantial discrepancies in the trail. This alerted Dr. G to some issues, and he began to probe more deeply. He asked Pam to give him a report on the accounts receivable, and was stunned to learn that she was reporting a $360,000 balance on receivables, this against $1 million per year in billings, and only $600,000 in collections. Dr. G called on me to try to figure out what to do.

In the second case, Dr. T, from Chicago called because he had just learned that his petty cash box – which is supposed to hold about $200 – is empty. Dr. T had given complete control over the box about a year ago to a front desk staffer – she had the only key other than Dr. T’s. For reasons which Dr. T isn’t entirely sure of, he decided to take a look in the cash box one day last week while he was out front with his office manager. When he opened the box and found it empty, his office manager could not explain it. Nor could the front desk staffer, who claimed she had not been in the box for a month, having repeatedly forgotten to bring the key to work with her.

Now, Dr. G and Dr. T both have strong evidence that employees have been stealing. In Dr. T’s case, rather than be concerned about trying to recover the money, he decided to fire the staffer immediately. His concern is that if he doesn’t act – the fact of the missing cash having gotten around the staff – he will lose this authority with the staff. Another option is to confront the staffer, offer her the opportunity to repay the money through a payroll deduction, and not terminate her. This option he chose to forego.

Dr. G ’s situation is much trickier for him. First, Pam is the only one who knows the documentation of the practice. His concern is that if he summarily terminates her, he may never be able to reconstruct the financial situation – even if he brings in a forensic company to dig into the operations. He cannot, however, ignore the possibility that hundreds of thousands of dollars may have been siphoned off by Pam.

An additional complication is that Dr. G has been seriously considering selling the practice. Without the ability to give a trusted picture of the finances, the impossibility of valuing the operation is self-evident.

In this case, Dr. G is a crisis management client. There are a number of ways to approach the challenge, and one that we are working on is the tightrope walk of eliminating Pam’s ability to steal while keeping her on for a period of time so that she can be compelled to come up with the source data for such issues as the accounts receivables. That may not be possible, and sooner or later, Dr. G is going to have to bite the bullet and dig into this mess. This means, of course, that Dr. G is going to have to devote lots of hours to cleaning up the mess that he finds himself in.

How to avoid these surprises is pretty simple. First, review your insurance policies. Find out if you have theft/embezzlement coverage, and, if so, what are the limits and the deductible. Important too, is to find out who has to bear the cost of the analysis of what has been stolen – this can cost tens of thousands of dollars.

Second, review how cash and deposits are handled in the office. No matter how small an operation you might have, never allow a single staffer to have control over handling money and deposits. If the employee knows that you, or your designee, will be periodically – without notice – reviewing the office cash records and bank records, there is little likelihood of some serious loss. This means, as well, that you need a cash receipts process that requires documentation of all cash into, and out of, the practice.

Third, talk to your accountant about having him or her conducting a detailed semi-annual review of your books. If the accountant makes an appearance at the office, and interviews those staffers who handle the cash and deal with deposits, it goes a long way to deter theft.

Fourth, you want to make sure that employees all provide an authorization to you to deduct from their paychecks amounts they owe the practice. This ordinarily addresses amounts owed from dental work done for staffers or family members, but it can apply to money or the value of personal property taken. I am always asked by the doctor in these situations if he or she can take the money out of the paycheck. In the absence of prior authorization, the state wage and hour agencies uniformly reject that self-help action.

Every office has some variation on how cash and deposits are handled. Now is the time to take a long look at your practices. Even if you have no reason to believe that something is going on, by tweaking the practice, and requiring some oversight, you will be discouraging someone who might otherwise take a “loan” for his or her own benefit.

Mike Moore is ranked among the best in employment law and has been named one of the top 10 lawyers in Ohio. As Director of McKenzie's HR Solutions, Mike is the creator of the Employment Policy and Handbook, geared to providing dentists who are unsophisticated in the legal arena with a step-by-step policy manual.

Click here to hear Mike present “7 Elements of an Effective Employment Policy.” Email Mike at mike@thedentistsnetwork.net.

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