Theft.  No one likes to think about it, but embezzlement in private psychotherapy practices is far more common than any of us would like to acknowledge.

In my years in human resources, I was called in to consult on investigations of countless cases of employee theft.  It was heartbreaking.   Good employees– employees I liked,  with stellar work histories and nice families were caught stealing.  These good people, whom the company trusted implicitly, would come up with unbalanced accounts and cash drawers that were off a little here and there.  The problem was, a little here and there would suddenly add up to a lot when the accountants  started digging.

And in private practice?  Well, most practices try to keep it quiet when it happens, but theft is a much more common problem in private practice than you probably realize.   It can be absolutely devastating, especially if  an office manager has come to be trusted with much of the financial operations of the practice.

The scenario usually goes like this:  The practitioner is swamped with patients and associated paperwork, and the office manager is handling the insurance billing and cashflow.  Time goes by, and the office manager becomes more and more trusted and indispensable.  Clinician is so relieved to have all that “stuff” off his/her hands that he/she begins to pay less and less attention to the bank deposits, cashflow reports and other finanancial information.   As time goes by, clinician lets office manager take on more and more responsibility.  It’s just such a relief not to have to think about all of that billing stuff and banking stuff.  But what the clinician doesn’t realize is that there are cash payments that are “skimmed” here and there.  Or, sometimes, when the office manager has check writing authority or use of the practice’s credit card, money leaks out through these sources.  Sometimes, it’s a combination of all of the above.  Sometimes the office manager has failed to make key tax payments while writing checks to himself or herself out of the practice’s bank account.

How do these thefts get discovered?  Unfortunately, it’s not uncommon for money to be leaking out of a practice for months or even years before the leak (or leaks) is discovered.  Maybe the office manager goes on vacation and the clinician happens to scrutinize the checkbook or credit card statement a little more closely than he/she has done in a long time and discovers some irregularities.   Sometimes a sharp-eyed accountant may notice a change in the pattern of income flowing through the practice when preparing the clinician’s taxes.  Often, it’s not until the employee leaves the practice or until the theft has become so egregious that it finally comes to the therapist’s attention.  By then, countless hard-earned dollars may have been lost that may never be recovered.

So what can you do to protect yourself from employee theft in your therapy practice?  You MUST put in safeguards. (No matter how trustworthy and likable your employees may be, and this includes family members that work for you!)

• Implement a written policy for your staff that each and every time a patient makes a cash payment they will receive a receipt– NO EXCEPTIONS.  Publish this policy to your patients so that they expect a receipt each time they pay with cash.  It’s quick and easy to use one of those self-duplicating receipt books that can be purchased at any office supply store so that the patient gets a copy and your office has a copy– if there are any questions later, it’s very easy to review the receipt book against your billing records and bank deposits.
•  If your office manager can write checks on your business account, limit the dollar amount he/she is able to write checks for.  For larger amounts, have your bank require your signature on the check in addition to the office manager’s in order to process payment of the check.
•  If your office manager is writing his/her own payroll checks, you must review his/her hours worked vs. the hours submitted to payroll on a regular basis.
•  If your office manager is entrusted with making important payments on behalf of the practice (payroll taxes, property taxes etc.), double-check your bank statements to be sure these payments are actually being made.
•  Employees should never write checks for “Cash” without your permission.  Make this a written policy and stick to it.
•  Don’t sign a purchase order or any other financial document presented by your staff without fully reviewing and understanding it.
• Whenever possible,  divide duties among employees rather than entrusting one employee with all key responsibilities.  (This can be difficult in a small practice– it means you need to hold on to some of the ropes.)
•  Be leery of invoices from a new vendor that doesn’t seem to jibe with your practice’s needs.  If you run a vendor report and all of the invoices from that vendor are in sequential order (2001, 2002, 2003 etc.) you may have a fake company on your hands created by an employee in order to write checks to out of your bank account.
•  Consider running a criminal background check on potential employees the next time you hire.  This by no means guarantees that you will avoid theft, but it does help send a message to your employees at the start of their employment that you are serious about protecting your practice.  It may also catch a potential new hire that has had a history of illegal behavior before you welcome them into your practice.

Every employee is not out to rob your practice blind.  Most people are honest and hardworking and will have the best interests of your practice at heart.  Putting safeguards in place from the day you hire your first employee just makes sense to protect what you have worked so hard to build, and those honest and hardworking employees will respect that.

Copyright © 2012 Real Psych Practice LLC