Preventing Fraud-most dentists miss these first steps to internal controls.
Updated: Dec 30, 2019
If you have had a dental practice for any period of time, I am sure you have heard the statistics that 60% of all dental practices will experience some form of fraud in their office. The statistics are believed to be even higher since many go unreported for one reason or another. The embezzler, for example, might have information on the dentist that he/she prefer not be exposed. For reasons like this and others, only 20% of dental fraud cases are ever prosecuted.
With the possibility of having an employee steal from your dental practice being so high, the dentist can see the need for having internal controls for prevention.
In this article, I am not going to go over all the different ways an employee steals and the internal controls that should be in place to prevent them. I am sure you have heard stories of employees that deposit cash and checks collected into their own account and making adjustments in the practice management software. This is a whole different topic of internal controls in itself.
This article will describe and discuss the "Preemptive" measures. The activities and safeguards put in place before you even begin practicing or hiring any new employees.
The first step you need to do when hiring an employee or subcontractor to work in or for your office is a background check. This should not only be done on any employee handling money or finances, but also on subcontractors such as bookkeepers. I once worked in a dental office where one of the employees hired had actually been convicted and was on parole for stealing cash from another office. She was handling the money.
Criminal activity isn't all the dentist needs to be concerned about though. A background check should also include a soft credit check. (A soft credit check does not affect your credit score) If someone is having credit problems, they might be at higher risk of stealing. A bank does not hire anyone with bad credit to handle their money, neither should you. In my bookkeeping business, I welcome my clients to do both a background and a credit check.
Have an open dialogue with your office manager, bookkeeper and staff. Create a workflow diagram for everyone to follow. It will make it clear who is in charge of what. Ultimately though, you the dentist are responsible. You need to take part in the workflow. Go over your financial reports with your bookkeeper and your practice management reports with the office manager. You are in charge.
User access must be kept separate with employees and subcontractors. Every individual needs their own access and password. No exceptions or sharing. The audit trail on the computer programs need to be turned on so that you can see the trail of who did what. Online software can even show the IP address or physical address if someone is doing something from home.
Fraud Insurance can sometimes be a part of your liability insurance. Make sure you have some. It is not so easy to collect money back that has been stolen.
Lastly, you need to have an engagement letter with your bookkeeper and contracts with your employees. Spell everything out as to what is expected and what their duties are. Special note, your bookkeeper and person collecting money should never be one in the same. This can save you a lot of hassles in the long run. As Benjamin Franklin said "an ounce of prevention is worth a pound of cure".