Fraud and Embezzlement – Don’t be a Victim

In the current economy the average American’s income is falling and at the same time credit card debt is on the rise.  In this environment employee fraud and embezzlement becomes a very important topic.

In 2001 statistics showed 1 out of 6 dental offices was a victim of some form of fraud or embezzlement and as recently as 5 years ago those numbers had increased to 1 out of 4.  Today’s statistics indicate that 1 out of every 2.5 dentist is a victim of fraud or embezzlement.

As a business owner, it is very important that you take steps to reduce the likelihood of becoming a victim.  By simply following some guidelines, you can greatly reduce your risk.

  • Hire smart; every potential employee should go through a stringent background check.
  • Check references on all potential employees.  You can ask “would you hire this person again?”  “Is there anything else I should know about this person?”  See if they will share information with you.
  • Lead by example; never take money from your own petty cash.  Set a high standard in your practice.
  • Segregate employee duties.
  • Use computer passwords and make it mandatory that employees sign on using their own password.
  • Make sure you are adequately trained on your computer system.
  • Set up and use different security levels in your system.
  • Make bank deposits daily.
  • Have all bank statements mailed to your home address.
  • Limit the number of dental supplies vendors.
  • Limit the number of employees who have authorization to order supplies.
  • Eliminate all signature stamps and make sure you have adequate backup before you sign a check.
  • All patient credit balances should be refunded with a check; do not do credit card refunds.
  • Maintain a separate petty cash fund.  Typically no more than $100 and make sure you keep a register.
  • Use an outside payroll company to process payroll and use a time tracking program.
  • Safeguard all sensitive financial data and corporate records in a fireproof safe or cabinet.
  • Make sure you have some insurance coverage against employee theft or embezzlement.
  • The most important piece is a Daily Internal Control Packet.  The packet is created by the front office and provided to you on a daily basis.  You need to, at a very minimum, give the appearance that you are reviewing it.  We can help you set up your Daily Packet.

Finally, keep in mind that in a small office, the person who embezzles is typically a trusted employee; they are often a friend of the owner.  They are typically a very hard worker who seldom takes vacation and is the first to the office in the morning or the last to leave at night.  It is okay to trust your employees, but you need to make sure you have a good system in place so that the opportunity to embezzle is minimized.

Comments (1)

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