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HOW CAN YOU PROTECT YOURSELF FROM EMPLOYEE DISHONESTY?
PRACTICE
MANAGEMENT
HOW CAN YOU PROTECT YOURSELF FROM EMPLOYEE DISHONESTY? JENNIFER M. DE ST. GEORGES; DON LEWIS JR., D.D.S.
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Background. Forty percent of dental offices have been or will be embezzled by an employee. Overview. As employers, dentists need to prescreen applicants diligently, as well as take strong, proactive roles in the monitoring of all business
Your financial security and future practice
growth are built on ensuring that your bottom line is protected. This requires that you take the steps necessary to guarantee that the clinical dentistry you provide is correctly posted to the patients’ account and that the fee is billed, collected from the patients and deposited to the proper account by administrative staff members. Installing and monitoring proven internal controls will go a long way toward protecting the large financial investment you have made in your practice. The average amount embezzled from a dentist is $105,000 per incident.1 As embezzlement in the dental office grows, the attitudes of dentists who have had employees embezzle from them must change rapidly. In the past, most dentists chose to suffer their financial losses in silence; the sense of shame and invasion of privacy these dentists felt was borne in private. Today, we find that dentists no longer are prepared to sit back and accept that their hard-earned money is easy pickings for dishonest employees. Today’s dentists are prosecuting embezzlers and demanding repayment of their stolen monies. What can you do to prevent employees from embezzling from you? PERFORM AN EMBEZZLEMENT AUDIT OF YOUR PRACTICE
There are three ways to initiate a practice audit. The most extensive and expensive method is to ask your accountant to perform a practice audit. The second, less expensive—but not nearly as
aspects of their practices. Practice Implications. To make their offices embezzlement-proof, dentists need to take responsibility for both implementing and monitoring strict accounting and banking procedures.
thorough—way is to ask your accountant to design a brief self-audit form for you to use. The third approach allows you to perform an immediate, cursory, on-the-spot random audit. Pull 15 patient charts from the past week’s schedule. Confirm that the treatment performed was posted to each patient’s account and check to see that that patient’s payment (check or cash) was posted both to his or her account and the bank deposit. Then, confirm that the bank receipts reflect the same amount as the daily inhouse deposit amount. Experience shows that if you do not find any discrepancies within these 15 patients’ records, your practice most probably is clear of embezzlement activity from patients’ accounts, although this is not guaranteed. UPGRADE YOUR INTERNAL CONTROLS TO HELP PREVENT EMBEZZLEMENT
It is essential that staff members who handle a practice’s money operate using a very clearly defined bookkeeping system that is backed by strong and consistent monitoring. Charges, payments and adjustments. Segregate bookkeeping duties between employees to eliminate having one employee being in total control of all bookkeeping systems and responsibilities. Control adjustments, write-offs and refunds by creating strict bookkeeping procedures for processing these easy-to-manipulate functions. Analyze all adjustments and each entry of your monthly adjustment report. Implement strict cash processing rules, thus
JADA, Vol. 131, December 2000 Copyright ©1998-2001 American Dental Association. All rights reserved.
1763
PRACTICE MANAGEMENT COMMON CHARACTERISTICS OF EMBEZZLERS. WONDERFUL INNATE QUALITIES
WONDERFUL WORK HABITS
dVery loyal dHave dentist’s total trust dAble to rationalize dPart of extended family dPleasant, joy to work with dIntelligent, have common sense dBelievable,convincing dOften long-term employees
dWork long hours dWill not delegate, no one meets their standards dEfficient, organized dCome in early, leave late dTotally understand computers dNever take vacations dWork uncompensated overtime dTake on more and more responsibility
requiring total employee accountability. Payables. You need to be the only person with check-signing authority. Only sign a check when creditor invoice or statement is accompanied by the three parts of the payment process— packing slip, purchase order and original proof of receipt. MONITOR YOUR INTERNAL CONTROLS
Monitoring your internal controls is essential in safeguarding your assets. You are vulnerable to embezzlement without weekly and monthly monitoring. Plan on performing the 15patient chart audit each week. At the end of your audit, leave the charts at the front desk. Add a note stating you are finished with charts and they can be filed. This is a very nonthreatening way of informing your staff that you review charts for your own follow-up needs, which never are stated or implied. Support this brief audit by having your bank statements sent to your home. Closely analyze your monthly reports in open view of your staff. Letting your staff members see you “pore over the books” is not to intimate that there is a lack of trust on your part, but rather
1764
that you have an interest in the business side of your practice. UPGRADE YOUR HIRING TECHNIQUES TO PREVENT HIRING AN EMBEZZLER
Prescreening potential employees is mandatory if you are to eliminate the potential of hiring an embezzler. Employee references. Legally, you may check references only after obtaining an applicant’s written release or consent form. Areas for you to explore when checking references include employment dates, work habits, job titles, ability to work with others, job descriptions, reason for termination or leaving, compensation rates, performance level, job tasks and job performance. When you are providing a reference for an ex-employee to another dentist be truthful and objective; obtain a written release or consent form; do not mislead; avoid accusations, exaggerations and blacklisting; and give job-related facts only. Background and credit checks. These tasks need be delegated to a prescreening service that will perform them in a legal and confidential manner.
IS AN EMBEZZLER ALREADY IN YOUR PRACTICE?
Stereotyping is inappropriate and dangerous. Ms. de St. Georges is a practice manYet, there is a agement educator, classic profile of JdSG International Inc., P.O. Box 35640, an embezzler. Monte Sereno, Calif. An embezzler 95030, e-mail "[email protected]". can be anyone: Address reprint single, married, requests to Ms. de St. Georges. divorced, widowed, young, old, a high school drop-out or college-educated. Embezzlers know no boundaries. The box lists common characteristics of embezzlers. Unfortunately, these are the same qualities and habits displayed by loyal and wonderful employees who have your best interest at heart. SUMMARY
Employee embezzlement creates a very difficult and stressful situation for dentists. You need to be on your financial toes and watch for classic embezzlement behavior and characteristics in your employees. As an employer, you need to trust your team, while implementing strong internal controls to prevent any new or long-term employee from committing the criminal acts of stealing, embezzlement or fraud. ■ Dr. Lewis is an oral and maxillofacial surgeon and a lecturer on employee embezzlement, Euclid, Ohio. 1. Williams HE. Investigating white collar crime: Embezzlement and financial fraud. Springfield, Ill.: Charles C Thomas Publisher Ltd.; 1997:38.
JADA, Vol. 131, December 2000 Copyright ©1998-2001 American Dental Association. All rights reserved.
MANAGEMENT
HOW CAN YOU PROTECT YOURSELF FROM EMPLOYEE DISHONESTY? JENNIFER M. DE ST. GEORGES; DON LEWIS JR., D.D.S.
A
B
S
T
R
A
C
T
Background. Forty percent of dental offices have been or will be embezzled by an employee. Overview. As employers, dentists need to prescreen applicants diligently, as well as take strong, proactive roles in the monitoring of all business
Your financial security and future practice
growth are built on ensuring that your bottom line is protected. This requires that you take the steps necessary to guarantee that the clinical dentistry you provide is correctly posted to the patients’ account and that the fee is billed, collected from the patients and deposited to the proper account by administrative staff members. Installing and monitoring proven internal controls will go a long way toward protecting the large financial investment you have made in your practice. The average amount embezzled from a dentist is $105,000 per incident.1 As embezzlement in the dental office grows, the attitudes of dentists who have had employees embezzle from them must change rapidly. In the past, most dentists chose to suffer their financial losses in silence; the sense of shame and invasion of privacy these dentists felt was borne in private. Today, we find that dentists no longer are prepared to sit back and accept that their hard-earned money is easy pickings for dishonest employees. Today’s dentists are prosecuting embezzlers and demanding repayment of their stolen monies. What can you do to prevent employees from embezzling from you? PERFORM AN EMBEZZLEMENT AUDIT OF YOUR PRACTICE
There are three ways to initiate a practice audit. The most extensive and expensive method is to ask your accountant to perform a practice audit. The second, less expensive—but not nearly as
aspects of their practices. Practice Implications. To make their offices embezzlement-proof, dentists need to take responsibility for both implementing and monitoring strict accounting and banking procedures.
thorough—way is to ask your accountant to design a brief self-audit form for you to use. The third approach allows you to perform an immediate, cursory, on-the-spot random audit. Pull 15 patient charts from the past week’s schedule. Confirm that the treatment performed was posted to each patient’s account and check to see that that patient’s payment (check or cash) was posted both to his or her account and the bank deposit. Then, confirm that the bank receipts reflect the same amount as the daily inhouse deposit amount. Experience shows that if you do not find any discrepancies within these 15 patients’ records, your practice most probably is clear of embezzlement activity from patients’ accounts, although this is not guaranteed. UPGRADE YOUR INTERNAL CONTROLS TO HELP PREVENT EMBEZZLEMENT
It is essential that staff members who handle a practice’s money operate using a very clearly defined bookkeeping system that is backed by strong and consistent monitoring. Charges, payments and adjustments. Segregate bookkeeping duties between employees to eliminate having one employee being in total control of all bookkeeping systems and responsibilities. Control adjustments, write-offs and refunds by creating strict bookkeeping procedures for processing these easy-to-manipulate functions. Analyze all adjustments and each entry of your monthly adjustment report. Implement strict cash processing rules, thus
JADA, Vol. 131, December 2000 Copyright ©1998-2001 American Dental Association. All rights reserved.
1763
PRACTICE MANAGEMENT COMMON CHARACTERISTICS OF EMBEZZLERS. WONDERFUL INNATE QUALITIES
WONDERFUL WORK HABITS
dVery loyal dHave dentist’s total trust dAble to rationalize dPart of extended family dPleasant, joy to work with dIntelligent, have common sense dBelievable,convincing dOften long-term employees
dWork long hours dWill not delegate, no one meets their standards dEfficient, organized dCome in early, leave late dTotally understand computers dNever take vacations dWork uncompensated overtime dTake on more and more responsibility
requiring total employee accountability. Payables. You need to be the only person with check-signing authority. Only sign a check when creditor invoice or statement is accompanied by the three parts of the payment process— packing slip, purchase order and original proof of receipt. MONITOR YOUR INTERNAL CONTROLS
Monitoring your internal controls is essential in safeguarding your assets. You are vulnerable to embezzlement without weekly and monthly monitoring. Plan on performing the 15patient chart audit each week. At the end of your audit, leave the charts at the front desk. Add a note stating you are finished with charts and they can be filed. This is a very nonthreatening way of informing your staff that you review charts for your own follow-up needs, which never are stated or implied. Support this brief audit by having your bank statements sent to your home. Closely analyze your monthly reports in open view of your staff. Letting your staff members see you “pore over the books” is not to intimate that there is a lack of trust on your part, but rather
1764
that you have an interest in the business side of your practice. UPGRADE YOUR HIRING TECHNIQUES TO PREVENT HIRING AN EMBEZZLER
Prescreening potential employees is mandatory if you are to eliminate the potential of hiring an embezzler. Employee references. Legally, you may check references only after obtaining an applicant’s written release or consent form. Areas for you to explore when checking references include employment dates, work habits, job titles, ability to work with others, job descriptions, reason for termination or leaving, compensation rates, performance level, job tasks and job performance. When you are providing a reference for an ex-employee to another dentist be truthful and objective; obtain a written release or consent form; do not mislead; avoid accusations, exaggerations and blacklisting; and give job-related facts only. Background and credit checks. These tasks need be delegated to a prescreening service that will perform them in a legal and confidential manner.
IS AN EMBEZZLER ALREADY IN YOUR PRACTICE?
Stereotyping is inappropriate and dangerous. Ms. de St. Georges is a practice manYet, there is a agement educator, classic profile of JdSG International Inc., P.O. Box 35640, an embezzler. Monte Sereno, Calif. An embezzler 95030, e-mail "[email protected]". can be anyone: Address reprint single, married, requests to Ms. de St. Georges. divorced, widowed, young, old, a high school drop-out or college-educated. Embezzlers know no boundaries. The box lists common characteristics of embezzlers. Unfortunately, these are the same qualities and habits displayed by loyal and wonderful employees who have your best interest at heart. SUMMARY
Employee embezzlement creates a very difficult and stressful situation for dentists. You need to be on your financial toes and watch for classic embezzlement behavior and characteristics in your employees. As an employer, you need to trust your team, while implementing strong internal controls to prevent any new or long-term employee from committing the criminal acts of stealing, embezzlement or fraud. ■ Dr. Lewis is an oral and maxillofacial surgeon and a lecturer on employee embezzlement, Euclid, Ohio. 1. Williams HE. Investigating white collar crime: Embezzlement and financial fraud. Springfield, Ill.: Charles C Thomas Publisher Ltd.; 1997:38.
JADA, Vol. 131, December 2000 Copyright ©1998-2001 American Dental Association. All rights reserved.