The title phrase you just read is unfortunately being heard in a growing number of dental offices all over the country. By most current estimates, employee fraud and embezzlement has reached an all time high of 40% in dental practices. And sadly, the guilty party is usually a trusted employee who was given too much autonomy and too much opportunity to be dishonest. As a practice consultant, I wish I never had to warn my clients to be wary of embezzlement, and I certainly don’t want to encourage any doctor to view all staff members suspiciously. I do however encourage getting all the systems in place to recognize a problem if it arises.
The biggest problem with employee embezzlement is not actually the staff member who embezzles. The biggest problem is the doctor who doesn’t put sufficient checks and balances in place, doesn’t monitor daily transactions and doesn’t pay attention to red flags popping up all around him. We’ll never be able to completely eliminate embezzlement, (there will always be new tricks that determined thieves will find) but a practice that has good systems in place can go a long way towards keeping themselves safe and protected. Let’s look at the protections you should have in place, the “red flags” you should heed, and the steps to take if you do suspect embezzlement.
How do I head off embezzlement?
- At the end of every day, a member of the front desk staff should run an end of day report from your software that shows detailed production numbers, collection numbers, adjustments and deposit lists. They should also prepare a deposit slip for the bank with all checks and cash listed and run a “batch” slip from your credit card processing machine.
- These reports, deposit slip and batch slips should all be given to the doctor before staff leaves for the day. Once given these reports, every doctor should take a few minutes before leaving for the day to review these reports to see if anything in production, collections or adjustments doesn’t match with his understanding of what was actually done on that day. He should also be sure that the amounts of cash, checks and credit cards processed match the numbers on the computer deposit report. If anything seems incorrect, this should be addressed with the front desk staff the next morning. Even areas that looked off, but may actually have been well explained by staff, provide an excellent opportunity for staff to be aware that the doctor is always checking and is not an easy target for embezzlement.
- I also strongly suggest having two or more staff members cross trained to do this end of day reconciliation, especially in larger offices. If this job is always only done by one person, there’s more opportunity for her to feel safe doing a bit of creative financing.
- While I know it’s tempting to hand over the onerous business chores totally to a good office manager, it’s never a good idea in terms of protecting the practice. The business QuickBooks (or whatever software you use) should not be in the office unless its kept in the doctor’s locked office, and only used by the doctor. Giving an office manager too much control over the office finances, especially giving her check signing privileges, might take some work off your plate, but it could also easily end up taking a great deal of money out of your business wallet.
What are the “red flags” for embezzlement?
- A staff member consistently tells you she can’t possibly get the end of day information (discussed above) to you before the next day.
- You’re working harder and harder, but there still never seems to be enough money in the checking account.
- A staff member refuses to ever take vacation or be away from her desk, no matter how ill she is. This person will also frequently work late or early when alone in the office, and take work home to complete. I realize this could just be a mark of excessive loyalty in some cases, but more often than not, it’s a sign that there’s something to hide.
- A staff member is in extreme financial distress or is obviously living well beyond her means.
- Excessive adjustments are being made to patient accounts that you have not authorized.
What do I do if I suspect embezzlement?
- Call your CPA and/or your attorney and quietly set up a meeting with them after hours or on a Saturday to review the accounts.
- Do not discuss the matter with any other staff members or friends until the professionals have looked everything over.
- Follow your attorney’s advice to the letter as to how to terminate the employee and what to say to her.
- If your CPA has definitely found a trail of embezzlement, (and your attorney is in agreement) I strongly suggest prosecuting the offender. As embarrassing as it can be to admit this happened to you, wouldn’t it have been great if the last doctor she worked for had prosecuted and saved you all this time and money!
