Are You Ripe for Embezzlement?

How often have you heard of an employee stealing from another healthcare practice and thought, “It couldn’t happen to me?”

That kind of blind faith could put your practice in peril. In the daily bustle of running a practice, it’s possible to become overly confident in—and dependent on—your staff member, delegating too much authority and ignoring your part in safeguarding your accounts.

Allowing one staffer to handle all the finances provides an easy opportunity for embezzlement. A trusted employee who’s handled the finances for years could take advantage of the bond they have built with you. Without a system of checks and balances, an employee bent on fraud or in a sudden position of financial hardship, can find various ways to steal from you with low risk of being caught. And by the time you or your accountants do catch on, your practice can lose a great deal of income. It’s important to remember that mistakes can happen, too. But proper controls can help diminish both mistakes and the temptation to steal.

Internal controls as a deterrent

A strong recommendation is to use patient encounter forms tracked by the practice management system. At the end of each patient visit, the practitioner uses the form to list services rendered, and then returns it to the front desk. The receptionist then completes the form, handing the patient a receipt for treatment and/or payment.

No patient should be seen without an encounter form, and the forms should be handled by an employee who doesn’t have access to cash. At the close of each day, a bookkeeper or the doctor should double check the forms, making sure that all patient charges are properly entered into the billing system. The practice management system should identify patients checked in as their encounter forms are created, and identify those who have not checked in by the end of the day. This procedure also helps to foil any temptation to destroy an encounter form if a patient pays in cash.

Additionally, the most effective deterrent to employee theft is segregation of duties, if possible: one staff member should receive payments from patients and prepare the bank deposit slips, while another posts payments to the accounts, reconciles bank statements, and performs other accounting functions. By segregating duties, there’s little chance for an employee to cover his or her tracks by altering accounts.

Know your team … and make sure they know you

Maintaining consistent and open communication with your staff is another effective way to prevent fraudulent behavior. Weekly “team huddles” – perhaps early in the morning at the start of the work week – can help bolster office organization, highlight notable life events of the week’s patients (birthday, retirement, etc.) and convey the sense that management is involved and accessible. That last point is important to your bottom line: according to the Association of Certified Fraud Examiners (ACFE), tips are the number one way fraud is detected at a company. If the staff feels that the practice’s management team is accessible, it stands to reason that vital tips have an easier route to the right ears.

The ACFE also reports that a formal code of conduct is an example of a simple, but effective, internal control mechanism that any organization can implement to fight fraud. Although the vast majority of employees will never commit fraud, those who are tempted can be put off by a code of conduct that clearly outlines a zero-tolerance policy on unethical behaviors. It should contain clear illustrations and information about behavior that would violate the code, as well as instructions on how to confidentially report suspicious behavior that could be fraud. So create that code and then periodically add overviews of it to the agenda of your early morning “huddles” for an effective, and cost-effective, deterrent.

Additional controls to consider

Another approach in preventing embezzlement in your practice is to compare the daily journal or day sheet with the appointment book to determine which patients showed up and which didn’t, to capture patient charges that are inadvertently—or purposely—eliminated from the day’s activity.

Yet another safeguard is the preparation of daily bank deposit slips for all funds collected, whether or not they’re taken to the bank that day. This simplifies the reconciliation between patient account records and bank deposits. Cash received for the day can be compared against the bank deposit slip. If the deposit doesn’t match the total of patient payments posted for the day, it’s time to investigate.

Published in Dental

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