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Seven ways to protect your practice from fraud


Posted on 9/9/2019 by Joelle Jump
Do you focus only on the clinical side of your practice, leaving the bookkeeping to someone else? Do you have a trusted employee who “handles everything?” One of the biggest threats to any dental practice is the risk of fraud. In a study by the American Dental Association, almost 12% of dentists reported a loss due to employee theft.

It's hard to imagine that any of your devoted employees would steal from your practice. But typically, the culprit tends to be a longtime trusted office manager or bookkeeper. This person is usually well established, deals with patients and vendors, handles account receivables, payables and/or banking functions, and tends to be the last person you'd suspect. Oftentimes, the employee is able to misappropriate funds for years without being discovered, which can lead to truly significant losses.

Financial advice from Benchmarks Financial Group

Here are just a few of the ways clever employees are able to divert your funds into their pockets.

1.  Fictitious merchant account. The employee simply sets up a second merchant account, but with this account, your patient's payment goes into the employee's bank account instead of yours.
2.  False adjustment. When a patient pays in cash, your employee makes an adjustment in the practice management software, but the cash never shows up at your bank.
3.  Mystery vendor. In this scenario, the employee fabricates a vendor. You think you're writing a check for supplies or services, but you're really funding your employees next night out.


So how do you know if your hard-earned dollars are being siphoned, and how do you protect yourself?

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1.  Know the signs. Research has shown that there are a number of warning signs that your employee might be diverting funds. Often, the employee will come in early or stay late, and typically refuses a vacation. After all, his/her unlawful activities might surface if the employee is away from the books for any period of time. You should also look out for employees who often complain about money or being short on cash, or employees who are exceptionally territorial, not wanting to train others on certain tasks. Of course, the presence of one of these behaviors does not necessarily signal guilt. But if two or more of these traits is present, it's definitely time to investigate further.
2.  Perform background checks. These days, it's simply not enough to use your instincts. Performing a thorough background or reference checks is not only prudent, it's pretty simple. These days, there are a variety of affordable ways to check on the background of a potential employee. The time and money required is far less than you'd spend recovering from embezzlement.
3.  Avoid single-control accounting. When you give all the control to one person, you're significantly increasing your risk. Therefore, separate tasks such as opening incoming mail and data entry. You don't want the same person responsible for receiving money and sending it to the bank.
4.  Know your vendors. Never sign a check if you're not familiar with the vendor. Regularly review your vendor list, and if you don't recognize a vendor, dig further.
5.  Secure company checks. Be sure that the checks are accessible only to authorized personnel.
6.  Require authorization for significant purchases. Designate a specific amount such as $100 and require that you sign off on purchases over that amount.
7.  Regularly conduct a 3-point reconciliation. While all of the previous points are helpful, nothing protects you more than a regular reconciliation of your practice management software, third party payment processor and your bank statements. This reconciliation would literally track each dollar from when it is received until it makes it to your bank. Whether your employee creates a fictitious merchant account, posts a false adjustment, or sets herself up as a mystery vendor, the discrepancy will be always be discovered.


If your current processes don't provide you with a 3-part reconciliation, it's time to find a process that does. We perform a 3-part reconciliation for all of our dental clients on a weekly or monthly basis. As part of a fresh approach to dental accounting, we serve hundreds of dentists all over the country, providing easy-to-read, easy-to-monitor monthly reports that have saved dentists thousands of dollars, protected them from fraud and helped them exceed their goals. If you'd like to find out how you can easily and affordably protect yourself and increase your financial performance, contact us today or schedule a free consultation.

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