How to Prevent Embezzlement in Your Practice

Recently, I had to fire an employee who had stolen money from our office. She wasn’t caught in the act, and I wouldn’t have missed the money. I only found out because she had a guilty conscience. She had overspent her bank account during Christmas, and had some personal financial problems. When I found out and offered to advance her a small loan on her salary-a bad idea which I rarely do-she broke down and admitted to the theft. I appreciated her honesty, but had to fire her immediately.

According to an article in the American Academy of Family Physicians newsletter, “a recent study of community health clinics found that more than 40 percent had experienced some type of financial crime during the previous five years.” Not only that, this was supposedly underestimating the problem, as it is frequently an unreported crime. Fortunately, the article had six clear steps to help prevent embezzlement:

1. Check candidates’ references and job histories – Supposedly, many embezzlers are repeat offenders, so a thorough vetting of all applicants is suggested; if you haven’t got the HR department, you can always outsource this step.

2. Review individual expenses – It’s smart to have one person order supplies, another to verify receipt, and a third to sign the checks for payment; also occasionally spot-check expenses to be certain they are legitimate; for a larger practice it even makes sense to have two people required for check signatures.

3. Prohibit pre-signed checks and signature stamps – At the very least, every time you write a check, know exactly what you are paying for.

4. Enforce job rotation and vacation policies – It is suggested that employees take at least five consecutive days off for vacation; having someone else who can step in to do their job is good in case of emergencies, and a fresh pair of eyes can usually spot any wrongdoing during someone’s absence.

5. Bonding employees – Employee bonds are insurance policies that reimburse you for your loss if the employee commits fraud or embezzlement. Bonding also serves as a deterrent to financial crime because bonding companies prosecute perpetrators.

6. Issue receipts for cash collected – In this era of frequent co-pays, cash can accumulate quickly at a practice. Whether you use an automated receipt system or an old fashioned booklet with carbon copies, make sure receipts noting the date, amount received and the patient’s name are scrupulously kept.

I found these steps both easy to implement, and very effective. Making each employee involved in the process accountable for their co-workers, as well as for themselves, left me feeling more confident that this problem won’t occur in the future.