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!

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