“My Day-end Report Balances to my Deposit, so I Must Be Safe From Embezzlement”
Home > Media > Embezzlement Blog > “My Day-end Report Balances to my Deposit, so I Must Be Safe From Embezzlement”What You'll Learn
- Why a day-end report that balances to the deposit doesn't rule out theft: under double-entry accounting, money stolen without being entered anywhere simply shows up as an inflated balance on some unsuspecting patient's account rather than as an obvious shortfall.
- Why checking only the cash and checks in the bank bag is not enough verification: you also have to reconcile third-party ACH deposits from insurance and financing companies, which post through the practice management software before landing in the bank.
- Why credit card payments create an embezzlement blind spot: the software logs the payment as received the day it's charged, even though the actual deposit typically lands in the bank a couple of days later, leaving a timing gap a thief can exploit.
- Why forensic CPA David Harris, Prosperident's CEO who has investigated dental financial crime since 1989, deliberately withholds the specific 'cooking the books' methods embezzlers use to make a stolen-from day-end appear balanced, offering a private consultation instead.
“My Day-end Report Balances to my Deposit, so I Must Be Safe From Embezzlement”
We hear this a lot from people discussing embezzlement with us. They say that they always check that their day-end report balances to their deposit.
At the core of your practice management software is a concept called “double-entry accounting.” This means that a transaction mandatorily affects two different “accounts” maintained by your software.
So, for example, entering a dental procedure increases both your “charges” and the receivable due from that patient. Entering a payment decreases the patient’s receivable balance and adds to “collections.”
In a perfect world, stealing money would cause one of two issues; either the day-end report would not balance to the bank deposit if the amount stolen had first been entered as a payment in the practice management software. On the other hand, if the amount received was stolen without anything being entered into the practice’s practice management software, the software would show some unfortunate patient having a balance that is higher than what it is supposed to be.
Many dentists believe that the existence of this double-entry accounting will prevent would-be thieves from successfully stealing from the practice.
How can I have embezzlement if my day-end report balances?
There are a couple of flaws in that logic. First, many dentists do not thoroughly check reports from their practice management software against the bank deposit. It isn’t sufficient to limit the review to the amount of cash and checks being taken to the bank; the practice owner must also verify deposits made directly by third parties, such as credit card payments and “ACH” (automated clearing house) deposits made by some insurance companies and other third parties like patient financing companies.
A complicating factor is that there is often a timing difference — if a patient pays by credit card today, the practice management software treats this payment as being received today, although there is typically a delay of a couple of days before this payment is deposited to the practice’s bank account.
So if the practice owner is not verifying deposits or is doing an incomplete verification, a thief may not be required to display any artistry — they simply create an out-of-balance situation in the knowledge that the doctor will not find it.
If the day-end routing is done properly by the practice owner, a thief must become more creative. There are a number of methods of generating “fake news” where so that the reports produced by the practice management software are inaccurate, so that the day-end appears to balance while at the same time patient account balances are accurate. This is common, and something that we see almost daily.
Because we do not want to add to the tool kits of any embezzlers who happen to be reading this article, we are not going to enumerate the methods of “cooking the books” here; however, a dentist with concerns or questions is welcome to click HERE to contact us for a private discussion.
To learn about how to master your practice’s finances, click HERE.
Have questions about your practice? Click the button below
Balanced Reports Are the Oldest Trick in the Book.
Experienced embezzlers know exactly how to make the numbers add up while siphoning money out. Prosperident's First Look Financial Review looks beneath the surface to find what your reports hide.
Concerned about embezzlement in your practice?
Prosperident is dentistry’s embezzlement expert. Talk to us confidentially — there’s no obligation.
We hear this a lot from people discussing embezzlement with us. They say that they always check that their day-end report balances to their deposit.
At the core of your practice management software is a concept called “double-entry accounting.” This means that a transaction mandatorily affects two different “accounts” maintained by your software.
So, for example, entering a dental procedure increases both your “charges” and the receivable due from that patient. Entering a payment decreases the patient’s receivable balance and adds to “collections.”
In a perfect world, stealing money would cause one of two issues; either the day-end report would not balance to the bank deposit if the amount stolen had first been entered as a payment in the practice management software. On the other hand, if the amount received was stolen without anything being entered into the practice’s practice management software, the software would show some unfortunate patient having a balance that is higher than what it is supposed to be.
Many dentists believe that the existence of this double-entry accounting will prevent would-be thieves from successfully stealing from the practice.
How can I have embezzlement if my day-end report balances?
There are a couple of flaws in that logic. First, many dentists do not thoroughly check reports from their practice management software against the bank deposit. It isn’t sufficient to limit the review to the amount of cash and checks being taken to the bank; the practice owner must also verify deposits made directly by third parties, such as credit card payments and “ACH” (automated clearing house) deposits made by some insurance companies and other third parties like patient financing companies.
A complicating factor is that there is often a timing difference — if a patient pays by credit card today, the practice management software treats this payment as being received today, although there is typically a delay of a couple of days before this payment is deposited to the practice’s bank account.
So if the practice owner is not verifying deposits or is doing an incomplete verification, a thief may not be required to display any artistry — they simply create an out-of-balance situation in the knowledge that the doctor will not find it.
If the day-end routing is done properly by the practice owner, a thief must become more creative. There are a number of methods of generating “fake news” where so that the reports produced by the practice management software are inaccurate, so that the day-end appears to balance while at the same time patient account balances are accurate. This is common, and something that we see almost daily.
Because we do not want to add to the tool kits of any embezzlers who happen to be reading this article, we are not going to enumerate the methods of “cooking the books” here; however, a dentist with concerns or questions is welcome to click HERE to contact us for a private discussion.
To learn about how to master your practice’s finances, click HERE.
Have questions about your practice? Click the button below
Balanced Reports Are the Oldest Trick in the Book.
Experienced embezzlers know exactly how to make the numbers add up while siphoning money out. Prosperident's First Look Financial Review looks beneath the surface to find what your reports hide.
About the author
David Harris
Forensic CPA, CFE, CFF, FIADFE — Chief Executive Officer, Prosperident
David Harris is the Chief Executive Officer of Prosperident, the world's largest dental embezzlement investigation firm. A Forensic CPA, Certified Fraud Examiner, and Certified in Financial Forensics, he has led investigations into financial crime in dental practices since 1989 and speaks regularly to dental audiences across North America on detecting and preventing embezzlement.
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