Preventing and Detecting Embezzlement in Your Dental Practice

March 13, 2025

According to the ADA's Health Policy Institute, 48% of dental practices have reported some form of employee theft or embezzlement, and it often takes around two years before the fraud is discovered. During that time, a dishonest employee could be quietly siphoning thousands, or even hundreds of thousands, of dollars from your business. Most disturbingly, about 40% of the accused thieves were long-term employees who had been with their practices for four or more years.

As a practice owner, you dedicate your time and energy to providing excellent patient care. The last thing you want to worry about is someone within your team stealing from you. However, being proactive about accounting controls can help you prevent embezzlement before it starts. Let's explore how to protect your practice, recognize red flags, and take action if you suspect foul play.

Why Is Embezzlement So Common in Dental Practices?

Many dentists are highly skilled clinicians with little formal business training, making them prime targets for financial fraud. Unlike large corporations with dedicated financial departments, dental practices often have a small, tight-knit team where one or two employees handle most financial transactions. This lack of oversight creates an opportunity for a dishonest employee to manipulate financial records without immediate detection.

Another factor is the sheer volume of small, daily transactions that occur in a dental office. With a constant flow of insurance payments, patient copays, and cash transactions, theft can easily go unnoticed.

Perhaps the most challenging aspect is that the perpetrators are often among the most trusted employees. The individuals committing fraud are rarely new hires or temporary staff. Instead, they tend to be long-term employees who have gained the dentist's confidence over many years. They may be the ones who stay late, go the extra mile, and appear intensely loyal. Because of their perceived reliability, they often have more access to financial records and fewer checks on their activities, making it easier to commit fraud without raising suspicion.

Strong Accounting Controls

One of the most effective ways to prevent embezzlement is to establish robust internal controls that make it difficult for any single employee to manipulate financial records.

The first step is segregating duties, ensuring no single employee is responsible for all financial transactions. For example:

• One employee collects payments, another records them, and another reconciles the accounts.
  
  
• This system creates built-in checks and balances that deter theft.
  
  

Regular financial reviews are also essential. As the practice owner, you should personally review bank statements and production reports at least once a month. Look for discrepancies, such as deposit amounts that don't align with collections or unexpected adjustments to patient accounts. If possible, engage a CPA or third-party accountant for periodic reviews to provide an extra layer of oversight.

Many practices also benefit from surprise financial reviews. Employees who know that financial records will be randomly checked are less likely to engage in fraudulent behavior. Even small, routine audits can serve as a powerful deterrent.

Additionally, maximize security with your practice management software by:

• Restricting access to financial data based on job roles.
  
  
• Monitoring user activity logs for any suspicious adjustments or deletions.
  
  
• Keep your software updated to track financial activity with precision.
  
  

Recognizing the Warning Signs of Embezzlement

While accounting controls reduce the risk of embezzlement, they don't eliminate it entirely. That's why staying alert for behavioral and financial red flags is important.

One of the most telling signs is an employee who is overprotective or secretive about financial tasks. It could be a red flag if someone insists on handling all bookkeeping duties alone, resists audits, or becomes defensive when asked about records. Perhaps you have one trusted employee who always stays late and never takes a vacation. This seemingly ideal work ethic could actually be a red flag.

Other warning signs include:

• Unexplained financial discrepancies, such as missing funds, unusual write-offs, or increased patient refunds and discounts without clear justification.
  
  
• Lifestyle inconsistencies, like an employee suddenly driving a luxury car, taking lavish vacations, or making expensive purchases that seem out of sync with their salary.
  
  
• Frequent missing records or altered reports.
  
  
• Sudden changes in employee behavior, such as a once-reliable team member becoming withdrawn, irritable, or overly defensive.
  
  

What to Do If You Suspect Embezzlement

If you notice red flags, act swiftly and strategically.

• Do not confront the suspect immediately, as that can give them time to destroy evidence or cover their tracks. Instead, quietly begin gathering documentation.
  
  
• Review financial records and look for inconsistencies. Verify whether all collections are being properly accounted for.
  
  
• Hire a forensic accountant or fraud specialist. They can conduct a thorough investigation and help you determine the extent of the loss.
  
  
• Secure financial and digital records. Restrict the suspected employee's access to financial systems to prevent further tampering. Preserve emails, transaction logs, and reports that may serve as evidence.
  
  
• Consult with legal and HR professionals before taking any employment action. Following proper procedures is important, as wrongful termination claims can be costly.
  
  
• If you have employee theft insurance, notify your provider and file a claim with the necessary documentation.
  
  
• Depending on the severity of the fraud, you may also choose to report the incident to law enforcement to recover losses and prevent the employee from targeting another practice in the future.
  
  

Protecting Your Practice Moving Forward

No one wants to believe that a trusted employee could steal from them, but embezzlement is a potential threat that every dental practice owner must take seriously. You can protect your practice from financial harm by establishing strong accounting controls, staying vigilant for red flags, and responding strategically to suspicions of theft.

The key is to foster a culture of transparency and accountability. When employees know that financial matters are closely monitored and that fraud will not be tolerated, they are far less likely to commit theft. Investing in prevention today can save you from devastating losses, allowing you to focus on what truly matters: delivering exceptional patient care.

Not sure where to start? Contact us today!

References

American Dental Association. (2020, February 3). Nearly half of dental practices experience theft from staff. ADA News. https://www.ada.org.