About 70% of dentists will be embezzled during their careers. In fact, it may be happening to you now! In this episode, Kirk Behrendt brings back David Harris, embezzlement expert and CEO of Prosperident, to continue with part two of how to stop embezzlement from happening in your practice. To learn the best monitoring framework to stop future thieves in their tracks, listen to Episode 927 of The Best Practices Show!
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Main Takeaways:
Quotes:
“For the last 35 years, I've been the CEO of a company called Prosperident. Prosperident deals with one very narrow problem in dentistry: employee theft. If you're saying, as you hear that, ‘It will never happen to me,’ on average, you're wrong. Embezzlement will strike more than 70% of dentists at some point in their career. The average case loss from our files — the average — is about $109,000.” (2:42—3:13) -David
“What I want you to look at on your day-end report, Doctor, is a couple of things. The first thing is very simple. Does it line up with what I remember happened today? In other words, if I'm looking at the day-end report and I see a two-surface filling, but I remember that that was a really big four-surface and I talked to the patient about a crown on that tooth, that's an issue. Maybe it's embezzlement. Maybe it's just a clerical error. But the difference between a two-surface and a four-surface filling is significant. If the lesser one is on your day-end report, that's going to cost you money. So, the first thing I want you to look at with a day-end report is, does it agree with what I remember happened today? Which, of course, is confined only to your own operatory because you won't have a whole lot of memory on what happened everywhere else.” (5:39—6:25) -David
“When you're looking at other providers in your practice, what I want you to ask is, does it make sense? So, if your policy on radiographs is that patients should get annual bitewings and a panoramic every five years, if you're looking at a hygienist who saw ten patients today, there should be something around four to five sets of film, plus probably one pano. It's obviously a small sample size, so if you look at one day and there are two sets of bitewings, I wouldn't necessarily think a whole lot about that. But if you look at a whole week and the hygienist is averaging two sets of bitewings, maybe it was an anomalous week, or maybe X-rays aren't being updated as per your protocol. Or maybe, in the worst scenario, they are and they're not being billed to the patients. You need to have a little bit of common-sense logic review, like, does what I'm seeing make sense compared to what I think should be happening in that operatory? That's your day-end review. Again, my suggestion is not to try to do anything financial. Your staff should be balancing at the end of each day, but I don't see a huge upside to you checking their work each day. I think you can do that better monthly . . . To me, that day-end review should take ten minutes or less.” (6:26— 7:53) -David
“If you have multiple providers — so, you have a hygienist or you have an associate dentist — at the end of each day, they should also be handed their own day-end report and they should be required to sign off that, ‘Yes, this is what happened in my operatory today.’ That adds some accountability onto their shoulders for making sure that what their report says corresponds with what they did.” (7:55—8:18) -David
“I'm going to add one more thing to the day-end [report] that might not occur to every dentist. Any report that you rely on should be one that you printed. If you allow somebody else to print a report and hand it to you, you have opened the door to selective reporting. I'm not going to get into the techniques of how somebody could manufacture a report that looks like it tells the whole story when it doesn't, but I'll tell you that it happens a lot. So, print your own damn reports.” (8:20—8:52) -David
“I get to see what goes wrong in practices that results in missing money and the easy workarounds. But it is not hard in practice management software to make the software lie. When you print your own reports, you shut down the easiest way to do that. I know what some dentists are thinking as they hear this. ‘Well, I don't know how to do that. I'm worried I might break something.’ It's okay to be a little apprehensive about your software, but one of your goals should be to get comfortable enough in your own software that you can find things and you can print reports. So, if you're not sure how to do this, there's somebody who can show you. Every brand of practice management software has trainers who would help you with that if you asked. There are lots of consultants who are good at software. So, if you're using Dentrix, there are probably 500 consultants in the United States who could teach you how to print your day-end reports. There are also YouTube videos — the way I learned how to do plumbing. So, there are lots of options out there.” (9:13—10:24) -David
“Let's even park for a minute the concept of dishonesty, that somebody is trying to steal from you. The traditional error rate in key punching, in other words, in entering information into a computer, is somewhere between one and three percent. So, even if somebody is not stealing, there are enough errors being made in your software each week to cost you more than the value of your time to do this. So, if you want a best practice, it is this: at the end of today before you go home, you need to spend ten minutes and ask yourself two questions about your day-end reporting. Does it line up with my memory, and does it make sense?” (11:13—11:52) -David
“Here's the step that a lot of dentists miss that is really important. As soon as I outline it for you, you'll probably see the benefit. The term I'm going to talk about is articulation. I'm very deliberately borrowing a term from dentistry because as soon as I say articulation, every dentist in the audience is picturing jaw function and the friendship that the mandible should have with the maxilla. Again, I'm borrowing from that very purposefully here. What articulation means when I talk about it, in other words, financial articulation is this: if your practice was open 16 days last month, and in your left hand you've got 16 day-end reports that were the ones that you printed at the end of each day — and once you print a report and look at it, get in the habit of putting your initials on it so you know that that's the one you saw. Otherwise, reports look very similar, and it would be easy to slip one report in and exchange it for another one. So, put your initials on the report when you've seen it and put it away. At the end of the month, you bring these 16 reports out, and in your left hand you have those, and in your right hand you have a month-end summary from your software that prints what happened in the whole month. Now, what we want to do is to take the 16 reports and produce totals for three important numbers. Those numbers are fees charged, adjustments made, and payments received. We want to total those three things up, and they should be exactly — and I mean to the penny — the same as the totals on your month-end report.” (12:10—13:47) -David
“One of the best ways for people to hide stuff from you, in other words, to enter stuff into your software that they don't want you to see, is to do it after hours. If somebody comes in on a Saturday and puts a bunch of transactions through, and then does a day-end report and shreds it, if your focus is looking at day-end reports, or if you just look at the month-end report, you will never know that happened. On the other hand, when you articulate the 16 or whatever number of day-end reports with the month-end report, if they don't add up, then you know instantly that somebody did extracurricular data entries in your software. From there, probably your next step is to call me and find out what happened and why it wasn't on any of your day-end reports.” (13:47—14:35) -David
“[Checking and comparing reports] needs to happen every month for the rest of your life. There's no sunset to this. You've got to do this every month. If you don't and somebody realizes that that comparison isn't happening, then if they're stealing, they will find a way to make after-hours entries. Again, I'm not going to talk about the content of those entries, but it's quite possible to fool you by doing that. So, they will make after-hours entries, and then you will have money missing and not realize it.” (14:51—15:22) -David
“The second part, once you've done the articulation, is now to compare collections against deposits. So, you have a collections number, which again was the same on the 16 or whatever day-end reports you have and on the month-end report. Now, we should be able to see that money, plus or minus a little bit going into the bank. Will the bank deposit line up perfectly with what you collected according to your practice management software? Not likely. The reason is something called timing differences. So, if a patient pays by credit card on the last day of this month, your practice management software is going to treat that as a payment this month, but it takes a couple of days from when a patient pays by credit card to when the money hits your bank account. So, if somebody pays on July 31st by credit card, that will be a July transaction in your practice management software and an August transaction in your bank. So, it's unlikely that collections are going to add up perfectly to deposits.” (15:42—16:43) -David
“The thing to remember about timing differences is that they reverse in the next month. So, let's say I pay $4,000 on the last day of July by credit card. Let's assume that's the only timing difference in July. Then, I'm going to show practice management software collections greater than bank by $4,000. But in August, I'm going to start August with a $4,000 deposit to my bank account that has no offset in practice management software because the offset happened in July. So, if that's the only timing offset in July, then in July I will show bank deposits greater than collections in my software by $4,000. So, if you want to see if you have a problem, it's very simple. Each month, when you do this exercise, there's going to be a variance plotted on a graph. Then, over time, when you look at the variances, it should look roughly like a sine wave. In other words, you should have some months with practice management software collections greater than bank deposits, and you're going to have other months with bank deposits greater than practice management software. If you looked at six months and the trend was all in one direction, that's not timing. That's when something else is happening and you probably should call 911 David.” (16:44—18:05) -David
“One of my clients I was talking to years ago, this guy lost about $300,000 from embezzlement. I asked him at the end of that, ‘What did you learn from this?’ I thought his answer was brilliant and really summarized a lot of what we're about. He said, ‘I have learned to trust systems, not people.’ In other words, for a lot of dentists, the only — and I stress the word only — reason they haven't been stolen from so far is that their staff who could do it and get away with it have chosen not to. It's wonderful that you have staff that make that choice. But it's also a really precarious place to be when the only barrier between you and being stolen from is staff honesty.” (20:13—20:59) -David
Snippets:
0:00 Introduction.
2:36 David’s background.
4:20 Day-end reports, explained.
8:54 Why dentists need to print their own reports.
10:25 Two questions to ask about day-end reports.
12:01 Month-end reports, explained.
14:36 How often should month-end reports be done?
15:23 Compare collections against deposits.
18:07 Prosperident’s monthly monitoring spreadsheet.
19:52 Final thoughts.
22:09 More about Prosperident.
David Harris Bio:
Under David’s leadership, Prosperident has expanded over the past three decades to become a team of more than 20 highly specialized fraud investigators, forensic accountants, IT specialists, and support staff. David’s vast investigative experience, coupled with his youth-filled misadventures and his past military service, have given him a unique insight into embezzlers’ mindsets and actions. He is passionate about sharing his wealth of knowledge with dentists and dental specialists.
David is a much sought-after speaker and an accomplished author on the topic of dental embezzlement. Dental Embezzlement: The Art of Theft and the Science of Control is his most recently published book.
David’s professional qualifications include Certified Fraud Examiner, Certified in Financial Forensics, Forensic CPA, Chartered Professional Accountant, Certified Management Accountant, and Licensed Private Investigator.