February 14, 2017

Why Dentists Are So Susceptible to Fraud

Chances are you’re going to become a victim of fraud, and the loss could range from $35 to $900,000. So, what are you going to do about it? My advice: educate yourself and implement these preventative management tips to save your practice from utter devastation!

A few weeks ago, I opened your eyes to the sad truth that your receptionist could easily embezzle $50k in 15 months. But in all honesty, your receptionist isn’t the only employee you need to worry about. Susan Gunn’s survey on embezzlement, published on Dental Economics, found that dental office embezzlers range from assistants taking cash payments chairside to front office managers taking patient checks to CPAs diverting funds to relatives and even the dentist!

What Types of Fraud Are Most Common?

When it comes to occupational fraud and abuse, healthcare has 7.3% of all the cases reported. Key word there is “reported.” Susan Gunn’s survey also revealed that only “21% reported prosecuting the embezzlers.” Why? It’s hard to prosecute a relative, and even harder to prosecute an employee when the business owner himself is engaging in illegal business activities (insurance fraud, employee fraud, illegal deductions, etc.).

Still, according to DentistryIQ and David Harris, CEO of Prosperident, 3 out of 5 dentists will become victims of fraud. Click to Tweet


*Source: American Dental Association, Association of Certified Fraud Examiners

Why Are Dentists So Susceptible to Embezzlement?

Well, let’s get real. Firstly, you run a small business, which means:

  1. you have a small team to segregate daily duties, and
  2. you’re on the production line, so you don’t have the time to closely supervise team members.

Secondly, when it comes to your professional education, preventing fraud is likely to have been very low on your list of critical skills to learn. Somewhere far behind dealing with dental insurance, infection control, HIPAA, and OSHA.

How to Prevent Employee Fraud

By now you’ve gathered that your practice is highly susceptible to fraud. Okay, but what do you do about it? Here are a few more management tips that will further develop you as a business owner and help prevent embezzlement!

12 Simple Management Tips to Help Prevent Employee Fraud:

Communicate Consequences

Consequential communication can be threatening to some, but most employees want to know the rules, regulations, and consequences of inappropriate activities (like embezzling).

Look at the Checkbook

If someone else is entering your payable and deposit transactions into the checkbook, make a point to look at it often. DO NOT allow Wite-Out to be used if anything is voided. Instead, simply draw a line through the entry, so it can still be read.

Request Cancelled Checks

Inspect all cancelled checks for unusual amounts, payees or endorsements. Have your actual checks, or copies, returned with your statement each month.

Review Invoices

Never sign a check without reviewing its corresponding invoice.

Sign, Stuff, and Mail

Sign the checks, and stuff and seal the envelopes yourself. Ideally, you or someone other than the person making out the payables should mail the checks.

Conduct a Quarterly Review

'At the end of each quarter, set-up a review time with your accountant or another professional advisor. A third party can often sight unusual amounts or percentages, which you can then investigate more carefully.


No one person should be empowered with total control of your front desk or money operations. Cross-train for coverage and an extra set of eyes and ears, even if it’s you or your spouse receiving the training.

Defer “Alone” Time

Many schemes are developed when an employee is alone in the office. Insist that employees come and go with the other staff or the doctor. Having other people around can deter wrongful manipulation of figures, postings and reports.

Require Daily Deposits

Deposits are to be made on a daily basis. Never let deposits accumulate. All postings must be done on the day of treatment or within 24 hours of treatment or any business exchange.

Establish a Budget

Take an active part in the budget process. Establish a budget for each business year. Monitor expenditures on a monthly basis. Evaluate your overhead expenditures and percentages (per category).

Identify Computer “Hideouts”

It’s easy to hide things in the computer. Have a third party, that understands your computer, show you how and where monies or embezzlement behavior could be masked in the computer. Have them teach you how to interpret the computer reports and how to cross-reference the reports.

Stop Bad Banking Habits

Join the many practices that are rendering services for cash only. Make certain your production is being billed out in full and that your deposit slips match the production report. Again, track your posting and the form of payment received—cash, personal check, insurance check, or bank card.

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