Like many other business owners, dentists may find themselves victims of embezzlement. Some sources indicate that as many as 6,000 dentists a year have money stolen from them by employees. Everyone has heard of a dentist who has suffered from employee theft, and many have had the unfortunate experience themselves. It is a demoralizing and saddening event. Preventing theft is a better course of action than dealing with it after the fact. However, the methods used are often inventive, well thought out, and ever evolving. Dentists don’t want to believe that a trusted employee might be stealing from them, so they will often ignore the warning signs:
• An employee who comes in early and stays late, offers to work on accounts, bills and other office “paperwork” when the office is closed, and takes few vacation days may be working on something other than office concerns. This employee is typically someone who is considered “essential” and may have been with the practice a long time.
• An employee who resists anyone helping with his/her work load or is secretive about administrative or security software codes raises red flags. The employee may also object to any type of outside audit, citing “no need to spend money on something I can handle myself.”
• An employee who maintains control over deposits and check-writing by asserting that the dentist is “too busy to do it” may be manipulating the finances. This can be exacerbated when the dentist does not understand fully how finances are being handled on a day-to-day basis and “trusts” the employee to take care of things.
Some of the methods used for embezzlement:
• Changing or eliminating payment entries and/or setting up false office accounts are common mechanisms for theft. After deleting a charge on a patient account, an employee may endorse that patient’s check to her/himself, or simply open a fake practice account and deposit payments into this account rather than the true office account.
• While cash payments are not as common as they once were, they still offer an opportunity for theft. A separate receipt book can be kept so patients get a fraudulent receipt, any charge on the patient’s account is deleted, and the employee keeps the cash.
• Payroll checks can be forged. Additional paychecks made out to an employee can be created and may not be caught by the dentist’s bank. If the bank does catch discrepancies, a front office employee may intercept bank notifications preventing the dentist from learning about the problem.
• Employees who have access to an office credit card may use the card for cash advances to themselves or to pay off personal bills. Even if the dentist signs all credit card payments, he/she may think the payment is going to pay off the entire bill, rather than only an installment due on a much larger balance.
• Falsifying hours worked per payroll period is another embezzlement method. This can work even if the dentist employs an outside payroll service. One office employed two individuals who worked together to falsify their hours over a ten-year period! The payroll service authorized the checks, and because the dentist trusted the front-office employee to handle check signing, (even with payroll checks!) he did not discover this for years. The employees were careful to make the hours falsely worked not too extravagant in order to prevent suspicion.
• An employee discovered she could hijack insurance checks by signing over the payment to herself and using an ATM to deposit them in her personal account. Again, the bank sent letters to the dental practice, but the employee opened all mail and discarded the notices.
What should you do if you suspect stealing?
• Dentists are advised to compile proof before confronting an employee. This may require the assistance of an outside accountant, an office software representative, or the practice’s bank. Credit cards that the employee has access to should be cancelled with new cards issued to the dentist alone. It is also a good idea to run a credit report to see if fraudulent accounts have been opened in the dentist’s or office’s name.
• If proof is discovered, as painful as it may be, all evidence should be turned over to the police and prosecution of the employee should ensue. Prosecution ensures that the crime becomes public record.
• Employee restitution may be encouraged by the fact that embezzled funds may be taxable. Inform the employee that a 1099 will be issued to them if they do not pay back the stolen money.
Preventing theft is preferable to dealing with the aftermath. A dentist should keep a close eye on all financial processes of the practice. Employees should not be allowed access to security codes for billing or accounting. Random financial audits should also be performed. A single employee should not be in charge of “everything” and all employees should be required to take time off.
The dentist should be responsible for signing all checks with supporting documentation required, especially credit card bills. Time-cards and hours should be carefully evaluated to make sure they correspond to actual hours worked. Require your bank to send all statements and other letters or notifications to your home address, and be aware of amounts the practice is issuing in patient refunds, account adjustments, or write-offs.
Dealing with office theft is terrible. Not only is it a betrayal of trust, it also makes us embarrassed that we did not see the signs before being robbed. Despite this, dentists can take comfort in knowing they are not alone. Very few business owners have escaped employee theft of some type. The vast number of dental office employees are honest! We let our employees know that we value their honesty when we take responsibility to prosecute the dishonest ones.
Carol Tekavec RDH is the Director of Hygiene for McKenzie Management. Carol can improve your hygiene department in just one day of training “in your office.” Interested in knowing more about how to improve your hygiene department? Email firstname.lastname@example.org.
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