“It Can’t Happen To Me”
A recent discussion got me thinking about employee theft. Several interesting things came to mind but mostly I was pondering the grand naiveté and ubiquitous hubris regarding this most fundamental of business topics. To be blunt, practice owners are ignorant of the threat and have an “it can’t happen to me” attitude about the possibility of employee theft in their businesses. Nothing can be further from the truth. But there are dozens of scare pieces based on truth out there. I may be more in your face in my presentation style than most out there, but I am not going to scare you into action either.
Do You Have A Spare $300k To Lose?
A real example might be instructive in putting the potential impact into proper perspective. Years ago a doctor purchased an established practice for $285,000. He spent the next four plus years growing and improving the practice successfully. This was where I entered, to help him deal with a growing problem: sky rocketing labor costs. In the course of this consult, I spent a day interviewing the staff members and getting a feel for how a typical patient day goes down. The day after my employee interviews one of the staff members abruptly quit. She happened to be the person responsible for accounts payable (AP). The doctor asked me about her interview. I had noticed some odd behavior during her interview (mostly that she diverted the discussion away from the practice continuously) but I wasn’t tipped off on about anything specific other than a quirky personality. The doctor decided to spend a week or two doing her AP job at my recommendation. What he discovered made him ill. And angry. After several weeks of investigating we uncovered over $320,000 in embezzled funds paid to mysterious vendors that didn’t exist. Internalize that for a minute. Do you have a spare $300K+ to lose? Nobody does and nobody should have to. Also, consider that this doctor effectively had to pay for his practice twice because of trusting an employee he shouldn’t have. That is scary. And ridiculous. And all too common. But, this can’t happen to you…right?
I know you’ve heard these types of true stories before and you’ve not been moved to action. I know “it can’t happen to you.” I know you “trust” your staff and you have dinner with the person that does your AP every couple of weeks.
1 In 5 Practices Has Been (or is) A Victim Of Embezzlement
Stats on employee theft are amazingly difficult to develop with any degree of reliability. Why? The vast majority of pilferage is never discovered. And then, when it is, it goes unreported with a promise to pay back some portion of the money stolen. I’ve looked under the hood of hundreds of practices over the past 16 years and I’m very comfortable estimating that 1 in 5 practices has been (or is) a victim of embezzlement. Honestly, I feel the number is closer to 1 in 4, but I’m keeping it conservative here.
It is time to stop the rationalizing and get real. Assume you are being robbed today and do something to stop it now. What are some things you can do? I’ll start with a couple in this blog and then present a few more in later installments on this topic.
Burn It Before It Burns You
First, if you have a signature stamp burn it before it burns you. And don’t be the fool that delegates the task of gathering and destroying any and all stamps to your staff (true story, I swear). A colleague of mine once said that all signature stamps leave two impressions: the copy of the boss’s signature and proof positive that someone is looking to be robbed. Signature stamps save time, no question. The cost of that time savings may be more than you paid for your practice. Is that a price you are willing to pay for some time savings?
Second, create a list of those in the business (and outside the business) that have check writing capability. Then take all the names on that list that are not the owner and eliminate their check writing capabilities. Do this yesterday. One of the most common and simple theft methods is tapping the business checking account for a little money “here and there.” Those “here and there” checks can add up to tens of thousands of dollars in a New York minute. Don’t have the time to write all those checks? Make time. Delegate other things, hire more staff, add a part time doctor, but just make it happen now.
OK, I know. I gave you the most obvious solutions. But I know a lot of you are guilty of using signature stamps and delegating check writing authority. I see it routinely. As my old man used to put it: wise up, this is the real world, son. The real world, indeed, old man.
More to come soon…
John McDaniel, OD, MLHR