Over your career as a dentist, the chances of being embezzled is about 70%. So, what can you do to lower that risk? To share some answers, Kirk Behrendt brings back David Harris, embezzlement expert and CEO of Prosperident, with four best practices to prevent embezzlers from stealing your time and money. Put systems in place so embezzlement doesn’t happen to you! For tips to make life as a dentist a little bit easier, listen to Episode 563 of The Best Practices Show!
- Prosperident: https://www.prosperident.com
- Call Prosperident: (888) 398-2327
- David’s Facebook:facebook.com/davidharrisprosperident
- David’s social media: @davidharris9406
- Subscribe to the Best Practices Show Podcast
- Join ACT’s To The Top Study Club
- Join ACT’s Master Class
- See our Live Events Schedule here
- Get the Best Practices Magazine for Free!
- Write a Review on iTunes
Links Mentioned in This Episode:
**Email David for a free copy of his Embezzlement Risk Self-Assessment Questionnaire: https://www.prosperident.com/contact-us
Prosperident’s Hall of Shame: https://www.prosperident.com/hall-of-shame
Dental Embezzlement: The Art of Theft and the Science of Control by David Harris: https://www.barnesandnoble.com/w/dental-embezzlement-david-harris/1134016570
Previous Best Practices Show episodes with David:
Prevention is better than the cure.
Check collections and deposits monthly.
Remember to check your day-end reports.
Track any financial discrepancies with a graph.
Learn to use your practice management software!
Your team doesn’t need access to bank statements.
You should be delegating to your team, not abdicating.
“The chance that a dentist will be embezzled in his or her career is around 70% . . . So, it’s not a problem that affects a small corner of dentistry somewhere. The majority of dentists will be embezzled. Sometimes, it’s taking tens from the office, or a few thousand dollars, or maybe scrap gold from the gold jar. And sometimes, it’s over $1 million dollars.” (4:14—4:44)
“About half of those who get embezzled once will be embezzled again. And about half of those will be embezzled again.” (4:49—4:59)
“Most dental offices don’t have really good control systems, and that means that people get away with things that shouldn’t happen. And the goal is to improve. It’s just like dentistry. If I’m a patient and I go to my dentist and say, ‘Doctor, I want to spend the least money in my lifetime on my teeth.’ What the doctor is probably going to do is hand me a toothbrush and a can of dental floss and say, ‘Use those like you believe in them, and see my hygienist every six months. That will keep your lifetime outlay to the minimum, because what happens if you neglect those things is going to cost a lot more, and it’s going to be a lot more invasive.’ And I’ll say exactly the same thing about embezzlement. Prevention is far, far, far cheaper and requires a lot less heart muscle than remediation.” (5:30—6:21)
“Let’s talk first about how embezzlers think. If you’re a dentist and I work for you, the first question I’m going to ask is, ‘Does [the doctor] know how much money should be in today’s bank deposit?’ It doesn’t matter, to be clear, whether you make the bank deposit or I, your office manager, does. The first question is, does [the doctor] monitor how much the practice management software says was collected? And if the answer to that question is no, which is probably the case in 80% of practices, then stealing is incredibly easy for me. I mean, all I have to do is divert some of the deposit. I don’t have to do anything exotic in the software. If you do monitor deposits against collections, I can still steal. But it’s a lot harder because now what I have to do is teach the software how to lie to you about how much money came in. It can be done, but that’s a lot harder.” (6:32—7:26)
“Let’s ask the really basic question: why do 80% of dentists not compare what the software says they collected versus what went into the bank? It’s a simple concept. The problem is that the practical application of it is a little bit tough. So, it’s the end of the day, today. It’s 5:00. You had a busy day. You’ve seen 20 patients. You got bit twice. You are really thinking about getting out the door. There’s a report that appears from your practice management software, and you get the idea, ‘Okay. But before I go home, I really need to check this against the bank deposit.’ Here’s the problem. A lot of the money that was collected today is going to arrive in your practice’s bank account either earlier than today or later than today. In other words, we have what we call timing differences. So, think about a patient who pays today by credit card. Your software captures that as a payment today, your practice management software. But that money doesn’t get to your bank until probably two or three days from now. So, you actually have no way of comparing that amount in your software against the deposit in the bank today. You have to say to yourself, ‘Okay. I need to write that down on a piece of paper, put it in a spreadsheet or something, and then come back to it three days from now and see if that amount actually arrived.’” (7:27—8:54)
“Another complication is that a lot of payments go by electronic funds transfers into a doctor’s account. And when an insurance company pays by EFT, there’s a timing difference but it’s actually in the opposite direction. So, what the insurance company does is they send out the money electronically, and they send the EOB, the explanation of benefits, by the U.S. Postal Service. Electronic funds transfer of money gets there in your bank account in about 30 minutes. The EOB, the explanation of benefits, might take four or five days to arrive, and then somebody in the practice opens it, and they might be too busy today to post it, so maybe it goes tomorrow. And again, what you’re forcing the doctor to do is to go back into the electronic banking and try to find a deposit that might’ve happened four days ago, or it might’ve happened 34 days ago. So, trying to do all that at the end of the day when you’re really thinking about getting out the door is a bit of a daunting problem, and it’s asking a lot of somebody at a moment in time when they probably don’t want to do it. And the consequence is, as I say, most doctors have given up on this one.” (8:57—10:14)
“We have always had the tradition that [checking collections and deposits] should be done on a daily basis. And I’m probably going back to before your time, but if you think back to before computers, in the old pegboard system, there was really no such thing in pegboard as a monthly report. The whole focus of pegboard was today. And at the end of the day, the doctor got the report and the bank deposit, and lined one up against the other, and decided that all the money was there. So, we’ve continued, even though computerization has been around in practice management software for over three decades, that basic mentality of, ‘This is something we should check at the end of each day,’ is still there. I’m going to make a radical suggestion. Don’t do that. Let’s look at a month at a time instead of a day. And that means a couple of things. The first thing it means is that rather than doing this activity 20 times in a month, we do it once. So, that just got a lot easier. Even though we’re doing it for a bigger period of time, once is easier than 20. If you had to do a quadrant of fillings, you would logically try to do them all at once because it’s numbing once, and prepping once, and so on, rather than doing that four times for a quadrant.” (10:17—11:46)
“There are some other advantages [to checking collections and deposits once a month]. The second advantage is that a lot of those timing differences that I mentioned have now self-corrected. In other words, when you’re looking at a whole month at a time, a credit card payment that is recorded in software on the sixth of the month and gets deposited to your bank on the tenth of the month, there’s no longer a timing difference because you’re looking at the month as a whole. So, now the timing differences you have to contend with when you look at a month are only the transactions that overlap the first day of the month and the previous month, or the last day of the month and the next month. So, the percentage of deposits, if you’re looking at a single day, it’s really easy for 80% of the money you take in today to have a difference between the day it hits the bank account and the day when it hits your software. When you look at a month at a time, now you’re probably talking about five or eight percent. So, the magnitude of the stuff that’s difficult to resolve gets much smaller.” (11:56—13:07)
“Here’s the second trick people can do. So, we’re looking at a month at a time. When you look at your collections according to practice management software versus your deposits in the bank, you’re probably going to end up with what I’d call a variance. In other words, this month, either you collected more according to your software than what went into your bank, or you collected less. So, let’s take that number and see how we can resolve it. And there are a couple of things you could do. You can look in your previous month’s bank statement and try to find this stuff with a negative timing difference, or you can look in your online banking after the end of the month and try to find this stuff with a positive. So, you can try and track down the origin of the variance. That’s the best answer, but it’s also a lot of work.” (13:09—14:05)
“The other thing you can do is you can create a graph and stick the variance on that graph. So, we’re having this conversation in April of 2023, which means we probably just did or are about to do this for March. So, let’s say in March that the practice management software collections were greater than the bank by $2,200. What you do on a graph somewhere, and it can be up on your wall, if you’d like, or it could be on a spreadsheet or something like that, is you put a dot for March at $2,200. You do the same thing for April. You do the same thing for May. And if you’re mathematical about it, you fit a regression line to those dots. If what you’re looking at is timing differences, timing differences reverse. So, let’s say on the last day of the month, a patient pays $4,000 by credit card. And let’s keep it simple and let’s assume that’s the only timing difference for that month. What you’re going to see at the end of that month, let’s call it March, at the end of March, what you’re going to see is practice management software is greater than bank deposits by $4,000. What you’re going to see when you look at April is the reciprocal. In other words, in April, you have a $4,000 deposit and nothing in practice management software because the payment was recorded in March. So, the variance reversed, if what you’re looking at is timing differences. When you plot your timing differences over time and you fit a line to them, what you get is something with a slope of zero, or pretty close. If you look at that line and it’s not zero, it’s increasing, for example, now you don’t have timing differences anymore, it’s something else, like maybe embezzlement. But you know what? Putting that dot on a graph takes a whole lot less time than trying to go back and find the origin of that $4,000 variance and make sure that the money was deposited.” (14:06—16:20)
“If you’re not doing a comparison between collections and deposits, you’ve made it so easy for [thieves]. I mean, the dumbest, laziest thief on the planet can steal in that framework. So, let’s eliminate the bottom half, intellectually, of the people who want to steal from a dental practice. This one step [of checking collections and deposits] will rule out those people. Anybody who can’t figure out how to crook your software now can’t steal from you. And if what’s involved is doing this once a month, and as I say, not having to actually track down the source of the variance but just plot it, that makes life so much easier. Can people still steal from you in that case? Yes. But now, what they have to do is trick the software, which is a lot harder and a lot more demanding.” (17:09— 18:00)
“This really basic control [of comparing collections and deposits], which, as I say, most people don’t do because it looks too daunting, if we can make it as simple as getting a month-end summary report from your software, looking at your monthly deposits from your bank statement — and when you look at your deposits, just to point out something that may not occur to all the audience, you have to pull out any nonrevenue deposits. So, if you got PPP money back in the COVID-19 days, that was a deposit to your account, but it was not revenue in your practice management software. If you have multiple accounts and you’re moving money back and forth, those are nonrevenue deposits. So, you have to screen that stuff out. But if you have none of those, every bank statement gives you a total for the total deposit, so you don’t even have to add them up.” (18:04—18:55)
“The other advantage of looking at a month at a time is that what some thieves have done is if they think the doctor is looking at day-in stuff but doesn’t look at month-end information, then they’ll come in on a Saturday or a Sunday when the practice is closed, and they’ll put through a bunch of transactions that they don’t want the doctor to see. When you look at a month as a whole, you catch all those things. So, there’s an advantage there as well. But the real advantage is, let’s shut down those stupid, lazy thieves and let’s make it so that anybody who pulls money out of the deposit and doesn’t do something in software to cover it up will get caught.” (18:58—19:43)
“First of all, why would you have to [tell your team you’re going to start verifying collections and deposits]? You get the bank statements, I’m hoping. And I really have an issue with any dentist who lets staff get that stuff first. Staff generally don’t need access to your bank account. So, the banking side, you get already. There are some dentists who don’t know how to print a month-end report from their software. And I would suggest that if you’re listening and you are in that category, I have one word for you: learn.” (20:15—20:51)
“I’m going to say something that a lot of your audience won’t like to hear, but it has to be said. Whatever reports you rely on as a practice owner from your software, print them yourself. As soon as you allow a staff member to print a report and hand it to you, you have given up control over the parameters used to generate that report, and it is really easy to hide stuff from you. So, I know there are doctors out there who would like to go their whole career without learning the first thing about their practice management software. That software is more important to your financial well-being than your handpiece is. And you all know your handpiece like it’s your child. You need to embrace your software with about the same amount of enthusiasm.” (21:00—21:49)
“If you don’t know how to print reports in your software, there is somebody, somewhere, who can show you.” (21:50—21:55)
“What’s involved here is getting bank statements that you already get anyway and learning how to print one, exactly one report, from your software. And assuming that you can climb those two mountains, you don’t need to go to your office manager and say, ‘I’m going to start doing this.’ You might end up going to the office manager later with a question about discrepancies. And if they’ve never seen you ask that question before, they may wonder why or even how you got the information. But you can decide, at that point when you’re likely facing a problem, how important secrecy is to you. But just to do this calculation, no, you don’t need anybody’s help.” (22:15—23:01)
“Step number four happens when you start seeing variances that don’t look like they’re caused by timing, like somebody stealing your money. A typical thief will take between two and four percent of your collections. So, you have an office that’s collecting $100,000 a month. That means we would expect a thief, once they get comfortable with their pattern, to be taking between $2,000 and $4,000 a month from you. So, when you’re looking now at your variances each month between collections and deposits and you see that January was $2,000 and February was $2,300 in the same direction, and March was $1,700 and April was $3,500, when you start seeing that the variances are all on the same side of the origin on your graph, as I said, this isn’t timing. So, now, you have a sleepless night. And what you do, hopefully, in the morning, is call Prosperident.” (23:24—24:37)
“When we investigate, our investigations are completely invisible to staff. We go to tremendous lengths to make sure that when a doctor calls us with unconfirmed suspicions — and sometimes, it’s been confirmed — but when it’s somebody who says, ‘I think Sally, my office manager, is stealing,’ our whole process is intricately planned so that Sally has no idea we’re on the job. And that’s important.” (25:50—26:18)
“A dentist will call me, and they’ll say, ‘Yeah, I’ve been a bit negligent in my overseeing of my practice, and now I think that Sally, my office manager, is stealing.’ And what I say to that doctor, and I will say to the next one who calls me, is let’s understand how unequal this battle really is. You are busy all day, every day, trying to do great dentistry for your patients. And that is your primary focus. And while you’re spending that time doing that, Sally, your office manager, has the whole day to think about how to separate you from your money. And beyond that, your control systems are 100% visible to her because she’s the person who lives with and probably, in some cases, implemented those controls. So, Sally knows whether you compare the day-end report to the bank deposit. Sally knows whether you look at a day-end report at the end of the day, or you just throw it in your basket to get to when you get to. Sally knows whether you get the mail, or she does, whether you make the bank deposit, or she does. It’s kind of like playing poker with somebody, but your cards are face-up and theirs are hidden. That’s how I view the challenge that a doctor has.” (26:22—27:48)
“A lot of people call me, and they’re really beating themselves up. And let’s put on the table what we both know about dentists. They come from a culture of accountability, where everything that goes wrong in their practice, whether it’s something a hygienist does 40 feet away from them when the doctor is doing something completely different — everything that happens in the office is their responsibility. And in a clinical sense, I agree with that, completely. When it comes to running the business, I think a lot of dentists hold themselves to an unreasonable standard. They really beat themselves up because either something goes wrong that they think they should have caught sooner, or because something happened, and they never caught it at all. I get a lot of calls from people who are smacking themselves in the head and saying, ‘If only I had done this little thing differently, I would’ve seen that that was going on.’ And I say to them, ‘Embezzlement is a pretty interactive crime. The person doing it knows exactly what your systems are and plans their crime accordingly.’” (27:49—29:00)
“I think what a lot of dentists struggle with is the difference between delegation and abdication. Delegation is when you give somebody a job to do with that accountability that you just mentioned — and this is the important part — and you enforce that accountability. Abdication is when you say to somebody, ‘I don’t ever want to hear about this again.’ And I think in a lot of cases, dentists rush to abdicate around business stuff when, really, what they should be doing is delegating.” (31:10—31:44)
“The thing, I think, that dentists need to buy into is that with the finances of their practice, everybody needs oversight. In other words, if you have an office manager and three receptionists, one of the jobs of your office manager is to oversee the three receptionists so that they don’t take your money. And your job is to oversee the office manager. And when you abdicate, in other words, when that oversight isn’t there, that’s when — not in every case, but in enough to drive those statistics that we talked about — that’s when enough people will see the opportunity to steal.” (31:58—32:38)
“What a busy dentist, what a clinically focused dentist needs to do is to find enough bandwidth to oversee the office manager. That doesn’t mean that they need to do it personally. In other words, this calculation that we talked about is a mechanical one. Sure, the dentist can do it. If the dentist has a bookkeeper and the bookkeeper has remote access to the practice management software, they could do it too.” (32:40—33:06)
“When we talk about accountability, what I think a lot of dentists perceive is, ‘Okay, this is going to take more of my time.’ In other words, abdicating takes less time than delegating. And sometimes, that’s true. But let’s think a little bit outside the box on this and see if we have other ways of achieving the accountability without necessarily a big time commitment on the part of the dentist.” (33:47—34:12)
“It’s easy to take what I said here out of context. When I say do the math at the end of the month instead of trying to do it every day, I am not suggesting to a dentist that you forgo looking at the day-end report at the end of the day. But I think you’re looking for something different than trying to line up the deposit with collections. What I want you to look at is, ‘Wait a minute. There’s a patient who was in here, and I don’t see their name on my day-end report.’ Or, ‘I’m looking here and I see a three-surface composite filling, but I’m pretty sure that was a four-surface.’ Looking at the hygienist’s work, do I see the amount of radiography that I’d expect? If your protocol in your office is that patients get annual X-rays and the panoramic once every five years, then what that means is that about half the patients in the hygiene chair should have bitewings or periapicals, and around one-tenth of the patients in the hygiene chair should have a panoramic. So, you still need to look at those things at the end of each day.” (34:39—35:52)
“I’ve seen cases where some of the stuff was being done but not billed properly just because of miscommunication in the office. And if radiography is being done and not billed, that’s tens of thousands of dollars a year to a doctor. So, stuff like that needs to be looked at at the end of each day. But let’s forget about the dollars. Let’s deal with those once a month instead.” (35:55—36:24)
“Let’s go back to something we talked about early on, that percent of dentists who get stolen from. And I said the number is around 70% in their careers. Does that mean that every staff member is looking to steal from you? Absolutely, positively not. It is a really small proportion of staff who cause problems. But if you’re a dentist in solo practice, you’re probably going to have 30 or 35 employees over your career, at least. And the chance that one of those will be a rotten apple is really big.” (36:49—37:20)
“We had done a previous session on hiring, and I’m going to bring back one statistic that we talked about that made Kirk’s eyebrows go up. The statistic was that 70 million Americans, which equates to one in four adults, has a criminal record. So, when I say that the chance that your barrel is going to have a rotten apple sooner or later, it’s that kind of number that I’m talking about. And let’s acknowledge that while the overwhelming majority of your staff are there for all the right reasons and wouldn’t steal from you in any foreseeable circumstance, there’s that small cohort who do. And we need to orient our systems around those people.” (37:21—38:06)
“We had one of our clients who was embezzled, he lost about $270,000 to his office manager, and he made a video for us after. What he said was, ‘You know what? You’re not going to get all your money back. You’re not going to get your sleep back. Just prevent this.’ I thought it was really profound, and what he said applies completely to everyone in the audience who owns a practice. Let’s put the structure in place so that it means this will not happen to you. Or if it will, you’ll catch it when it’s $5,000 instead of $105,000.” (39:07—39:47)
1:23 David’s background.
2:39 About the Embezzlement Risk Self-Assessment Questionnaire.
4:02 What are your chances of embezzlement?
6:24 Why this is an important topic for dentistry.
10:17 How often you should check collections and deposits.
16:22 Ways to make things harder for embezzlers.
19:44 Should you tell your team about verifying collections and deposits?
21:00 Learn how to use your practice management software.
23:04 Why you need to involve a third party.
29:19 Create systems of accountability.
31:09 Delegation versus abdication.
34:24 Remember to always look at your day-end reports.
36:30 Last thoughts on how to make dentists’ lives easier.
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 believes that the best educational experiences are enhanced using humor. His entertaining and insightful presentation style has made him a favorite presenter at regional, national, and international dental conferences.
David’s professional qualifications include Certified Fraud Examiner, Certified in Financial Forensics, Forensic CPA, Chartered Professional Accountant, Certified Management Accountant, and Licensed Private Investigator.