Practice owner Dr. Mark Bark walks into the storage room, pulls a 25-pound bag of dog food from the shelf and says, “George, can you help me, please?” George grabs the bag, walks to the lobby and pauses at Lauren’s desk, waiting for her to issue an invoice. George looks for the client, but Lauren tells him, “It’s for Dr. Bark.” The practice owner waves at George to follow him to the front door and load the bag into his car.
What just happened? On the surface, you might think nothing much. However, what George and Lauren witnessed was a bag of pet food leaving the hospital without an invoice. They might think nothing more of it because Dr. Bark owns the practice.
A lot has been said about fraud prevention, particularly the precautions in place, but let’s look at the scenario above through the eyes of a potential thief. George might be a dedicated, hard-working employee and in the 10% of the population that never steals. Yes, you read that right, 10%! The 10-10-80 fraud rule says 10% of people will never steal, 10% will look for opportunities to steal, and 80% might steal given a chance.
But what if George is in the 80% club? What might cause a respected employee like him to steal? What if he needs money to support a gambling habit or another addiction? But wait a moment. The motive doesn’t have to be that significant.
This morning, Dr. Bark yelled at George for ruining a blood test and later gave him the evil eye for calling Mrs. Smith “Mrs. Jones.” George is working overtime, still needs to run a few errands after work and doesn’t feel appreciated today. Yet again, he’s the last employee to leave the hospital. His phone beeps before he locks the door. The text reads: “Hey, honey, can you grab some dog food on the way home? We ran out, and I forgot to place it on the shopping list. Sorry. Thank you!”
George stares at the message for a minute. Should he grab a bag off the storage room shelf or buy dog food at the grocery store?
“It’s just one bag,” he thinks. “Dr. Bark took one home.”
Internal theft can start small. And in the mind of a fraudster, small wins lead to braver acts and larger rewards.
Here’s what you can do to lessen the chance of falling victim to internal wrongdoing.
1. Keep Accurate Records
Every product leaving your clinic and every service performed needs an invoice. The permission to discount prices and credit invoices should be limited to the practice owner or manager. Alternatively, make sure your practice management software assigns specific permissions to each user. Also, check discount and credit reports every week. That way, team members questioned about a discounted product or service should be able to recall the circumstances.
2. Count and Double-Count
The inventory on the shelf should match the computer records. If they disagree, the practice owner or manager should investigate and document any variances. Be visible and consistent in your inquiries.
3. Stash the Cash
Your cash register is not a piggy bank. Accumulating money in the till for a week and then making a commingled multiday bank deposit sends the message that you might not reconcile day-to-day transactions. The wrong message also is sent when money is pulled from the drawer occasionally to buy office supplies or staff lunches.
Count your cash every day, preferably before the practice opens and again at the end of the day. Then, pull a report from the practice management software showing the cash collected during the day and reconcile it to the money on hand. I recommend preparing a cash deposit daily. You don’t have to take the cash to the bank every day if you have a safe but do it at least weekly.
4. Amass an Archive
Some practice management software systems allow you to “lock” reports after an end-of-day reconciliation. Or they might permit weekly or monthly lockdowns. That way, no unauthorized person can alter old records. Consider locking your account software annually as part of the year-end closing.
5. Get Personal
Activate safeguards in your practice management software or ask your vendor how. For example, you should require every team member to use an individual login. Also, empower only a few individuals to discount, void payments, change payment types, and issue credits and refunds. Finally, don’t forget to monitor adjustments regularly. Professional services are most likely to be abused since they’re unlikely to trigger an inventory shortage.
Let’s face it, the veterinary industry is accustomed to giving free nail trims and discounting grooming services when a client is unhappy. So, be vigilant.
WHAT NOW?
Almost everyone has a story to share about fraud. That’s not surprising. According to an American Animal Hospital Association survey, 86% of the respondents said employees had stolen from their veterinary clinic.
What if you suspect theft, fraud or embezzlement? Here are the five steps to take:
- Don’t react prematurely. Betrayal, disbelief, anger and rage are natural emotions, but don’t alarm your staff unnecessarily. You don’t know who might be involved in fraudulent activity. Sometimes, multiple co-workers are engaged in larger schemes. Therefore, don’t jump to conclusions, accuse people or confide in subordinates.
- Utilize outside advisers. Tell your practice attorney or insurance agent what you discovered and run the scenarios by them. A second opinion can bring a fresh perspective and ideas, such as counting the opioids a third time.
- Don’t alert law enforcement (yet). A missing bag of dog food or a $100 shortage in the till could be an anomaly or a small piece of a larger scheme. The exception is when a controlled substance is missing, which you must report within one business day.
- Build your evidence. Look for patterns, review historical data, and, if needed, consider calling clients who might be connected unwittingly. In one case, a practice owner learned that an employee handled refunds suspiciously. The owner contacted 10 clients to confirm that they received refunds, as the practice software indicated, but none had. At another clinic, the owner thought a team member was stealing from the cash register, so he installed security cameras. The footage confirmed his suspicions.
- Prosecute. Many practice owners reach the end of an emotional roller coaster and don’t prosecute. When that happens, the fired employee finds another job and potentially defrauds someone else. A successful prosecution leaves the employee with a record that a simple background check should uncover.