As the owner of a dental practice, you would probably like to believe that all your employees are trustworthy. However, many small-business owners, including dentists, are victims of embezzlement. To avoid becoming one of these victims, you need to pay close attention to your accounts so you can quickly spot the signs of embezzlement.
What Is Embezzlement?
Embezzlement is the theft of money or property from a business by an individual who has been entrusted with responsibility for that asset. Usually, embezzlement relates to the theft of money, but it can also involve the theft of confidential information or other company assets.
How Common Is Embezzlement?
Statistics show that embezzlement is shockingly common in the dental industry. At some time in their career, as many as 60 percent of dentists will become victims of embezzlement. The most common form of dental embezzlement is billing fraud, where an employee purposefully orders too many supplies, returns the surplus and keeps the refund. This accounts for 35 percent of all cases, according to the American Dental Association.
Another common form of embezzlement is cash larceny, which accounts for almost 30 percent of cases. This is a very simple form of fraud, where cash collected from patients goes straight into the employee’s pocket. Skimming is a slightly more sophisticated form of stealing money paid by customers, which involves charging the customer full price while recording a discounted amount into the system and keeping the difference.
Other common frauds include employees lying about the number of hours they have worked or submitting fake claims for expenses. You need to be on the lookout for all these forms of embezzlement.
Why Does Embezzlement Occur?
Employees have a wide range of motives for embezzling funds from the dentist offices where they work. One main motivation is financial difficulty. Employees who can’t afford to pay their household bills, or who are struggling with money as a result of addiction, divorce or medical bills, have a strong incentive to steal to make ends meet.
On the other hand, some cases of embezzlement arise from simple greed. Some employees see an opportunity to increase their income and take it, without caring about the effect on your dental business. They may rationalize their actions by telling themselves you don’t pay them enough, or they may simply enjoy the thrill of stealing money without getting caught.
As well as motivation, employees must have the opportunity to steal and believe they can get away with it. Many dentists who own their practices forget that they are not just dentists, but also small-business owners. As a business owner, you need to make the time to review your business finances; if not, you are possibly enabling employees to get away with embezzlement for months before being found out.
How to Prevent Embezzlement
The first step in protecting your dental practice from embezzlement is to hire only the most trustworthy people. Always check references and perform background checks on candidates during the hiring process.
As well as bringing the right people into your dental practice, you also need to retain some amount of control over your employees. Keep your own financial records and check them regularly, rather than handing this responsibility completely over to your employees. In particular, it’s never a good idea to give one single employee full control over your finances; if two or more people work on the books, any suspicious entries are more likely to be noticed.
You also need to watch out for common warning signs of dental embezzlement. Look out for employees who isolate themselves from other staff and don’t like to be supervised while they work, particularly if these changes in their behavior occur suddenly. Watch out for signs of excessive spending from your employees, such as buying cars that they shouldn’t be able to afford.
Other signs of embezzlement include a sudden drop in your accounts receivable or your collections. If you can’t explain the drop, you have to consider the possibility that an employee is trying to cheat you.
You should also look out for soaring overheads. Are you spending much more on supplies than you used to? It’s normal for operating costs to gradually increase, but if you suddenly find yourself going through twice as many supplies as you used to, you need to investigate to find out what is going on.
Finally, look for signs of cash flow problems in your dental practice, such as frequent late payment charges from your suppliers. A cash flow problem could suggest that something is going wrong in your business, such as problems collecting payments or a drop in the number of patients you see each week, but it could also be a sign of embezzlement. Investigate both possibilities to protect your business from financial ruin.
Embezzlement is a serious problem for dentists. A busy dentist office is in many ways the perfect place for embezzlers to skim money from the accounts and hope to get away with their crime. By paying close attention to the accounts and to your employees, you can spot the early signs of embezzlement and tackle the problem before it leads to your business losing a lot of money.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.