Are you taking proper measures to prevent embezzlement in your practice?
“Trust but verify” has been our philosophy which echoes with one of the fundamentals of accounting principles – professional skepticism.
Physicians and dentists are more exposed to embezzlement than any other profession for multiple reasons and just to name a few:
- Doctors are extremely busy and often fully delegate financials tasks to a single person
- Doctors receive very limited or no business training in medical school
- Doctors have very caring and trusting personalities
As technology gets more advanced and innovative – so do the thieves!
Most common ways of embezzlement:
- Adding family members or bogus people to payroll
- Paying unknown or fake vendors
- Keeping cash co-pays
- “Borrowing” from petty cash draw
- Issuing bogus credit card refunds where the refunds are going to the employees credit card
- Pocketing patient’s payments and making billing adjustment on the patient’s account
- Charging personal items on the Company credit card
In my personal experience billing and collections is the most sensitive area where most theft happens and needs to be watched closely.
Red flags to look for:
- An employee never takes vacation or time off
- An employee is not willing to cross-train
- An employee constantly works overtime and takes work home
- An employee is overly controlling of all finance functions
- A change in employees lifestyle
- Increase in patient refunds
- Increase in billing adjustments
- Drop in collection percentage
- Increase in expenses
Steps to prevent embezzlement:
- Applying payments in the EMR and making deposits should be done by two separate employees
- Bank reconciliations should be done by an outside person (usually your CPA firm)
- Credit card terminals should have a password for issuing credit card refunds
- Mail should not be received exclusively by one person
- Review monthly bank statements and cancelled checks
- Review monthly credit card statements
- Review financial trends monthly and verify that variances are explainable
- Approve each payroll run
Listen to your instincts! If you become suspicious don’t turn the other way but start digging.
One can never imagine that such a thing can happen to their practice…but embezzlements do happen and more often that we think. If you have no segregation of duties in your practice which is common due to small size, rely on your CPA to at least prepare monthly bank and credit card reconciliations and perform monthly financial analytics.
It all starts with the tone at the top so establish strong financial practices in your office and adhere to them. Existing employees will appreciate a solid foundation and a clear understanding of how things need to be done. New hires will recognize how much you respect finances and know what is expected of them. They will understand this is a practice that “minds the money.”
CPA Solutions offers training to teach employees on procedures to help minimize embezzlement risk. Give us a call today to find out how we can help prepare your business: 407.650.9088.