in pediatric dentistry volume 23, number 3, september 2014

practice management and marketing news

Ways Embezzlement Can Occur• Adjustments to Balance Due—adjustments can be

made towrite-off thebalance that is due.This allowsthe embezzler to take cash or checkpayments. If anembezzler is taking checks, they have fraudulentlyopened an account in the doctor’s name at a bankand aredepositing the checks into that account.Yourbank can do a search for any other accounts thathaveyourname.

• If an embezzler adjusts off a balance due that wascharged to an insurance company, this is consideredinsurancefraudandyourlicenseisatrisk.

• Credit card refunds—front desk personnel and evenassistantshavebeen caught giving themselves refundsontheirowncreditcards,thisisequivalenttoprintingmoney. Select amerchant processor that provides re-fund securityprocedures.Theseare safeguards againstprocessing refunds to cards that have never beenchargedor amounts that are greater than theoriginalcharge.Doctors should review theirmerchantaccountstatementmonthlyforcorrectness.

• Check alterations—embezzlers have been known towhite out the doctor’s nameon a check, insert theirownname and thendo aphotodeposit.Thebank isnonethewiser.

• Stealing out of payrol—managerswho handle pay-roll can pay themselves a bonus or extra weeks ofvacation.Weknowof anofficewhere anofficeman-ager stole 24weeks of vacation from her employerbecause he never checkedpayroll before itwas sub-mitted. Tomakemattersworse, shewas a salariedemployee andher vacationpaywas already includedinhersalary.

• Paying their personal bills—if an employee is payingyour practice bills, theymay also be paying theirbillswithyourchecksoryourcreditcard.

Signs of Embezzlement Behavior in an Employee• Hasanaddictionoradversefinancialissues.• Never takes a vacation, or sick day.They are always

in the officewhen no one else is, (this is typicallywhentheyaremanipulatingaccounts).

• Territorial regardingduties,work spaceandcomputer.• Never leaves the front deskwhile patients are there

andneverletsanyoneelsecheckapatientout.• Overlyresistanttochange.• Uncomfortablewiththedoctoraskingquestionsabout

charges, collections and what is happening at thefrontdesk.

• Doesnotwant toget ridof anoldversionofpracticemanagementsoftware.

• Doesnotletpatientstalktothedoctoraboutaccounts.• Very resistant to a consultant or financial advisor

lookingthroughpracticereports.

Embezzlement Red Flags• Large intervals betweendeposits.Deposits shouldbe

prepareddailyandreconciledtothedaysheet.• Write-offsareexcessive.• Doctor isworkingmore than ever and notmaking

anymoremoney.• Biggest sign: receptionist whomakes $40,000 per

year iswearingdesigner clothes anddriving a brandnewLexus.Donot be surprised if this is yourmosttrusted employeewho alsowatches yourhomewhenyou are away andbabysits yourkids.Embezzlerswillingratiate themselves to the doctor somuch so thatthe doctorwould never think this personwould doanythingtoharmthem.

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Preventing Embezzlement

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Pediatric dentists are generous and compassionate as theyworkwith children andparents day in anddayout anddealwith the reality of a parent being able to affordtheneededcare.Therearetimeswhenachilddesperatelyneedstreatmentthataparentcannot afford. Leftuntreated, this childwill suffer and their healthwill be compro-mised.Outof compassion, thedoctormay tell theirofficemanager that the treatmentwill bedoneprobono. It is always satisfying to keep a child from suffering; after all,this iswhypediatric dentists dowhat theydo.That sameofficemanagermaybe strugglingfinanciallyand think, “If the doctor can give away treatment, then hemight notmiss another few dollars ofcollection.What’s the big deal?After all, doctorsmake a lot ofmoney andmaynot notice if a smallamount is gone.”Theofficemanager rationalizes this by thinking that she isnotpaid enough forhowhard sheworks.Longgone are thedaysofmissing stampsoroffice supplies; thesedays embezzlers feelthey deserve a lotmore. The average embezzlement in a dental practice is $140,000 according toProsperident, a company that specializes in investigation of frauds and embezzlements committedagainstdentists.

in pediatric dentistry volume 23, number 3, september 2014

practice management and marketing news

• Over ordering supplies—it has been known thatassistants order extra handpieces and sell them onEbay.Also, assistants purposely return the extra sup-plies,watch for the refund check anddeposit it intoa fraudulent account theyhave set up in thedoctor’sname.

Guarding Against EmbezzlementTrust but verify. Embezzlement can beminimized andprevented by putting proper systems in place and hold-ing the front desk team accountable. Thiswill give youpeace ofmind. Below youwill find somemethods thatwillhelpprotectapracticefromembezzlement.Review Reports MonthlyMonitor the reports eachmonth that should be run aspart of your endofmonth closing process. If your officemanager creates anExcel spreadsheet ofmonthlypracticenumbers and statistics for you to review, be sure thetotals on the spreadsheetmatch against the reports gen-erated by your practicemanagement software.We haveseen examplesofdoctors thinking thepractice collectionswere healthy because the doctorwas only looking at thereport the embezzlerwas creating herself. Reports thatshouldbereviewedeachmonthare:• Adjustment report

— Embezzlers typically enter apartial cashpayment,take thedifferenceandadjustoff thebalance.Lookat the adjustmentsonyourday sheet at the endofeachday to be sure they seem appropriate. Everyadjustmentthatismadeonanaccountshouldhavethereasonfortheadjustmentstatedontheaccount.Make sure the reason for the adjustmentmakessense. If the front desk staff knows that you arechecking for accuracyonadailybasis, thiswill beadeterrentforembezzlement.

— Watch for toomany entries or adjustments on anaccountoroddadjustments thatdon’tmake sense.If an adjustment looks strange, ask to see a print-out of the account ledger and ask for an explana-tionoftheadjustment.

— Create a threshold for adjustments that can bedonewithoutthedoctor’spermission.

— Reviewmonthly accounts assigned to ‘No Bill’status. Be sure you knowwhy someone is not re-ceiving amonthly statement; thesepatients shouldonlybeapprovedbythedoctor.

• Patient refund reports— Showsallpatientswhoweresentarefund.Itshould

include charge andpayment transactions to justifytherefundandthereasontherefundwasmade.

• Aging report— Shows patient name, and aged balance. Be aware

of theAccountsReceivable (AR) total; thisamount

should be a 1:1 ratiowith your averagemonthlyproduction.Also, theAR amount that is 61 daysandolder shouldnot bemore than 18-24percentofthetotalAR.

Review Statements Monthly • Look for changes, discrepancies or unusual entries

onthefollowing:— Bankstatementforunauthorizedchecks.— Merchant account statement (patient credit card

payments)forunauthorizedrefunds.— Creditcardstatementforunauthorizedcharges.— Payrollreportforunauthorizedpayments.— Dental and office supply vendor statements for

changeinmonthlyexpensesandrefunds.• The owner/doctor should have the administrative

passwords to allwebsites and accounts.User accessshouldbegranted to these siteswithvarious rights tostaffmembersbasedontheirresponsibilities.Example:Yourmerchant processing account should allow eachfront office teammember to have their own log-onfor processing credit cards or processingmerchantreports. The doctor should be the only one to havethe administrative rights to set thisup.Theability todeleteor void transactions shouldbe restricted to theappropriatefrontdeskstaff.

• Only theowner/doctor shouldhold the full adminis-trative rights to thepracticemanagement software toprevent the alterationof audit trails.An audit trail isareportthatwillprovideinformationonwhoentered,altered or deleted transactions in your software pro-gram. Most dental software programs have thisreport and it should be restricted to the highestadministrative level of access. Furthermore, it shouldnot allow thedeletionof payments or accounts.Thisreport should be run and reviewedmonthly. Lookfordeletions of payments, account balances orwholeaccounts.

• Endofdayprocedures should include: reconciling thedaysheettotalcollections,anddeposittotaltopreventthe alterationof ledger entries after the reports havebeen printed.Create a secondary verification of theday sheet and deposit that is checked several dayslater.Audit trail reportshelp identify any transactionsthatmighthavebeenalteredordeletedafteradayhasbeenclosedout.

• Followbestpractices for receivingpayments andbal-ancingthedeposit.— When cash is received, it should be placed in a

sealed envelope, the amountwritten on the out-side, and initialed by two front desk teammembers.

in pediatric dentistry volume 23, number 3, september 2014

practice management and marketing news

“If you don’t change the direction you are going, then you’re likely to end up where you’re heading.”

~ John Maxwell

— The sealed envelope shouldnotbeopenedby anymember of the front desk team.The envelope isplacedwith the deposit and opened at the bank.

— The end of day process should include balancingtotal amounts (from the end of day report) ofchecks to (actual) checks, cash to cash, credit cardpayments to credit card payments.Not just thetotal deposit amount; an embezzler could receivea cashpayment,pocket the cash,butpost a creditcardpaymentonthepatientsaccount.

— Thepersonthatclosesoutattheendofday,shouldNOTbe the sameperson thatmakes thedeposit.Thedeposit shouldbe verifiedby a separate teammemberordoctor anddeposited in thebank.Anembezzler can remove cash or checks after theyleavetheofficeandmakeanewdepositslip.

• An electronic funds’ transfer is the embezzler’sworstenemy. Since the funds are automatically depositedinto thedoctor’s account, theopportunity for embez-zlement does not exist. Set up all possible insurancepaymentswithanelectronicfundstransfer.

• Keepminimalpetty-cash and apetty-cash log.Verifythebalanceaspartoftheendofmonthprocedures.

• Understand the cashflow in your business so ifdis-crepanciesoccur,thesewillbeobvious.

• Knowhow toprint andunderstand thepracticeman-agementsoftwarereports.

• Do random spot audit checks of charts for chargesandpayments.Match lastweek’sprintedday sheet toa newly generated report for that sameday.The col-lectionandproductionnumbershouldmatch.

• The staff shouldknow that youarekeepingan eyeonyour business by being interested inwhat goes onat the front desk, understanding the payment andbilling process and reviewing the practicemanage-mentsoftwareandreports.

• Honest people are completely comfortable and invitethedoctor to look intohow things arebeingdone atthe front desk. If you offend a staffmember becauseyou are implementing these safety controls, that ismore reason for you to stay involved andknowwhatisgoingon.

There are forensic accounting investigators that specializeinworkingwithdentists andhavequestionnairesdentistscanuse to help determinewhether or not embezzlementmay be occurring.Only the doctor should be choosingwho theywill dowork for andnot getpaid for it, let thatneverbeastaffmember’schoice!

Published four times per year as a direct membership benefit by the American Academy of Pediatric Dentistry (AAPD), 211 East Chicago Avenue, Suite 1600, Chicago, IL 60611-2637, (312) 337-2169. Copyright2014 by the AAPD. All rights reserved. ISSN 1064-1203. aapdinfo@ aapd.org, www.aapd.org. Writer: Julie Weir has built an outstanding reputation as a consultant, interna- tional speaker and author in the business of dentis- try. Opinions and recommendations are those of the author and should not be considered AAPD policy. Chief executive officer: Dr. John S. Rutkauskas; Publications Director: Cindy Hansen; and Publications Manager: Adriana Loaiza.

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american academy of pediatric dentistry 211 east chicago avenue, suite 1600,

chicago, illinois 60611-2637