Article Date: 6/1/2004

Prevent Theft in Your Office
Many employees admit that they steal from their employers. Here's how to protect your practice with practice management software.
BY MARILEE BLACKWELL, M.B.A., C.P.A., A.I.B.A., Saint Augustine, Fla.

Did you know that employee theft is the cause of one-third of the bankruptcies in the United States? Or that more than 50% of employees admit that they've stolen from their employer at least once? And did you know that small companies are more vulnerable to theft than larger ones? But worst of all, were you aware that employees who steal are sometimes the most trusted staffers?


The faces of theft

Most optometrists report they've either experienced theft themselves or know someone who has. Types of theft include loss of:

This article will focus on the theft of cash and inventories, as well as what you can do to reduce the chances of this happening at your practice.

The three reasons why employees steal are:

1. motive

2. opportunity

3. lack of integrity.

The most common motive is a desire for money -- even people who are usually honest can end up in situations in which they need money and can't get it through normal channels.

For example, they may need to pay hospital bills, alimony or their out-of-control debt.

Monthly Reconciliation

Beginning Inventory (from Stock Status Report and actual count, which should equal)

+ Purchases (from your vendor invoices and Receiving Report, which should equal)

- Frames Sold (from Frames Sold Report)

= Ending Inventory (from Stock Status Report and actual count, which should equal)


Theft happens

Many optometric practices unknowingly provide easy opportunities for staff to steal. And opportunity is like an invitation to steal. Opportunities exist when no one knows whether frames are missing because no one has counted the inventory recently. A practice encourages theft when someone catches an employee stealing but doesn't fire or prosecute him.

A practice creates further opportunity when the same person who writes the checks also reconciles the bank statement. If someone on your staff lacks integrity and has motive and opportunity, then she'll probably steal from you. A responsible business owner must maintain a system of checks and balances to limit opportunities for theft.

Limiting opportunities

Believe it or not, your practice management software (PMS) is one of your biggest resources in the fight against employee theft. Proper use of your software provides the basis for setting up strong internal controls.

To begin with, I can't over-emphasize the importance of issuing receipts and properly inputting data. Your PMS is only as dependable as the information you enter into it. Therefore, make sure all transactions:

To help ensure that staff enter transactions into the system, give all patients a receipt. I suggest putting a sign at the front desk and check-out area requesting patients to ask for a receipt if they aren't given one.


Every patient on the schedule should receive a fee slip.

Protect your cash

After instituting the crucial policy of giving patients their receipts, take the following steps to use your software system to protect you from employee theft:

Make use of your PMS' security features. Base each employees level of security access on her job description. Only the owner of the business should have full access to all features of the PMS. It's also best to allow only you and your office manager to change fee slips, make adjustments and record returns. However, if you allow your office manager to change fees slips and make adjustments, then you should perform surprise audits on her work.

The person who has the lowest level of security should sign on first every morning. That way, employees who need to use higher security features will have to provide their passwords. In certain software systems, many reports show who entered data or who made changes. (See the OfficeMate example below). Part of your management process should include a review of the "Recorded By" fields.

Implement a checks-and-balances system. This is also called segregation of duties. The person who collects the receipts shouldn't also prepare the daily deposit ticket, compare the deposit ticket to the production summary and manage accounts receivable.

Compare your appointment schedule to your Fee Slip Audit Report. The Fee Slip Audit Report shows the name of each patient who received a fee slip, along with the charges and payments. Each patient on the schedule should have received a fee slip. You should have a reasonable explanation for why patients who are on the appointment schedule aren't on the Fee Slip Audit.

For example, contact lens rechecks may appear on the appointment schedule, but if the patient paid previously then they didn't receive a receipt. A red flag should go up if you have patients who were on the schedule and didn't receive a fee slip.

Reconcile the Daily Production Summary Report or Deposit Ticket Report to the manually prepared deposit slip. The actual cash and check deposits should equal the amounts shown on the Daily Production Summary Report. Investigate all overages and shortages.

On a weekly basis, print out and review the Discount Register and Adjustment Register. You should look at what patients received discounts and adjustments, the amounts and who made the entry. Do the adjustments make sense? Did you authorize them?

Review your Patient Aging Summary Report on a monthly basis. Look at the amounts and percentages of accounts that are current, 30 days past due, 60 days past due, etc. If the percentage of past due accounts is increasing, this indicates that someone isn't applying payments. Of course, it could also mean that your collections efforts are slowing down. Either way, this report provides information that all good managers should know.

Let your employees know that you're watching. Remember, opportunity is one of the underlying causes of theft. If employees know that you're watching and reconciling, then they'll be less likely to steal from you.


Compare your appointment schedule (above) to your Fee Slip Audit. A red flag should go up when patients who appeared on the schedule did not receive a fee slip.

Now for your inventory

Most PMS provides inventory management support. Use it and you'll strengthen your internal control system. As with the cash controls, the inventory management system is only as good as the data you put in. Follow these steps:

If you haven't used the inventory module of your PMS, then you must begin with a physical inventory count and enter the data into the system. To make this task easier, you can purchase a disk from FramesData [(866) 265-3267], which has all the frames listed; just enter the number of frames you have in stock.

Use the Purchase Order System in your PMS. The system can create purchase orders directly based on what you've actually sold, or you can manually enter what you want to purchase. You or your office manager should approve the purchase order before placing the order with the frame rep.

Enter inventory into the system when you receive it. Print receiving reports and check them off against the vendor's statement before you make a payment.

When you sell a frame, enter it into the system; it should also appear on the patient's fee slip. If you use the automated purchase order system, then the frame order will automatically appear on the Purchase Order. By entering the sale into the system, you'll update your inventory count.

At the end of each month, count the number of frames. Your total should equal the number of frames shown on the Stock Status Report. If it doesn't, then you'll have to take a more detailed count. Adjust the inventory system to equal the actual count. Only you and your office manager should make inventory adjustments. If your office manager makes the entry, you should review the Inventory Adjustment Report as part of your checks-and-balances system.

Each month, you should do the reconciliation featured in the box on page 50.

It's important that all of these reconciliations work -- more checks and balances. If they do work, then you know that your staff entered all receipts and sales and that no inventory is missing.

Conduct surprise inventories on a regular basis. Get a family member or friend to help you. Your surprise inventory should match your practice management software at all times.

Some of you may believe that theft will never happen to you, but I hope that reading this article will convince you to change your practice from providing opportunity for theft to eliminating any chance of it.

What if I catch a thief?

Reporting a clear case of theft to the police and taking legal action will help employers stop future theft. This is assuming that the employer follows the good practice of performing background checks on new employees.

You need a zero tolerance policy to eliminate theft. Inform employees that you'll take legal action against anyone you catch stealing. If you don't have a zero tolerance policy, you're partly responsible for theft by giving employees an opportunity to steal without consequences.

When all else fails . . .

As Ed Buffington, chief executive officer of OfficeMate told us, "Neither perpetual inventory control features in your practice management software nor the strictest software security measures can fully protect you against dishonest staff. Establishing your expectations and hiring staff who possess integrity are the real protective measures."

However, should that fail, eliminating opportunities for theft may help keep an employee honest and from getting into serious trouble.


Got Security?

Here is a sampling of practice management software vendors who can help make your practice secure:

(800) 456-4522

Crowell Systems
(800) 366-4564

(800) 788-3356

MSF Computing
(519) 749-0374

(800) 269-3666

Prima Systems
(281) 835-3514

(800) 600-4797



Ms. Blackwell is president of Blackwell Consulting. You can contact her at (800) 588-9636.



Optometric Management, Issue: June 2004