It’s easy to assume that your practice is immune to fraud. Ignorance is bliss, right? This case study from the ADA might change your mind: A young, new dentist acquired an existing practice and decided to keep the staff intact. After all, they knew the patients, and the previous dentist trusted them. But on the first day, the bookkeeper changed the amount on a check signed by the dentist for petty cash. Suddenly, a $50 check became a $950 check, and the employee netted the difference. During the next three years, the dentist estimates that another $100,000 was taken.
This might be an extreme example, but the reality is that fraud can happen in any practice – even yours. So how can you protect your livelihood? I suggest 1) screening employees to make sure you hire the right people and 2) developing a culture of honesty that values oversight and accountability. Here’s why (and how).
Read our previous post on where fraud happens in dental practices.
Whether you’re starting out or 20 years into your practice, you should be screening all new employees. The hiring process is much more than finding someone who can do the job; it’s also an important part of fraud prevention. At a minimum, you should conduct a background check and call references.
You might even want to use a professional background check company and running a credit check for financial positions. That way you know for certain if you are hiring an upstanding citizen for your practice instead of someone who presents a liability. On the legal end, we encourage you to do your research before investing in an outside screening resource and to get signed, written consent from any potential employee before proceeding.
Reduce Your Practice’s Fraud Risk
Now let’s discuss how to reduce the “comfort level” that invites fraud. You have the right employees in place, but they still need guidance. Being both a dentist and a manager, it falls to you to provide clear expectations of total honesty and then to monitor office activity. Here’s what I suggest:
- Create a climate of accountability. Think about introducing a fraud policy statement and a way for employees to report suspected fraud. Make it known that theft of any kind will not be tolerated. Then randomly monitor items like day sheets against the sign in sheets and the appointment book to make sure that every patient who is seen is recorded.
- Install a system of checks and balances. This helps prevent and minimize fraud because it’s more difficult to steal when multiple hands are involved in bookkeeping. To implement these systems, cross-train employees and require vacation time every year. It’s good for the soul, and good for business.
- Cash and check controls. It might sound obvious, but keep petty cash between $25 and $50, do not sign blank checks, and view bank transactions online daily. Finally, reconcile the bank balance monthly.
- Credit card statements. Always review every line item and match receipts, especially if an employee has access to a card that belongs to the practice. Also, make it a policy to shred any incoming credit card applications. That way the person who gets the mail won’t be as tempted to open a credit card for your practice without your knowledge.
- Computer security. Each employee should have his or her own username and password. Also, you should have a basic understanding of the financial programs so you can monitor them at any time.
These tips can get you started but talking with the experts is the best way to combat fraud in your dental practice. Contact the Dental CPAs team here for questions or call us at 410-453-5500 to discuss your unique fraud prevention strategy.