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Issue #11 - 1.16.07
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Embezzlement - Is Your Practice an Easy Target?
Take a minute and think of three other dentists you know. Perhaps they are friends, former schoolmates, or fellow members of your local dental society. Now consider this: One of the four of you has been, will be, or is being embezzled.
In 2004 alone, embezzlement cost American businesses some $660 billion (yes that’s billion with a “b”) and that figure only reflects the cases that have been reported. Fraud and embezzlement frequently go unreported because business owners want neither the negative publicity nor the hassles of prosecuting the offending parties.
While the dollars are big, those businesses being quietly robbed are often small. In fact, the Association of Certified Fraud Examiners reported in its 2006 Report to the Nation on Occupational Fraud and Abuse that small businesses continue to suffer disproportionate fraud losses. “The median loss suffered by organizations with fewer than 100 employees was $190,000 per scheme. This was higher than the median loss in even the largest organizations.” Why are the losses so high in smaller companies? Poor controls and monitoring. Small businesses, such as dental practices, don’t have measures in place to detect fraud.
The most common forms of occupational fraud in small businesses involve employees fraudulently writing company checks, skimming revenues, and processing fraudulent invoices. And the most common fraudsters are the employees you would never suspect, the ones that have you convinced they are the most wonderful and trustworthy people you could ever know.
Be aware of some of the subtle indicators that a thief is among you:
- A staff member who is too dedicated, never takes a vacation, frequently works through lunch, and is routinely staying after hours to “take care of a few things” may need to be there to keep her/his scheme going undetected. This employee is devoted indeed, to robbing the practice.
- An increase in the number of patient complaints about billing errors could be an indicator that payments being made on accounts are being diverted.
- Staff comments about an employee’s erratic behavior or about an employee living beyond their means should not be dismissed. These may well be subtle clues that could indicate theft is occurring in your practice.
In addition to simply being more aware of some of the subtle signs of fraud, implement controls. For example, contact your bank and request all bank statements and notices be sent directly to your home and that all cancelled checks be returned to you as well. Examine all cancelled checks for unusual endorsements. Review unopened monthly credit card statements, deposit slips, and receipts. Look for checks that are out of sequence or written to “cash.”
Write-offs warrant special attention. That’s a common tool for the embezzler to use in putting the theft out of sight and out of mind. Work with your software vendor to implement software controls in which only you have “supervisor” access and staff have “restricted” access. Those designated to have restricted access cannot write off, reduce, or delete transactions such as accounts, invoices, or appointments without authorization.
Review the audit report daily, which shows every transaction entered since the last audit report. Work with your software vendor to configure the system so that employees cannot access or change the practice audit log. Regularly review reports listing all patients whose accounts have been altered or changed.
Separate financial responsibilities. One person should not be responsible for billing, collections, and delinquent accounts. Under no circumstances should the employee making the bank deposit be the one who is responsible for checking the deposit slip that is returned from the bank.
Keep your signature stamp under lock and key, or do away with it entirely.
Remember, honest staff appreciate honest efforts to protect the practice because they will be protected as well. Staff who have something to hide will be uncomfortable and may strongly resist efforts to institute controls or even the mere mention that they take a few days off.
Sally McKenzie is CEO of The McKenzie Company, Inc. a nationwide dental management, practice development and educational consulting firm. Working “on-site” with dentists since 1980, McKenzie Management provides knowledge, guidance and personalized systems that have propelled thousands of general and specialty practices to realize their potential. Sally can be reached directly at 1.877.777.6151
Interested in speaking to Sally McKenzie about your management concerns? Email her at Sally@thedentistsnetwork.net
Interested in having Sally speak to your dental society or study club? Click Here.