Foiling embezzlement – with reviews, rules, quesitions

NATIONAL REPORT –– Implementing simple review processes and business procedures can safeguard veterinary practices from embezzlement and the risks that come with it — fraud, theft and financial downfall.

"Business fraud is on the rise," says Elise Lacher, a Florida-based CPA at Lacher McDonald with a focus on veterinary medicine.

But it doesn't have to be in all businesses.

A simple check-and-balance system for reviewing practice sales, payments and deposits prevents one person from having sole authority over the practice finances, says Karl Salzsieder, DVM, practice owner, JD and veterinary consultant.

"Everyone needs to be looking at the bookkeeping system and cash accounting system. You need to have at least two people doing this so one person isn't in charge," says Salzsieder, a three-time embezzlement victim.

Watch bank records

Reconciling monthly bank accounts and credit-card bills with pertinent receipts, withdrawals, charges and transactions ensures validity and helps catch any questionable entries quickly.

Copies of checks should be requested from your bank, with signatures and recipients reviewed. "When you pay attention to your business practices, it can be deterrent enough," Lacher says.

Two former employees at Salzsieder's practice skimmed cash from office deposits before taking them to the bank. "It is unbelievable that, even though we had fraud systems in place, liars still beat us," Salzsieder says.

With a combined loss of almost $6,000, he now uses a bank that comes directly to his practice to pick up deposits. After being counted by two separate employees and the bank representative, deposit receipts are provided for business records.

Payroll reports should be scrutinized to ensure that salary dividends, existing employees and check payments are accurate. "It is easy to increase gross amounts per check and get money back through a tax return," Lacher says.

Monitor inventory

"This is the second highest cost in a business, and you need to monitor it carefully," Lacher says. "Flea products and heartworm medications are major income sources. It is especially easy to take inventory from companies with a lot of surplus."

A receptionist at a Salzsieder-owned practice in Kelso, Wash., made off with almost $4,000 from selling flea bombs for cash and pocketing the proceeds. The theft went unnoticed for six months, until a customer returned a flea bomb and no receipt could be found in the practice system, Salzsieder says.

Inventory used for employee pet care should be monitored by strict policy. If employees receive services or order any type of veterinary supplies — food, flea treatment or heartworm medication, among others — ensure they pay for them through inventory and receipt control.

"Employees should be treated like clients when it comes to the financial stuff. This is a very important business issue," Salzsieder says. Employees should also never be able to write and settle their own invoices.

He further suggests requiring pre-numbered, original receipts be kept for all transactions, along with the requirement of management approval before deleting or voiding items from invoices. "In retail, we certainly have to wait for a manager or someone else to delete something. Why not in this situation?"

Screen staff

"Run background checks on all new hires," with their permission, Lacher says. "Check everyone, not just those with easy access to the cash drawer."

Too-good-to-be-true employees can be just that, Salzsieder says, whether practice owners want to believe it or not. "They commonly tried to be a star employee," he says of his former embezzling employees. "You think there is no way on earth this person could be crooked. You trusted them with everything. And then you get the big surprise."

Manipulative employees can be skilled at exuding false professional adeptness and can quickly gain the confidence of their practice owners, managers and coworkers, helping to make them appear a person one wouldn't suspect of embezzlement, Salzsieder says.

Limiting employee access to the practice also can help safeguard against theft or record tampering. "I took keys away from more than half of the staff," Salzsieder says of the Washington-based practice he purchased 18 months ago. "Some of them are very angry. But, limit the keys, limit the access."

Do not allow employees the opportunity to come into and out of the practice outside normal operating hours without someone to witness their behavior, he says.

"The key to this, the shocker, is that many of these employees can be very good, sharp employees that you like a lot," Salzsieder says.