Don’t Let Fraud Be a Practice Killer


If two practices are identical with the exception of their expenses, the practice with the lower expenses will have more value. Unfortunately, we often find that fraud is the reason for excessive overhead expenses in a practice. In fact, fraud is prevalent and pervasive in dental practices.

Fraudulent behavior usually begins with small actions, such as using stamps or envelopes for personal use, or personal telephone calls on the doctor’s time. Fraud always escalates in frequency and severity.

Fraud in the workplace is increasing in America. The average company loses 6 percent of its revenue to fraud. Statistics show that the longer the tenure and the older the employee, the more likely he or she is to steal if given the opportunity.

Other than taking cash from the practice, there are numerous ways for staff members to defraud the dentist. Cashing or depositing incoming patient checks or insurance checks into their personal accounts, filing fake insurance claims and pocketing the payments, and diverting payments for supplies to fake P. O. boxes are just a few examples of fraud in dental offices.

Unfortunately, there is usually no recovery of the missing money and little or no punishment for the crime. The best method in dealing with fraud is prevention. What follows are four ways of preventing fraud in your practice. Your honest employees will not be offended by control methods you institute.

Lead by example

  • Statistics tell us that 5 percent of the population is strictly honest, 5 percent is inherently dishonest, and 90 percent will follow the lead of the work environment.
  • If a dentist sets the example for his staff by removing cash from the practice without recording it or cheats patients in any manner, the staff will soon follow suit.
  • All patients should receive receipts from the computer when they exit the office, even if there was no charge for that date.

Separation of duties

  • Assign one person to accept the payments, and a second person to make out the deposit slips on a daily basis. Use computer-generated deposit slips.
  • Empower only one person to make adjustments in patient accounts. Never allow the employee accepting the money to have the password for adjustments.
  • (Note: It is still possible for staff members to overcome the separation of duties through collusion.)

Checks and balances

  • Have the production and collection reports printed and placed on the dentist’s desk at the close of each month.
  • Reconcile monthly collections report with your deposits from your bank account every month. Check your bank deposits directly from the Internet and match your monthly office deposits. If you accept credit cards, request that the discount be taken from your account at the end of the month, not from each deposit. If you don’t have the same amount going into the bank as the office computer states you received, you may have a problem.
  • Check the percentages on your monthly pro?t and loss statement. When you print a profit/loss statement each month, pay attention to the percentages of each expense, as well as to any changes in the percentages. For example, your dental supplies should cost approximately 7 percent of your income. If supplies were 7 percent last year and are 9 percent this year, investigate immediately!

Outline your fraud policy in writing

  • State in writing what you consider to be fraud.
  • Have each staff member read and sign your fraud policy. Keep a copy in the employee’s folder.

If you discover fraud in your office, immediately report the incident to the police. You will not get your money returned, but you may save one of your colleagues from the same losses.

Even if you are not considering selling your practice in the near future, you should institute the above systems to prevent fraud in your office. Do not continue to live in denial. Most people who commit fraud in the workplace consider themselves “good people.” Eighty-two percent are first-time offenders. Most rationalize that “they will pay it back later; they just need it now” or “they were due the money and the doctor won’t miss it.”

Establish the systems now, check them on a regular basis, and avoid the misery of confronting a long-time employee with the evidence of missing money. You will sleep better at night, your bills will be easier to pay, and your practice valuation will increase.

Gretchen O. Lovelace, MS, CFP, CPM, is president of Lovelace and Associates, Inc., a dental practice transitioning, consulting, and brokerage firm in Baton Rouge, La. She is a member of American Dental Sales. She can be reached at (225) 8925135, or by e-mail at gretchenlovelace.cox.net.

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