Embezzlement Wake-up Call
I recently attended a dental convention where one of the workshops was on Embezzlement. The presenter (wish I remembered her name to give her credit) had completed a survey on the topic, and quite frankly, the results surprised me. What became evident to me is that, in most cases, the lack of business focus and oversight by the practice owner contributed to the problem.
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 chair-side, 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. 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 teammates 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 cost 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 seems 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% repaid the money they took. Several dentists 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. Put in place security controls using your practice management and accounting software to monitor suspicious behavior.
2. Implement tight controls on passwords. Only the dentist should have the administrator rights to any software. That password should not be known to anyone or used by anyone but the dentist. Passwords should not be written on sticky notes and attached to the computer monitor. Create password no one in the office would guess or know. Since audit trail reports reflect which user makes changes, passwords should be protected by he 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 survey indicated that neither practice software nor QuickBooks reports were created daily and the embezzler had the opportunity to adjust practice software or QuickBooks entries and reports beyond the end of the day.
4. Be the boss. No one 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 – the practice software, the office staff, and the CPA.
Here are some steps you can take to minimize this from happening in your practice:
- Print the day sheet detail report each day, including any adjustments made.
- Print the audit trail report, including 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.
- These reports, along with the physical patient sign-in log, should be placed on the dentist’s desk at the end of each day. The dentist should take this information home to review the charges .
If we learn nothing else as business owners, learn that expectations are 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 a business. “I don’t have time” is a weak excuse.
Also recognize that you set the tone for the entire team. If you take money out of petty cash without signing for it or returning it, you just set the policy for petty cash by your actions. The petty cash fund should not be the dentist’s personal ATM machine (or anyone else’s). 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% 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.
Ignorance is not bliss. Take steps to monitor the money trail. Learn the systems you need to put in place to avoid embezzlement. BE THE PRACTICE LEADER!
Continued Success!
Art Deden
Why Dental Practices “FAIL”
You have probably heard that Dental Practices rarely fail. Well, recent economic woes have changed that story to some degree. There seems to be many more “motivated” practice sellers lately and I’ve recently run across a few dental practice bankruptcies and foreclosures. Surely this is a testament to our economic times. According to dental statistics, here are some of the primary reasons dental practices fail (in no order);
- General Dentist focusing on Cosmetic Dentistry. A lot of general dentists are placing too much focus on cosmetic dentistry and not enough focus on bread and butter dentistry. If you focus more on the bread and butter – crowns and bridges, the cosmetic stuff will follow within your own patient base.
- Dropping your PPO’s/insurance too early. You can drop or cap your PPO’s at some point if your practice is flourishing. However, if you drop them too early, you can quickly get into trouble. Accepting insurance is a form of marketing and it comes with a heavy price.
- Stop Marketing – My philosophy in business and in life is if you are not growing, you are dying. Marketing, both internal and external, should always be done. Just like death and taxes, losing patients will happen and caused by a variety of reasons. Therefore, you always need to find more patients. For those of you who are in a growing phase, you need to allocate about 5% of your collections on marketing. For those who are in a stable phase, allocate about 2%.
- Not knowing your numbers. What are your daily goals for production? Collections? Hygiene? Overhead? Payroll? Are you managing to those numbers? I know several practices that keep missing their numbers and think they can sit back and wait for better times ahead. Stop waiting and start managing! Take Action before it’s too late.
- No Internal Referrals. This may sound simple, but internal referrals is an indicator that you are giving your patients great service and care. If you are not getting internal referrals, you are not giving your patients the care they expect.
- Overstaffed – Remember the formula for payroll as a percentage of production? It should be about 27% (existing practices of more than 2 years). Another formula to consider is that you should be producing $20,000 for each team member in your practice. If you have three staff members, you should be producing $60,000 per month. Again, these are benchmarks.
- Not Recognizing You’re in Trouble and Not Seeking Help – This has been happening in the real estate market as people are losing their homes left and right. They don’t realize that they’re in trouble before it’s too late. They have used up all of their resources to continuously bail them out and now their lines of credit are used up. They get behind on payments and they lose their house or practice. Know when you’re in trouble, seek help, listen to the advice that you are being given and take action.
- Insanity – This is the dentist who continues doing the same thing over and over again and expecting a different result. They figure that eventually production will kick in, or the same marketing they keep doing will catch on. Or, the same case acceptance techniques will start working. Or the same lab that charges them $250 per crown will magically lower their rates. You get the point!
Now that you know why some of these practices have failed, do the opposite:
- Focus on your bread and butter as your first priority dentistry.
- Keep your PPO/Insurance in place for right now.
- Keep the marketing going, both internal and external.
- Know your numbers and manage to those numbers, especially accounts receivable, production and overhead.
- Monitor your internal referrals to ensure you are making your patients happy
- Keep staff levels at 27% of production or understand that increased spending comes from somewhere!
- If you are not making your numbers, make adjustments, try new things, don’t reinvent the wheel, find out what is working in other practices.
- Finally, seek a practice coach and ask your coach for help. Don’t stop there. Implement what they suggest as long as it makes sense and produces results.
Keeping these bullet points in mind will help you get through the slow times so that you are around when the good times come back.
Continued Success!
Art Deden
What is Important?
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Establishing priorities is difficult for many of us. "How," we ask, "can you say one item is more important than another item when everything is important?" The alternative to consciously setting priorities is unconsciously reacting to demands as they occur. Reacting seldom brings the best results. Initiating action requires control coupled with decision- making abilities. In your efforts to establish priorities, ask yourself the following eight questions:
Remember, too, that as difficult as it is to set priorities, you make a priority decision even when you decide not to set priorities. By default, you allow any urgent activity to control your time while items of greater importance go unattended. |
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What is NEW in your Dental Practice?
Seems most every dentist is on the constant look-out for the latest this or the newest that. This constant search for the next gadget or gimmick-of-the-week alarms me. Does it alarm you? Far too many dentists are ignoring the fact that the solutions we seek are already within us. I know what you’re thinking…”a practice management consultant who earns his income from selling dentists on hiring his firm is telling me that I already have the answers within me? Must be an imposter!”
I assure you I have been accursed of being a lot of things…an imposter is NOT one of them. But hang with me here…when we look for “new stuff” it is almost always because we are ignoring the true causes of our problems and, instead, simply treating the symptoms hoping the problems will go away. Hope is never a successful strategy!
Truth is, the factors that are causing your and your team problems don’t reside outside the four walls of your practice. It is not the economy, your patients, the ADA, insurance carriers, or the political party in power. The future of your practice rests on your ability to read the signs and adapt your practice appropriately. The problems lie inside your practice.
Many dentists would rather place blame for their poor performance than question how they are contributing to the challenges they face. How about you…is a healthy does of introspection due?
Continued Success
Art Deden
www.vista-practice.com
Communicating Effectively with your Dental Patients
The “health” of your dental practice – no, it’s long-term success – depends on the quality of communication between the practice and its patients. In the most successful practices, the team is valued by patients in three ways:
- the business and clinical skills used to perform their duties
- the attitudes of the team to help patients and grow the practice
- their ability to communicate effectively with patients and other teammates which enhances trust and increases case acceptance
What is the “quality” of your communications? Do your office guidelines and policies send a message about who you are and how you practice? Does the appearance of your team (uniforms, name tags, etc) communicate the neatness and professionalism of the practice? Do you demand patients arrive on-time while you normally keep patients waiting ten/fifteen minutes past their scheduled appointment time?
If I had to sum-up the purpose of this blog on communications, it would be this: every moment of every day, verbally and non-verbally, you have an opportunity to use communication as a practice-building tool.
Are you taking full advantage of this?
Tags: dental practice management, improving your dental practice, practice development & growth, practice growth
