March 1, 2003
by Larry Wintersteen
You’re not a negative person, nor do you enjoy focusing on negative subjects. However, periodically, it is smart to do a reality check. Your dental practice is not immune from the ugly possibility of embezzlement. Unfortunately, over the past several years, there has been an alarming increase in embezzlement heartache.
Needless to say I am awkward and hesitant to share this information. My hesitancy comes from the fact that this journal is being read by those wanting to protect themselves as well as those potential thieves. This information can be used for either camp. This is not meant as a ‘how-to’ article. I must work on the premise that integrity is the primary motivation for reading this article. Yet, if your motivation is prompted otherwise -remember that all victims of embezzlement should be prepared to:
Warn ALL employees of the consequences — when caught.
Register crime with the authorities
Legally prosecute – to the fullest degree
Be willing to forgive & forget
Insist on professional help and a strict probation.
Where Does The “E” Word Start?
In preparing this article, I interviewed 15 individuals who have been caught and prosecuted for embezzling funds in the dental office. Their remorse, their justification and their personal stories are all different. When asked to qualify their thinking and behaviors, they shared the following quotes:
“It was just easy to take a little bit at a time.”
“Dr. ___ always took money from petty cash and never paid it back. I guess I felt like this practice was just as much mine as his.”
“Dr .___ wastes more money than I ever took.”
“I figured Dr. ___ gave so much dentistry away that he surely wasn’t going to miss a few dollars here and there.”
“He never appreciated what I did, nor would he offer a raise without my begging — so I guess I just gave myself a raise. To hell with him!”
“Actually, I would have never been caught had I not taken a lunch hour.”
Let’s talk about this last quote. It’s an insightful, true case history.
This particular receptionist had been working in the office for approximately 15 months. She was the only full-time receptionist. Once in awhile she would have a helper. For the most part she ran the front desk and compiled all practice reports. One day, when she was away to lunch, the telephone rang. The doctor happened to be in the building and quickly answered the phone, thinking it was a call he was expecting. It was not his expected call. It was a patient wanting an itemized statement to verify receipt of personal payments to the office. Also, the patient was trying to qualify that his son had given the receptionist $100.00 cash, during his last visit. His last statement simply indicated a balance due and the patient was confused as to whether the payments received were cash, patient cheque or insurance cheque. The doctor thanked the patient and assured him that the itemized statement and form of payment history would be in the mail, promptly. He shared this patient request with the receptionist, upon her return from lunch. She immediately responded, “I will take care of it. I do remember the son giving me $100.00.”
The next day, the doctor asked the receptionist, “How should I answer payment questions for a patient if I were to pick up the telephone again. For example, how do we keep track of cash payments?” The receptionist said, “That’s easy, you would simply refer to the cash receipt book or the computer payment entry,” She then showed the doctor how to get in and out of the computer, which indicated a $100.00 adjustment, but not a payment. Funny thing — there was also no entry in the cash receipt book. Of course she gave many reasons why she hadn’t finished the transaction and again assured the doctor, “I will take care of it.” The doctor smiled, said thank-you, and proceeded to his office where he called his accountant and said, “we need to talk.”
For the next week, a three-person team examined and evaluated all transactions for a six-month period. The evidence was conclusive… there was a “thief” in the front office. The doctor and his accountant confronted the receptionist. She could not argue the documented evidence. She was caught. She was assured that they would continue to audit all of the records since her first day of employment. The end result was alarming. Over a 15-month period she had personally taken more than $50-thousand from the practice that was documented. She showed little remorse, the money was spent, she received the maximum reprimand and devastated her family unit.
From this case history and many others, here is some sound advice:
Be an Active Leader: It is important that the doctor participate in the management of the front desk. Act like you care about the business side of your practice and understand the business systems that are used in your office. All policies and practices pertaining to handling money in your office, must have your sanction and approval.
Review Your Numbers: Discipline yourself and calendar a routine review of your financial statements and practice statistics. Learn how to retrieve and track practice data. Interpret your numbers and confirm their workability and feasibility. Periodically, unannounced, reconstruct a day. Make certain that you can track all patients that have been seen in a given day and also how the monies or postings were recorded.
Monitor Your Bank Statements: Make certain that your staff knows that you look at your monthly bank statements. In fact, you should be the person to open your bank statements — review them, and then have a third-party balance and account for the practice chequebook. Do NOT use your receptionist for practice payables/chequing.
Request Canceled Cheques: It is important that you inspect all canceled cheques for unusual amounts, payees or endorsements. Make certain that you have your cheques returned with your statement each month.
Review Invoices: Never sign a cheque without reviewing its corresponding invoice.
Stuff and Mail: The doctor should sign the cheque, stuff and seal the envelope. Then have a person other than the one making out the payables, mail the cheques. Ideally, the payables should be mailed by the doctor or their spouse.
A.R. Review: Establish a set time with your receptionist to review all aged accounts (weekly/monthly). Look at each account with your receptionist. Talk about aged accounts and payment history.
Review Adjustments: At least once a month review an alphabetical list of all write-offs, adjustments, allowances and bad debt. Make certain the receptionist or person working the Accounts Receivable are participating in this review.
Budget: Take an active role in the budget process. Establish a budget for each business year. Monitor expenditures on a monthly basis. Evaluate your overhead expenditures and percentages — per category. Make certain your receptionist knows that you look closely at all payable entries and the returned cheques.
Look at the Chequebook: If someone else is entering your payable & deposit transactions into the chequebook, make it a point to look at the chequebook often. Absolutely do not allow whiteout to be used in the chequebook. If anything is voided, simply draw a line through the entry…so it can still be read.
Bonded & References: Employees that are individually involved with handling practice monies should be bonded. Also, make certain that your practice insurance addresses the possibility of embezzlement coverage. Check out references carefully, before hiring a person to handle your money and practice accounting.
Quarterly Review: At the end of each quarter set up a review time with your accountant or another professional advisor. A third party can often sight unusual amounts or percentages. If so, you can then investigate a little more carefully.
Cross-Train: No one person should be empowered with total control of your front desk. It is important that you cross-train for coverage and an extra set of eyes and ears. If you do not have another person to cross-train, then t
he doctor or the doctor’s spouse should make certain they can understand the essentials of the front desk, especially the receiving of money and the posting of.
Defer “alone” Time: Many schemes are developed when the receptionist is alone in the office. You may be impressed when you see them going the extra mile and spending added time in the office, but, it can also be very dangerous. Having other people around can deter wrongful manipulation of figures, postings and reports. Also, insist that receptionists take vacations.
Daily Deposits: Deposits are to be made on a daily basis. Never let deposits accumulate. All postings must be done on the day of treatment or within 24-hours of treatment or any business exchange.
Computer “hideouts”: It is easy to hide things in the computer. Have a third party who understands your computer show you how and where monies or embezzlement behavior could be masked in the computer. Have them teach you how to interpret computer reports and how to cross-reference them.
Cash Practice: Join the many practices that are rendering services for cash only. Then, make certain that your production is being billed out in full and that your deposit slips match the production report. Again, track your posting and the form of payment received — cash, personal cheque or insurance cheque.
Consequential communication can be threatening to some, but most employees want to know the rules, regulations and consequences of inappropriate activities.
How to Steal From a Dentist
Often, dentists don’t know what to look for. In fact, they are apprehensive to examine things for fear of destroying trust or team spirit. Yet, through controlled staff interaction and private examination time, you can be better safe than sorry. Prevention through awareness is valuable and helpful. I am constantly amazed how creative people can become — in order to be dishonest. The following activities have actually happened. Don’t let them happen in your practice:
— Cash patients have been overcharged and the difference has been pocketed. (Cross-reference your cash receipt book to the billing statement.) You can’t have a difference of amounts.
— Staff has used the company credit card for personal use. (Carefully review your statements.)
— They take cash from the deposit and then alter the deposit receipt before arriving at the bank. (Verify bank statement deposits with the actual deposit book.) Remember, to take your own deposits to the bank or have a bonded service collect your deposit.
— A new bank account has been opened in the doctor’s name and the person puts their name on the signature card. Some monies are deposited there for later withdrawal. (Please open all bank statements.)
— Cheques have been made out to fictitious vendors and the monies have been shared after the cheque has been cashed. (It’s called cooperative embezzlement.)
— Fake bills have been submitted to insurance companies for friends and families — who then receive insurance payment — to be shared later. (Insurance fraud is very dangerous and STUPID!)
— No charge services have been posted for family and friends without written Dr. approval. (A token payment is given to say Thank You.)
— Cheques have been written to self for a supposed reimbursement. (Before signing a personal cheque, see an attached reimbursement form and merchandise receipt.)
— Cheques have been made out to CASH. A familiar face can get away with this at a bank by using a rubber stamp of the doctor’s signature or forging the doctor’s name. (Do not have rubber signature stamps in the office.)
— Many dollars go out the door through staff using practice postage, supplies, equipment and company time. (Make a firm policy statement to all of your employees. Carefully define what is proper and improper.)
— It is common and easy to “borrow” from the petty cash or counter cash drawer. Make certain that your counter cash is separate from your petty cash. (Review and balance your petty cash each week and your counter cash daily.)
— Too often, surplus supplies, drugs, equipment and marketing items are ordered and the additional inventory is taken home. (Track inventory in/out.)
— Blank cheques have been signed by doctors as they are hurry out the door for a vacation or conference. (Never do it!)
— A doctor’s spouse or dental partner — with signature power — is in cahoots with a staff person to embezzle funds. (Require two owner signatures — one being the major shareholder.)
These are but a few precautionary measures you can take to help prevent embezzlement. The key is be involved with the business. Stress the importance of accountability and responsibility with self and staff. They must know you are keeping your eyes and ears open for inappropriate behavior.
Larry Wintersteen is a leading consultant, lecturer, author and trainer of dental, medical, and legal professionals. He is also a practice management consultant at the University Of Colorado, Dental School, Denver, CO.