Athena Consulting: Dental Practice Solutions

The holidays are upon us – the time of year when embezzlement skyrockets for obvious reasons. People become stressed over holiday expectations and need extra cash.

In this article, we will address why they do it, how they do it, and what you as a business owner can do to prevent this from happening in your practice.

Ten years ago, the statistics showed 35% percent of dental practice owners were victims of employee embezzlement, but that figure has drastically changed upward to 70%. You might ask why embezzlement is such an issue in dental practices. Because they are small businesses, the opportunities are many and most of you are so busy providing dental care you do not have time to oversee the front desk. All people have reasons for behaving as they do and all people have developed behavior patterns; no person changes an established behavior pattern without a significant reason. The principle of cause and effect applies to the relationship between a change in some aspect of a person’s life, and an accompanying change in that person’s behavior. There are three primary motives for a person to embezzle:

• Need for money;

• Revenge; and

• Excitement

What symptoms do embezzlers display? While there is no such person as an “average” embezzler, most employees who embezzle consistently display universal crisis “symptoms”. These symptoms are also known as “crisis signals” and serve as a warning that an employee is unbalanced mentally, physically, emotionally, spiritually or financially. These symptoms are clues that are often apparent to doctors and other dental staff, who are in daily contact with the employee.

Demonstrating any one of these symptoms does not mean that an employee is embezzling. It simply means that the employee is “at risk” of a breakdown of his/her morals, values, ethics, and that intervention may prevent an escalation of the imbalance. As you review these symptoms, recognize that most people have demonstrated at least one such behavior or lifestyle event at some point in their lives.

The listed symptoms all involve a significant change in behavior, attitude, lifestyle or job performance. Active embezzlers generally display addictive behavior, and simultaneously demonstrate three or more of these symptoms:

• Displaying a suddenly enriched, extravagant lifestyle, unsubstantiated by normal wages;

• Frequently requesting cash advances, or delaying repayment of prior loans;

• Receiving telephone calls at work from creditors;

• Having wages garnished;

• Borrowing constantly from fellow employees, and seldom repaying these loans;

• Displaying careless or sloppy work habits; failing to follow instructions or giving conflicting instructions; making unusual errors in judgment; being absent frequently from the work area; suffering repeated or unreasonable accidents on or off the job; or displaying a significant change in behavior, attitude or performance;

• Failing to report for work or offering poorly explained absences from work; being chronically tardy and leaving work early; or taking excessive advantage of available sick time;

• Refusing to take time off, or passing vacation options;

• Constantly working overtime without sufficient reasons, and often without pay;

• Gambling at the workplace, or excessive references to gambling activity;

• Making references to current excessive consumption of alcoholic beverages; consumption of alcoholic beverages during the work day; or evidence of frequent hangovers;

• Making references to substance abuse of a drug other than alcohol, either the overuse of prescription medication, or consumption of illegal drugs; substance abuse in any form during the work day; or evidence of the cumulative effects associated with substance abuse;

• Making references to significant domestic problems; telephone calls received at work from family members regarding domestic problems; or evidence of physical, mental or emotional spousal abuse and accompanying signals of distress;

• Meeting with questionable associates at the work place; and

• Creating disruptive or erratic behavior; displaying withdrawn or preoccupied manner; inappropriately displaying anger and frustration; suffering from extreme mood swings; and displaying a visible deterioration of physical appearance, and mental and emotional stability.

Most important, how do dental staff embezzle from the practice? Following is a short list:

• Not balancing at the end of each day

• Not posting charges and pocketing cash receipts

• Not posting insurance checks, applying a ‘credit adjustment” to the patient account, forging the doctor’s name on endorsement and depositing them into his/her personal account

• “Borrowing” from petty cash and never repaying the loan

• Having signature rights on the office checking account

• Opening up an office checking account under your name, using your Articles of Incorporation and depositing receivables into that account from which she then writes herself/himself checks.

• Running refunds to her/his personal credit card

• Writing accounts payable checks to bogus company invoices

Several safeguards you can implement in your practice will prevent embezzlement, but just as importantly, will keep you abreast of your own practice financial picture. Owner responsibilities necessitate a daily review of the day sheet and deposit. You should always review the day sheet for adjustments, and investigate the reason for the adjustment if it is not apparent. Your deposit should always balance to the penny; with your daily collections reflected on your computerized deposit slip. Make sure to add your credit card daily batching ticket to the bank deposit for proper balancing. Review your credit card receipts for any refunds, and make sure those refunds are reflected on your day sheet.

It is advisable to keep a certain amount of cash on hand, in small denominations, for making change when a patient pays cash. You should be counting your cashbox at the end of each day to ensure there are no shortages. If you insist on keeping petty cash, it must balance at the end of each day to equal your petty cash figure. Make it office policy that no personal checks are to be written in exchange for cash.

Another important way to prevent embezzlement is to handle the accounts payable yourself or delegate it to a professional bookkeeper. Too many doctors have lost thousands of dollars because a trusted employee paid the practice bills; this is one task that should never be delegated to staff.

The biggest deterrent to employee theft is to make your staff very aware that you do check the numbers on a daily basis. Ask your front desk team member(s) to place the day sheet and deposit on your desk at the end of each day, and let them see you balance petty cash and change from time to time. This is not done to show distrust in your staff, but to let them know you are on top of the practice!