Stop Embezzlement Before it Starts

An Embezzlement Environment?

Large corporations have departments dedicated to preventing employee fraud and embezzlement. The typical dental office is more susceptible to “inside jobs” but usually does not have a monitoring program in place to detect improprieties. According to the Association of Certified Fraud Examiner’s 2008 Report To The Nation on Occupational Fraud and Abuse, companies with less than 100 employees suffered a median loss of $200,000 per incident. The median loss works out to be 7% of a company’s annual revenue. If your office grossed $800,000, the loss could conceivably be $56,000. Most dentists are also small business owners – a loss of 7% of revenue is no small amount. How will you know if you have an embezzlement problem?

Traits of an Embezzler

The unfortunate reality is that embezzlers are usually found to be the most trusted and long-term employees. Don’t be discouraged – most employees are performing their duties honestly. The few that are not will most often give themselves away with “red-flag” behaviors. Look for behavior such as:

Reluctance to share responsibilities with others
Being the first one in and the last one to go home
Changes in lifestyle (i.e. expensive purses, new jewelry)
A recent upheaval in the employee’s personal life (i.e. divorce, family member suffering from addiction)
Refuses or is unwilling to take vacation or personal time off

While none of these are indicators of guilt, one or more of these behaviors is worth looking into. A dishonest employee will not want to relinquish any part of her job because it raises the possibility that strange transactions or incriminating behavior will be detected. The same fear is why embezzlers do not take time off. While traits such as dedication and reliability are to be appreciated, the embezzler uses this façade of strong work ethic to continue his or her deception.

When Times Are Tough

The financial uneasiness of the nation is growing with each new bailout story. Your employees have bills to pay, children to raise, and other personal issues that can be stressors. Personal stressors can lead to financial issues which can cause usually rational employees to behave irrationally. You don’t have to become involved in their personal lives but try to stay alert to any changes.

If You Suspect This Is Happening To You

Resist the urge to confront the embezzler. You will need evidence. Run an audit trail on your dental software program. If you do not know how to do this, contact the software company’s tech support privately. Run the audit trail after hours – this procedure may take up to an hour depending on how frequently this report is generated. Match random deposit slips to the day’s transaction. If you need help in this area, contact a specialty firm like Four Quadrants Advisory or myself for guidance.

How To Protect Yourself

If your team sees that you are observant and vigilant about business matters, your chances of becoming a victim decrease substantially. Embezzlement is a crime of opportunity. If the embezzler knows you are not checking daily deposit totals or watching credit card deposits, you have created an opportunity. Ask for these figures regularly. Reconcile your bank statements and your credit card deposits. Arrange to have your bank statement mailed to your house or inform your administrative team that all your mail is to be unopened when you receive it. Monitor adjustments made to patient accounts – look for odd credits or write-offs. Scrutinize payments to supply companies and other vendors. Look for payments to local addresses and unfamiliar vendors. Make a resolution to hire only candidates with good recommendations and solid work experience.

Embezzlement is an unfortunate risk of small-business ownership. Most employees can be trusted but it is up to the business owner to establish and follow a system of checks and balances. By staying alert, you can protect your practice and your retirement.

With over 20 years of health-care experience, Teresa addresses topics such as Insurance Coding, Fraud & Embezzlement and Practice Growth, particularly the use of blogs, newsletters and e-mail marketing to target today’s internet-savvy patient. She is a Fellow and Educator for the Association of Dental Implant Auxiliaries. Her memberships include the Association of Certified Fraud Examiners, American Academy of Dental Consultants, Speaking Consulting Network and Academy of Dental Management Consultants. Teresa received her Master’s Degree in Healthcare Management. Read more articles from Teresa at her blog, www.TheDentalImplantBlog.com or contact her at Teresa@OdysseyMgmt.com.