Avoid Embezzlement by Managing Staff Responsibilities

Medical practices are vulnerable to embezzlement because typically they are cash businesses run by a close-knit staff that the physician tends to regard as "family." 

You can protect your practice by establishing a formalized system of controls for monitoring money. One aspect of this is separating financial responsibilities among your staff - as much as practical - so they become accountable to each other. For example:

  • Do not give any one employee complete control over the entire sequence of cash transactions. Employees who receive payments from patients (in person or through the mail) or otherwise handle cash should not have access to patient accounts receivable or be responsible for making the bank deposits.
  • The individual who reconciles the bank statement each month should not be the one who writes checks.
  • You, the physician, should sign all practice checks. For larger medical groups, require two signatures, one being that of a physician. Avoid using signature stamps, and never presign checks.
  • Require that bank statements be delivered to you unopened, or have the bank statements sent to your home address. Make sure you have the master access to the bank accounts online. 
  • Require that someone other than the card user must approve a credit card purchase.
  • Rotate job responsibilities among employees if possible. This not only ensures that someone can step into a job in case of an emergency but also deters embezzlement when potential perpetrators know that someone else will do their job for a time.
  • Set and enforce vacation policies. Some practices require that employees take at least five consecutive days off for vacation so that a cross-trained staff member can do their job during their absence. (Employees who never take vacation can be a red flag for fraud; embezzlement schemes require constant vigilance from the perpetrator.)

If division of labor is impractical in your small practice, arrange for a review of all work quarterly or more. At the very least, focus your controls on tasks that relate to cash, such as opening mail and making bank deposits, because handling cash offers the most temptation and opportunities for embezzlement.

If you are concerned about embezzlement in your practice, call on TMA Practice Consulting to conduct an on-site embezzlement risk review. A TMA consultant will assess your current internal control mechanisms, identify potential weaknesses, and make specific recommendations for safeguards, processes, and duty assignments your practice needs to shield you against embezzlement.

The assessment includes a review of cash handling and inventory control procedures, and a comparison of your profit and loss statement to benchmarks. You will receive a written report with recommendations for improvement within 30 days of the assessment.

To set up an embezzlement risk review, contact TMA Practice Consulting at (800) 523-8776 or e-mail TMA Practice Consulting .

More on Embezzlement from TMA:

Guard Your Practice Against Employee Theft (Action, Oct. 31, 2014)
Top Three Reasons Embezzlement Occurs (TMA Practice E-tips, May 2014)
Trust but Verify: Employee Embezzlement Can Ruin You (Texas Medicine, Nov. 2009)
Business Basics for Physicians publication

TMA Practice E-tips main page

Last Updated On

June 23, 2016