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Employee Embezzlement – Employers Beware

Statistically, approximately 40%-50% of all veterinary practices will be hit by employee embezzlement. Many incidents of embezzlement are committed by employees that work in finance and accounting positions within the practice. You could consider doing a bankruptcy search before hiring, to see if there is any cause for alarm in case of money problems on the employee’s side.

The most common methods of employee embezzlement include pocketing cash from patients, stealing petty cash, removing cash or checks from the daily deposits, forging endorsements, writing checks to phony vendors, writing duplicate accounts payable checks, stealing prescription medications, and returning supplies to vendors for a refund.

Practice owners should be on the lookout for stale items in reconciliations, as deposits or checks not included in reconciliations are an indicator of employee theft. Another red flag regarding employee embezzlement is the excessive voiding of checks. Excessive credit memos are often used by employees to cover up embezzlement.

It is also prudent for a practice owner to ensure that their general ledger is balanced. Employees cover up embezzlement with excessive purchases, whereby fake payees and vendors are often used to convert funds into an employee’s personal account. In addition, a common method for employee embezzlement is altered time sheets. Employees may falsely indicate that overtime hours were worked by altering the time sheets.

In order to avoid employee embezzlement, practice owners should implement the following ten (10) tips:

  1. Have bank and credit card statements delivered to the practice owner’s home for personal review.
  2. Review checks and debit transactions with the statements.
  3. Either personally review business checks or require two signatures for all checks.
  4. Run an audit trail at the end of every week.
  5. Run periodic reports for account receivable and check the report against bank deposits.
  6. Make all deposits personally.
  7. Review the daily reports.
  8. Ensure that a copy of the bank reconciliation is attached to each monthly bank statement and require that it be reviewed by two parties.
  9. Do not allow finance or accounting personnel to be signers on all bank accounts.
  10. Ensure that checks received in the mail are immediately endorsed by a two-person team responsible for opening and processing the mail.

By implementing these ten (10) tips, a practice owner can effectively manage his or her exposure to the increasingly common (and costly) occurrence of employee embezzlement.

Author(s)

Stuart J. Oberman, Esq.
President & CEO | Website | + posts

Stuart J. Oberman is the founder and President of Oberman Law Firm. Mr. Oberman graduated from Urbana University and received his law degree from John Marshall Law School. Mr. Oberman has been practicing law for over 28 years, and before going into private practice, Mr. Oberman was in-house counsel for a Fortune 500 Company.
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Stuart J. Oberman is the founder and President of Oberman Law Firm. Mr. Oberman graduated from Urbana University and received his law degree from John Marshall Law School. Mr. Oberman has been practicing law for over 28 years, and before going into private practice, Mr. Oberman was in-house counsel for a Fortune 500 Company. <strong><a href="https://obermanlaw.com/people/stuart-j-oberman/"><span style="color: #0059b8;">Read More =></span></a></strong>

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