Employee theft: Could it happen to you?


The point is to increase the risk of detection to a point that most of those with the inclination to steal will be discouraged.

"Thanks for having Ann vaccinate our dogs. Are you sure we can't pay you something for it?"

Ann was our office manager, and the speaker was a casual friend and supplier of some office products. I was unaware that Ann had vaccinated their dogs, and rather surprised that there had been no charge. However, we had six doctors in our practice, and it was possible that someone had authorized this service for one reason or another. I made a mental note to ask my partners if they knew anything about the matter.

Guess what?

For once, I actually remembered to do so, and guess what? No one had authorized or knew of the gratis vaccinations. A look at the patient records revealed that the immunizations had been given, recorded in Ann's handwriting.

A fee was also recorded as having been paid, but no corresponding entry showed in our "one write" accounting page for that day.

A conversation with Ann revealed that, "She thought we would be okay with vaccinating the animals without charge because she knew the owners were our friends."

She had no explanation for why the patient records showed a fee had been paid. In reality, they were much closer friends of Ann's than of the practice owners. She had apparently wanted to extend them a favor at the expense of the practice.

Drawing the line

We terminated Ann because of this incident. We had an earlier issue with her because she arrived at work far earlier than our office opened, and far before she was needed.

We could only guess what she had done during those times prior to her termination. It was certainly possible she had extended this type of favor to others, or possibly collected a fee and pocketed it.

This was a firsthand situation of employee theft, and I have heard of many others. Believe it or not, your practice is vulnerable as well. And while it may be impossible to completely protect yourself, some basic safeguards will dramatically reduce your chances of becoming a victim.

Use sound accounting practices

I am aware of an employed veterinarian in a large dairy practice who initiated her own "buy three get one free" program on an expensive product. She did this in a misguided attempt to develop client loyalty. The scheme was detected when a client asked another doctor in the practice for the same treatment.

Computer programs are available that will tie purchases together with use or dispensing so that you can predict an inventory and re-order status at any given time. If you find yourself running out on products when the program indicates you should still have some in stock, it is time to begin asking questions.

How much shrink?

You should expect a small amount of "shrink," but anything more than 2 or 3 percent should raise suspicion. Employees will be more cautious when they know accurate accounting procedures are in place.

In another instance, a doctor was caught pocketing funds when a client who usually paid cash had occasion to charge. That, in turn, caused the practice to mail a statement that showed an earlier transaction as well. The prior one did not match the receipt that had been left with the client at that time.

Some investigation showed that the doctor had altered the practice copy of the receipt to show a lesser value, and had pocketed the difference. For this reason, it makes sense to mail statements even to cash customers. Again, staff members are less likely to embezzle if they know safeguards are in place.

Separate responsibilities so that a dishonest worker cannot cover his or her own tracks.

Staff members who have access to the practice checkbook should not reconcile the bank statement.

A friend of mine once opened the practice bank statement by mistake. He started to hand it over to his trusted bookkeeper, but the first check in the pile caught his eye. It was made out to that same bookkeeper, and signed with my friend's name, but not in his handwriting. It turned out that the bookkeeper occasionally wrote checks to herself, confident that no one ever looked at cancelled checks or the ledger.

This last example demonstrates the thrust of this column most clearly.

Get active

Be involved in your practice finances. An owner should always sign the checks and look carefully at every one as well as the invoice that it is paying.

Be sure they are legitimate, and make it clear to your staff that you really do check on things. Again, the point is to increase the risk of detection to a point that most of those with the inclination to steal will be discouraged.

I have touched on some ways to deter employee theft, but you should talk to your accountant to develop accounting procedures than give you the most protection.

Computers make it feasible to maintain far more control than was possible with manual systems. Put such programs in place.

Most people are honest. Others will yield to temptation when an opportunity to line their pockets is obvious. The lower the chance of detection, the more likely someone will take a chance. Practice owners are often surprised that it is the person they trusted the most, who has been with the practice the longest, and who seems completely above suspicion. That type of person usually has the most opportunity.

Strive to make the opportunity to steal low, and the risk of detection high.

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