Nicole was a loyal employee for 18 years. The doctor relied on her and she made his life easy. He believed that if she were not there, everything would fall apart.
Nicole was the first to arrive in the mornings and the last to leave in the evenings. She worked through lunch and came in on weekends. She never asked for a raise or to be paid overtime. She knew more about the computer software and front desk protocols than anyone in the practice. She never took vacations and she wouldn’t dream of the doctor’s having to make the bank deposits. The patients loved her.
Things changed quickly one day when a patient stopped by to speak with the doctor. She had been in for surgery a few weeks earlier. When she pulled out her checkbook to pay for her visit, Nicole told her that she would stamp the check with the practice’s name and not to worry about filling it out. When the patient received the check back from the bank, she noticed the word “cash” written in place of the practice name. The check had not been deposited. The doctor had been missing cash from his wallet and this confirmed his suspicions that something was terribly wrong. He started investigating and learned that Nicole had embezzled several hundreds of thousands of dollars.
This true story may seem all too familiar to many readers. Embezzlement in dentistry is becoming more common. The longer you practice, the more likely it is that you will become a victim. This is an uncomfortable subject for most dentists, but it is the ugly truth. Embezzlement is costing U.S. businesses $652 billion annually, according to the Association of Certified Fraud Examiners. Dental groups are particularly vulnerable, since they rely on office managers and front desk staff to handle collecting, depositing, and disbursing money.
** Perform background checks when hiring?
** Run credit checks on new employees?
** Drug test?
** Have bank statements and credit card statements sent to your home?
** Personally review the day sheet and adjustments?
** Compare the actual deposit receipt with the computer reports?
** Visit the financial area of your practice during the day?
** Have one person handling receivables and another person handling payables?
If you answered “No” to any of the above statements, you may be an easier target for the embezzler.
Attributes of embezzlers:
** Often long-term employee
** Loyal employee
** Doctor trusts them
** They are often part of doctor’s extended family
Symptoms of the embezzler:
** Receives telephone calls from creditors
** Having wages garnished
** Excessive spending, living beyond their means
** Asking for cash advances
** Personal problems such as a divorce, addictions, children with addictions
** Excessive use of alcohol, talk of going out partying and gambling
** Refusing to run a report you requested
** Not allowing others in their area
** Not wanting to miss work or take earned time off
** Employee quits unexpectedly
** Gets annoyed at reasonable questions being asked about bookkeeping
** Resists change
How they do it:
1. They steal cash; it’s hard to prove ownership and it’s easy to steal.
2. They deposit insurance checks in their own account.
3. They set up secret accounts in the practice’s name to which they have access.
4. They open a credit card account where the doctor has personal and business accounts. They pay their bills with the doctor’s checks.
5. They make adjustments on patient accounts.
6. Sloppy bookkeeping makes their theft harder to trace.
How we stop them:
There are ways to prevent staff from getting their hands in your “cookie jar.” I am frequently called in to practices as a consultant to help dentists detect and confirm embezzlement. These practices failed to implement necessary protocols. Don’t be a victim. Execute the following list of safeguards:
1. Hiring: Check references; do background checks, credit checks, and drug tests on every applicant. You should personally call the business owner when checking references. Do not talk to staff.
2. Write a policy on theft: Make it known that the office will have zero tolerance for theft. Let employees know that they are safe to report any suspicious activity. The dentist must set a good example for staff by not doing anything unethical or illegal. The dentist must insist on high ethical standards in the practice. I have seen dentists refuse to fire or press charges against staff for stealing hundreds of thousands of dollars because of their own dishonorable actions.
3. Computer software security: Each person in the practice should have his or her own confidential username and password. You should have a policy in your office manual that employees read and sign off on, agreeing to keep their passwords confidential. Any violation of this policy will result in termination of all parties involved. The policy should state that everyone will sign out anytime they leave their work area. The doctor should have two usernames, one that is used on a daily basis while working with patients and one with a higher security level for maintenance tasks.
4. Receipt book: Utilize a three-part carbon copy receipt book along with your computer receipts. The computer only knows what you tell it. A receipt should be written for every payment, whether cash or check. Most importantly, the receipts should be numbered and stored for future audits. You can use copies of the receipt to compare with the deposit slip and payments that were posted. It is used to verify that everything made it to the bank.
5. Enforce vacation policies: Office managers and staff should take five consecutive days off every year. Beware of any staff refusing to take vacations. I’ve seen a doctor try to give away a Caribbean cruise to have the opportunity to check for theft and the office manager refused the trip. Another red flag is when they never allow anyone in the financial area to help them or they resist anyone put there to monitor their work.
6. Sign your own checks: Always question the expense and do not sign checks without an official invoice attached. Every check should be for a legitimate expense.
7. Throw out the signature stamp: Do not allow a signature stamp in the office.
8. Investigate patient complaints about their account having errors.
9. Purchase a “Deposit Only” stamp: Every check that arrives via mail or presented by a patient in the office must be stamped “For Deposit Only.”
10. Arrange for all bank statements and credit card statements to be mailed to the doctor’s home: Look at the checks to make sure you recognize each one. Look for duplicate payments, extra payroll checks, and any electronic debits or transfers you don’t recognize.
11. Check merchant statements: One of the latest schemes is for employees to credit their own credit cards using the practice’s credit card terminal. You are receiving a monthly merchant statement; check it for credits. Credits should be a rare occurrence.
12. Beware of patient refunds: They process fictitious refunds using a patient’s name or a name they make up. Question all refunds. Ask for a printout of the patient’s ledger attached to the refund request. Also, when an employee gets the idea to refund credits to patients, make sure the unexpected checks end up in the patient’s hands and not the employee’s account.
13. Cash payments: All practices will receive cash from time to time. If cash is never listed on your deposit slips, this is a red flag. When cash is received, implement the receipt book and make it a cardinal rule that everyone gets a receipt. Have a written policy on how this should be handled. You may consider placing a small sign on the counter that patients will receive a receipt for all payments.
14. Cash loans: No one in the practice, including the doctor, is allowed to take cash out of funds received from patients or a petty cash box.
15. Adjustments: Every computer software program has an adjustment report that can be printed. Adjustments should be verified and approved by the doctor.
16. Install a security system and security cameras: Each person should receive a confidential security code. This allows you to track who is going in the practice after hours.
17. Insist that bank deposits are made daily: Deposits should be prepared and brought to the bank every day.
18. Learn your computer software: Know how to access reports, run audit and adjustment reports, and know how to look for deleted items.
19. Have regular audits: Your staff will see you keeping an eye on things and this is a huge deterrent to temptation.
20. Insurance checks: The embezzler takes the insurance checks which are payable to the practice and deposits them in their personal account via an ATM machine where there is no live teller.
21. Keep score: Track office production, collections, and adjustments in Excel. You will be able to detect financial misconduct early on. Look for an increase in accounts receivable without corresponding increase in production.
22. Receive the day sheet and daily deposit information at the end of each workday: This lets staff know that you are watching. Don’t let a day go by that you do not receive this report. If the report is not received, make a big production out of it.
23. Implement a drug-free workplace policy: Give your staff a 30-day notice and start doing routine drug testing.
24. Protect your patients: Take precautions to protect your patients’ personal information. Consider implementing a level of access.
25. Check your personal credit report: Do this at least once a year. Look for duplicate accounts with one creditor and accounts you are not aware of. We recently learned that a doctor was paying for cell phones for an entire family of an employee, unbeknownst to him.
26. Use QuickBooks: It will give you better control over expenses and enable you to detect irregularities early on.
27. Look at lab bills: Make sure you recognize the patient names and cases.
28. Employee termination: Any time you terminate an employee, you must change all security codes and passwords on the same workday.
29. Time clock theft: Review time clock reports before payday. Only one person should be able to make changes.
What to do if you suspect you have a thief in your practice:
1. Keep your suspicions to yourself.
3. Contact your attorney.
4. Contact your local police department and press charges. This prevents them from doing the same thing to another practice.
My purpose for sharing this information is to raise awareness in the dental community about a common occurrence in dental practices, and to provide dentists with tools to safeguard their practices. Most embezzlement schemes can be detected and prevented with internal systems, controls, and routine monitoring. Remember, the best defense is a good offense.
Feel free to contact me if you have any questions or need assistance with implementation of these safeguards.
Sandy Pardue is an internationally recognized lecturer, author, and practice management consultant. She has assisted hundreds of doctors with practice expansion and staff development over the past 15 years. She is known for her comprehensive and interesting approach to dental office systems, and offers a refreshing point of view on how to become more efficient and productive in a dental practice. Sandy is director of consulting with Classic Practice Resources. She is also a consultant to leading dental companies for product evaluation and design. She can be reached by e-mail at firstname.lastname@example.org