Article Date: 6/1/2005

fix this practice
A Family Affair

Checks and balances will ensure an embezzlement-free practice.

Q I started my first practice 15 years ago and hired my sister as my first employee. I eventually promoted her to office manager and she is in charge of all the practice's finances. I recently discovered that she's been making huge financial errors and hides them from me. How do I handle this situation?

Dr. M. L. Simon, via e-mail

A: While it's the norm for doctors to delegate duties such as accounting and bookkeeping, all delegation requires CHECKS AND BALANCES. I often mention the state patrolman analogy. If employees fend for themselves, unchecked by owners, the chance of embezzlement is extremely high.

Preventative Measures

Some prevention techniques:

 Never allow employees to open mail. Large payments from managed care and other carriers make the temptation to steal very strong.

 Do not allow ANY staffer (including family) to sign checks. If only you can sign, you control your funds. Many embezzlers steal checks and and can copy your signature from letters, contracts, prescriptions, etc. NEVER give staff access to a signature stamp.

 Review random schedules and trace the financial transactions of all patients on a given day. Look for any discrepancies between services rendered or materials dispensed and payments. Be aware of any attempt to delete transactions. This exercise should lead you to ask numerous questions about    patients, accounts, billing, etc. Try to do this at least once a week. When your employees know they are being watched, they are much less likely to take advantage.

 Distribute financial duties to reduce risk. Have separate employees collect payments, track ledger transactions and make bank deposits. Have an employee who is not in the front office balance the day sheet and make the deposit.

 Study profit and loss statements on a monthly basis. Look for discrepancies in the cost of goods. Study your accounts receivable and look for increases that could be related to embezzlement.

Familiar Story

Dr. L. T. Murry (fictitious name) called my company. His sister did not pay his federal taxes and embezzled monies. The registered mail he received from the I.R.S. was a total surprise. I went to his office to investigate. Mr. Murry's sister, was pleasant, outgoing, and well-groomed. After a day and a half of investigating schedules, lab bills, meeting with the accountant regarding quarterly tax responsibilities, it became evident that Susan had stolen a minimum of $10,000 a year from the practice for nine years. Her habit was easy to continue as Dr. Murry had no check and balance systems. Susan signed checks, made bank deposits, paid bills, balanced day sheets, all without any supervision.

When the evidence was presented, Dr. Murry wept. His sister had betrayed him. I immediately relieved her of her duties and spoke with Dr. Murry's attorney. We developed a contract that allowed Susan to pay the balance with interest. Unfortunately, the I.R.S. had no sympathy for the delinquency. Dr. Murry paid his taxes with penalties and interest.

I have seen numerous family members who have been tremendous assets. I have also found exceptions where siblings and spouses have embezzled and/or neglected responsibilities. I know how busy you are, but if you ignore financial issues, you will pay the price.

A final note about Dr. Murry and his sister: I told him to keep this private.  No matter what, they are still siblings.

DR. KATTOUF IS PRESIDENT AND FOUNDER OF TWO MANAGEMENT AND CONSULTING COMPANIES. FOR INFORMATION, CALL (800) 745-EYES OR E-MAIL HIM AT ADVANCEDEYECARE@HOTMAIL.COM. THE INFORMATION IN THIS COLUMN IS BASED ON ACTUAL CONSULTING FILES.



Optometric Management, Issue: June 2005