THE BUSINESS OF PRACTICE: MANAGING A PROFITABLE PRACTICE


money or other valuable things from other people. Email scams or gimmicks on social media are good examples. Embezzlement—involves an employee or a representative that funnels money or property owned and paid to the employer to his or her own personal account for his/her own personal use with- out the consent or knowledge of the victim-employer. An employee putting cash received by clients into their pockets or an employee using a company credit card for personal purchases are some instances. An employee cheating on a time card is also another form of embezzlement. The main difference is that in embezzlement, the employee is usually entrusted with the property or reasonability by the employer.


5. Characteristics of Employees Who Steal and Their Motives


According to an ACFE report, 54% of fraudsters are between the ages of 31 and 45 years, are females in management or accounting positions, and are long-term, trusted employees. Other fraudulent employee behaviors include excessive spending, liv- ing beyond their means, and unusually close relation- ships with vendors or customers, excessive control issues, and refusal to take vacations. Employees who were deemed disgruntled or had bad attitudes of enti- tlement are frequent embezzlers.


6. Early Warning Signs


Some signs to pay attention to in your practice in- clude if your practice is profitable, but has unexplained low cash flow, similar to our true story example. You will have a good idea of how much is normally put on your practice credit cards. If you notice they are unusually high 1 or 2 months, check it out. Many times inventory discrepancies can uncover theft. Any bank reconciliation differences must be addressed immediately. You should be in the habit of seriously looking through bills and invoices taking note of any strange ones or anything out of the ordinary. If there is zero or vague reporting or transparency from the person in charge of the money or books, that is a warning sign as well. Any data inconsistencies or absence in the archives could be one too. Pay atten- tion to gossip. Gossip in overdrive usually means where there is smoke, there is fire!


7. Ways to Prevent Embezzlement


Internal controls! Internal controls! Internal con- trols! It can’t be said enough. Separation of du- ties is vital in a practice. Have different office staff receive payments, post payments, and make depos- its. Have a different person ordering drugs than the person receiving in and counting. Separate the person/department that is processing or writing the checks from the person/department that reconciles the bank statements. Limit check signing duties to only the practice owners! Limit access and issu- ance of company credit cards as much as possible. Have all reconciliations of accounts receivable, credit cards, and banks done by an employee with no


access to those transactions—do it yourself as the owner, or pay your CPA or accounting professional to do it. Review all payroll before it is processed. In smaller practices with fewer employees, it’s difficult to completely segregate duties, so the owner will then have to stay more closely involved. The more aware- ness/involvement in the accounting transactions and finances done by the owners, the less likely anyone will be tempted or have the opportunity to steal.


8. What to Do if You Suspect Fraud


If you suspect fraud, be discrete about your suspi- cion. If you let on to the person that you suspect it and don’t have time to prove it or do anything else about it, you give them ample time and opportunity to cover it up. Consult an accounting/fraud expert to get proof, preferably an expert with knowledge of your industry and software. Hard proof is needed before accusing someone of something so serious. Consult an employment attorney on your options once you have proof. Formulate plans based on all your options and or potential outcomes of employee responses once confronted. Confront the employee with the proof in the presence of an independent eyewitness, or two, or three. Either way, if the employee denies or confesses and you have solid proof, immediately relieve them of their job respon- sibilities and company possessions and personally escort them from facilities or have a police officer do it if you think things could get ugly. Start the legal process of prosecution and or repayment plan imme- diately. In cases such as these, any time lapse can weaken your case. Check your insurance policy for coverage. A lot of business policies will cover em- ployee embezzlement. Far too often practice owners say, “not on my watch,” “it can’t happen here,” or “we are like fam- ily,” and far too often those same owners saw red flags or warning signs from employees and chose to ignore them because of those misconceptions. The intention is not to scare anyone or create un- necessary fear. It’s not paranoia, its prudence. As Ronald Reagan said, “Trust, but verify.”


Acknowledgments


Declaration of Ethics The Author has adhered to the Principles of Veteri-


nary Medical Ethics of the AVMA.


Conflict of Interest The Author has no conflicts of interest.


References 1. O’Neil T. How to Safeguard Your Hospital Against Theft. Proceedings of the 90th Annual Western Veterinary Confer- ence. March 4–8, Las Vegas, NV 89120.


2. Association of Certified Fraud Examiners. Report to the na- tions on occupational fraud and abuse. 2014 Global fraud study. Austin, TX: Association of Certified Fraud Examiners; 2014. Available from: https://www.acfe.com/rttn/docs/2014- report-to-nations.pdf.


AAEP PROCEEDINGS  Vol. 64  2018 487


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