It can happen to YOU!
by Susan Gunn
As
another spring dental convention wrapped up, I was perplexed
once again at the lack of attendance by the actual practice
owners - the dentists - at my sold-out QuickBooks®
courses. Typically, more than half the class is
composed of front office managers, who readily admit their
bosses are clueless about QuickBooks, their
practice-management software, or their actual day-to-day
business.
So, after sending out a survey on the topic of embezzlement,
the results did not completely surprise me. The consistent
thread in all of the stories was the lack of business focus
and oversight by the practice owner.
Wake up!
Yes, it is convenient for someone else to be responsible for
the business tasks you do not want to do, but is it worth
taking the risk that your hard-earned dollars will be stolen
by someone you trust? You must participate in all aspects of
your business.
My
survey did not specifically ask whether the practices had
been embezzled or not, it simply asked the owners to tell
their stories ... and tell stories they did!
Who responded to the survey? Respondents included staff,
dentists, dentists’ spouses, and practice consultants. Many
practice consultants told of noticing embezzlement warning
signs while they were in the dentist’s office for a
completely unrelated reason. One consultant developed
systems and checks for a client after his practice had been
embezzled. The dentist thanked her, but never implemented
the procedures. She wasn’t surprised to later hear he had
been embezzled again.
Who was
the embezzler? You name it,
assistants taking cash payments chairside, front office
managers taking patient checks, spouses and family members
taking from other family members, CPAs diverting funds …
even the dentist! No one was immune.
How did
the embezzler do it?A majority
of survey respondents admitted no background or
reference-checking was done prior to hiring the employee.
Ultimately, the embezzler had too much control, worked long
hours, and never took vacation time. These continue to be
warning signs of practice embezzlement that every lecturer
and author speaks and writes about on the subject of
embezzlement. Yet, doctors continue to “trust their
instincts” about new hires and do not perform background
checks or call for references.
Another interesting note was how often the embezzlers
stirred dissension in the office - bad-mouthing the dentist
for paying low wages or bonuses or complaining about other
staff members being incompetent. Be wary of employees who
stir up bad feelings or negativity in the practice by
routinely complaining about their co-workers or their
bosses.
How much
money was taken? From $35 to
$900,000, with the average loss being $104,585. The monetary
cost speaks for itself, but is secondary to the real cost -
destroyed trust, time spent in discovery and recovery,
shattered relationships, lost patients and revenue, bad
press, and last, but certainly not least, health issues
resulting from the ongoing stress. The emotional and
physical costs of embezzlement often outweigh the financial
cost. Multiple respondents sold their practices simply
because they lost the heart to continue. Broken trust.
Over how
long a period of time did the embezzlement go on?
From one week to nine years, with an average of 23 months.
Embezzlement is a crime of perceived need and opportunity.
Most people understand there is a difference between want
and need. Most respondents spoke of the embezzler’s unwise
life choices and addictions. All saw the embezzler’s motives
as greed for bigger, better, and more.
Embezzlement can happen in the blink of an eye. The act - in
whatever form - often takes just a few seconds to
perpetrate. Twenty-three months seem like a long time, but
in actuality, the damage takes place within a few short
hours during those 23 months.
How many
hours were spent in the discovery and recovery process?
From one hour to 360 hours. It
takes much less time and money to perform background checks,
call for references, and implement procedures than it does
to recover from embezzlement.
Were the
embezzlers prosecuted? Only 21
percent reported prosecuting the embezzlers. Of those
prosecuted, 90 percent repaid the money they took. Several
dentists did not prosecute because the embezzler was a
relative. One did not prosecute because he and the embezzler
were having an affair. A few practice owners did not
prosecute because they were engaging in illegal business
activities in the office (insurance fraud, employee fraud,
illegal deductions) and feared being prosecuted themselves.
Yes, it’s certainly hard for the guilty to prosecute the
guilty!
Overall, the survey revealed
five key points.
1) The dentist needs to be knowledgeable
regarding practice software and accounting software.
Hire a practice consultant or trainer to maximize security
controls on your practice-management and accounting
software. Schedule a half day with them and the practice
owner alone. Have them show you specific reports you need to
scrutinize daily, weekly, and monthly. “Getting the Most Out
of Quickbooks in Your Practice” lists these reports and how
to memorize them. Include these books in your reference
materials and courses in your continuing education.
Education is essential!
2) Implement tight controls on passwords.
Only the dentist should have the administrator rights to any
software. That password should not be known by anyone or
used by anyone but the dentist. Passwords should not be
written on sticky notes and attached to the computer
monitor. Create passwords no one in the office would guess
or know. Since audit trail reports reflect which user makes
changes, passwords should be protected by the user, as well
as the dentist. Do not use “password” or “dentist” or “1234”
as your password. Use six to eight alphanumeric (letters and
numbers) characters. Alternate letters with numbers, using
both capital and small letters. Eighty-two percent of survey
respondents did not create or protect passwords for any
software.
3) Implement a thread of accountability
between the practice software and the accounting software.
The surveys indicated that neither practice software nor
QuickBooks reports were created daily and the embezzler had
the opportunity to adjust the practice software or
QuickBooks entries and reports beyond the end of the day.
In
my QuickBooks courses, I teach “Organized Accountability”
between practice software and QuickBooks. As the last
patient walks out the door:
-
Print the day sheet detail report immediately, including
any adjustments.
-
Print the audit trail report, including any appointment
changes.
-
Physically batch out the credit card terminal, printing
the summary report of the day’s charges. Do not wait for
the credit card company to batch out your charges. These
charges must match the credit card charges listed on your
day sheet.
-
The physical deposit slip total must match the cash and
checks total from the day sheet. The Check 21 Act allows
practices to use third-party machines to scan patient
checks and submit these checks for deposit as a batch
immediately into your bank, just as you do with credit
card terminals. Several embezzlers had patients leave the
payee field blank on their checks. Using remote-deposit
capture for checks not only protects against returned
checks, but helps protect against embezzlement. More
insurance companies are using direct deposit features for
insurance payments to practices. Contact your insurance
company to have these payments deposited directly to your
bank. Detailed insurance deposit reports will still be
sent to your practice.
-
The above-listed reports, along with the physical patient
sign-in log, should be placed on the dentist’s desk at the
end of the day. The dentist should take this information
home to verify all matching totals with all patients.
4) Be the boss. No
one who is a direct employee or an extension of your
business staff is immune from embezzlement. Countless
stories revealed not only the staff, but CPAs, spouses, and
yes, even the dentists themselves, were embezzling from the
practices.
5) Accept responsibility.
Few dentists who responded to the survey accepted
responsibility for their lack of oversight. One dentist
blamed the embezzlement on everyone and everything else -
the practice software, the office staff, and the CPA.
If
we learn nothing else as business owners, learn that
precedence is set from the top down. Whether you are the CEO
of a Fortune 500 company, the leader of a church, or the
owner of a dental practice, the “boss” sets all standards of
business. “I don’t have time” is a weak excuse.
Think of it this way. Regardless of the hard copy of your
employee manual, the practice owner is the “verbal employee
manual.” If the practice owner takes money out of petty cash
without signing for it or returning it, the policy for petty
cash is set. Use a petty cash worksheet, initialing it at
the time cash is taken and brought back. Log in change with
a receipt. The petty cash fund is not the dentist’s personal
ATM machine. Establish precedence by monitoring your own
behavior first.
Dentists are kind-hearted human beings. It is hard for most
of them to define what is “business” and what is “personal.”
One dentist kept the embezzler on the payroll because he
felt “she’d made some poor choices.” And, he saw keeping her
on the payroll as one way to be repaid. The fact that a mere
21 percent of the practice owners responding to the survey
prosecuted the embezzler says more about their generous
hearts than their lack of legal counsel. Regardless of the
circumstances, it is never right for someone to take money
from your practice. Emergencies happen as an exception (not
the rule) in your staff members’ families.
If
an employee needs an advance on his or her salary, use a
legal document to state the amount advanced, how it is to be
repaid (by payroll deductions, etc.), and what will happen
if this employee should leave your employment before the
advance has been repaid (you will deduct the remaining
amount due from the employee’s final check).
To summarize, ignorance is not bliss.
After teaching a recent embezzlement course, I received a
phone call from an attendee less than a week later. He was
implementing the systmes and checks suggested in the coiurse,
and discovered money missing from the deposits. He never
suspected embezzlement before this. We can no longer claim
an innocent society. Take business courses at your next
dental convention. The CEs are not the same, but your
practice needs the attention. Learn the systems you need to
put in place. Call for references and do background checks.
Be the boss!
Susan Gunn's business and financial
background involves being an Advanced Certified QuickBooks
ProAdvisor and writing 12 technical books, including
"Getting The Most Out of QuickBooks In Your Practice." She
has a BA in psychology. Contact her at
www.susangunnsolutions.com.
What do you do if you suspect embezzlement in your
practice?
First, get legal advice from an attorney and accounting
advice from your CPA. One respondent said he did not
prosecute because he was advised not to by his CPA. That is
a legal decision and should not be made by a CPA, just as a
lawyer should not give accounting advice. Plus, it begs the
question: Was the CPA attempting to hide the fact he or she
should have known about the embezzlement from reviewing the
practice’s books? Hiring an outside auditor, forensic
accountant, or practice software specialist is a great
option. All embezzlers were people the dentist trusted!
Second, make sure you have documented proof and legal advice
before confronting anyone. The surveys showed a plethora of
liable mistakes made by practices in the termination and
documentation process. One respondent told of how he had a
friend come to his practice and pay cash for treatment to
prove the front desk person was stealing the cash. Always
consult your attorney prior to any confrontation to ensure
you are adequately and fairly documenting evidence prior to
termination or confrontation.
Third, terminate the embezzler’s employment, after you have
documented proof and consulted your attorney. File a police
report and prosecute. One survey story recounted how the
dentist was impressed by an interviewee’s skills (and her
short skirt), and hired her on the spot without calling her
references or doing a background check. Six months later,
out-of-state police found and arrested her for embezzling
from the practice she’d left previously.
In
another story, the job applicant said it would be impossible
to call her previous boss for references because he had
died. Unbeknownst to the interviewee, the dentist had gone
to school with said deceased and knew him to be quite alive.
When called, the “dead” dentist admitted the interviewee had
embezzled from his practice, but was not prosecuted. When
you choose not to prosecute, you are enabling the cycle to
continue and putting your fellow dentists - the next
employer - at high risk of embezzlement.
