How Embezzlers Think and Act Post Pandemic

You are listening to the dental practice owners podcast brought to you by Prosperident from our unique perspective as dentistry's embezzlement experts Prosperidents team can bring you the information that is important to practice owners The dental practice owners podcast brings you strategies tools and tips that you can use and dentistry's thought leaders as guests

So sit back relax and listen to Prosperidents Amber Weber Wendy Askins and David Harris talk about the issues that matter to you Welcome to our monthly Prosperident meeting. We are super excited to have everybody join us

We have a very exciting topic today that we're going to be talking about But as always we love it when you guys ask us questions during and after the webinar So please be an active participant tonight and we welcome your questions And if we don't have time to answer them, we'll take time at the end of the presentation to go ahead and answer them our Series tonight is going to last about 75 minutes and that includes our question and answer time

So we hope that you can stay and enjoy all the wonderful content We're going to bring to you tonight. It's a new and exciting content that we have been putting together Thanks, Amber This was a movie in the 1980s. I liked but I think it's described the last year for a lot of people really well Also, I'm going to put together a couple of kind of frightening statistics and let you see how they come together the first

Set of statistics comes from a survey that was done in 2019 and basically what it found is that There's a large subset of the United States population that's living more or less hand-to-mouth You know 70% have savings less than a less than $1,000 and 39% could not handle a $1,000 expense that they didn't expect that's

Not good, but let me put this with it in 2020. We had one of the biggest drops in employment in US history and What's called GDP which stands for gross domestic product, which is kind of a measure of the company's output took the biggest drop since 1946 well what happened in 1946 it was the end of World War two and that's when the economy was kind of moving from a war footing to a peacetime footing and Unemployment went through the roof

It had been around three and a half percent before the pandemic hit it went up to almost 15% of the peak and it's come down somewhat but still kind of high and a

lot of people were sort of kept afloat through this financially because Of government money, but that's pretty much done now so When when we look at why somebody might steal You've got a big subset of the population living hand-to-mouth on the one hand and on the other hand You had this sudden economic shock that meant that for example a lot of people working in

Practices had spouses that lost their jobs So let's talk a little bit more about why people steal are the reasons that people steal In the past we've seen that Really one of the main reasons is just basic greed. These are people that have Champagne taste on a beer budget or they want to live the lifestyle Lifestyles of the rich and famous or keep up with the Joneses. Whatever phrase you want to use

Except for that they don't have the earning capacity To produce that type of income or that type of money for themselves legitimately So what they begin to do is to go after the business owners money? Because it seems to be just free money that's handed to them and they want that people that still from greed often have the idea that The business owner success is primarily driven by their hard work

And so it's not fair that the business owner gets to drive a larger or more expensive car than they do

Because they're the reason why that person is successful The other type of category that we're seeing of theft is driven by need And we're seeing this a lot a lot of cases driven by need post COVID These are people who have had some type of extraneous negative life impact on their lifestyle and it's not a Matter of simply wanting to keep up with the Joneses are wanting better things now

It comes down to basically being able to pay my mortgage or my husband lost his job and You know, we don't have money to even eat so Anyway, again, they see the money and there it is and they're just driven out of need to do that it's interesting that Between these two separate groups of causation

We see that revenue theft versus expense side theft varies a little bit The person that's operating at greed will go primarily for revenue that would be patient payments insurance payments that are coming into the office Whereas a person from need that steals out of need they'll go after those types of payments as well but then they also

have a higher rate of stealing from the expense side which Logically would be maybe paying their car note out of the business bank account Or paying their credit card bill from the business bank account as well So those are some of the issues that we're facing lately. It's interesting to me. I want to tell a funny story about Dave

when we first met and We were Discussing this because it's a well-known theory by a criminologist and Creasy and David asked me Wendy Would you ever steal and I said absolutely not I Would not I've had plenty of opportunities and I wouldn't do it and then he said to me What would you do if there was a famine and your family was starving?

Would you steal and I finally had to come around and give him the answer which is Yeah, I would so that's kind of the kind of an example of A person stealing out of need no matter How moral we think we are or put in certain circumstances

Every one of us could be driven to a point where we would be willing to steal from somebody else be it food or money or whatever

But you know a myth that we hear quite often is well if I pay my staff members Well, they won't steal from me if I bonus them. Well, they won't steal from me And we're gonna cover that a little bit later in this presentation because that's a myth that we need to dispel Thanks, Wendy and you're so right, you know at some level of financial pressure Everybody's ethics become pliable that level is different for different people, but it's there in all of us and

The pandemic of the past couple of years has or the past year has created some desperate people You know and in the mind of these folks their backs are against the wall and they're stealing really to survive so what are we seeing in 2021 and Wendy and Amber and I when we were planning this presentation sort of went through that the cases that we've worked on lately and the ones that we are Working on and and tried to draw the commonalities from them And the first thing that we all noticed was that there's there's more theft on the expense side

And when he gave you a little definition, but just let me let me step through it again by revenue theft We mean stealing patient payments or insurance payments from a practice Expense theft means causing the practice to pay out something that it really shouldn't so tampering with payroll would be an example of expense theft

Another example is if there's a bonus plan in place to manipulate it and We'll probably get Wendy to talk in a minute or two about a case She's working on now where there's just massive tampering with a bonus and the other one that we're seeing that's relatively new we call Amazon fraud and Essentially what happens here is somebody in your practice has control over the Amazon account and You know, they need lawn furniture and they order it through the office Amazon account, which of course gets billed to the doctor's credit card

So that's the that's the other type of Fraud that we see now that that really is emergent on the revenue side. We also see some trends one that we've seen is What we call refund fraud and this involves Patients who have credit balances and in most states the law gives you a fairly short period of time when you have to refund that money back to the patient and

Sometimes the money goes somewhere that it probably really shouldn't the second thing that we see is called virtual credit card theft virtual credit cards a Lot of you may have seen in your practice. So this is when an insurance company pays you By giving you this credit card number and essentially putting money on that card And then what you do is you take you use that you enter the card manually in your merchant terminal in your practice And and then the money moves to your bank account. So the insurance companies have found that this is administratively very convenient for them to use

There are a lot of issues with it among others that You end up paying a merchant fee. So every time somebody pays your practice by credit card You lose, you know a percent and a half or two or two and a half percent depending on what your arrangement is when you get paid by an insurance company and these are typically PPO's so you're already taking somewhat of a haircut and

Then from there you run it through your merchant terminal. You lose a couple more percent So these are a bad idea in a lot of ways, but they also tend to be big enablers for theft so these are kind of the emergent patterns and I suspect I'll get agreement from Wendy and Amber when I say particularly the expense stuff which In a in a good year in a year when the economy is booming. We tend to see not much of Is really coming out right now

Yeah So one thing we really want to talk about Especially post-pandemic is how important true separation of duties is in your practice So because the dental office has so many moving parts you have to take care of patients You have to take care of staff members plus the the revenue side and the expense side We really recommend that being forward. You really have a great clear

Viewpoint with your team members and yourself on separation of duties. So, you know separation of duties serves two key purposes

One it's there to provide you assurance in your practice where you can review Catch errors and and make sure there's oversight in the daily weekly and monthly things that go on in your practice

Realistically a very clear well-designed system for separation of responsibilities is Essentially to protect your practice So we want you to consider, you know, three groups three areas that you can use Within your practice and your business to protect yourself. Number one is your team So we want your team to be actively involved just like you're actively involved What happens though is we see a lot of team members one team member being in charge of everything, right?

so not everybody is actively participating and Communicating to have a good separation of responsibilities The first place that we want you to really look at though is ownership It has come from you the doctor and the spouse. That's where that review and oversight comes from The other thing is a lot of these things that also help with accountability and true Separation is outsourcing the use of professionals who also help make sure that things are reviewed

Reconciled they catch any areas that errors that you your team or any other people in your practice are helping that may have been missed

One way to look at this is you're the CEO of the practice So the smaller the business Sometimes the more difficult it can be to have active team members completing tasks. So, you know, the CEO of Home Depot has

Many more team members to easily divide certain tasks and duties that need to be completed within that business. So

When you are a single practice owner, it's really important You that you won't have as many team members, but you have great transparency and oversight and you yourself Are very actively participating and making sure those separation of responsibilities are clear and concise You know, Amber, I love that you talked about catching errors the separation of duties even to catch errors as well as embezzlement but

Because as an examiner and I know you guys find this out as well as an examiner When I go through and I look at a data set and I start doing my own reconciliation I find not sometimes most of the time I find embezzlement. Sometimes I don't find embezzlement, but almost always I just find errors like for example a $100 check might be entered as 10 or vice versa and the thought comes to me You know, there's evidently if that can happen and I'm seeing that as an examiner

It's a key indicator to me that there there are no Separation of duties only one person looked at that number one and number two There was a balancing process that happened in that up. So I love that you brought that up because I think that's really important as well

Another thing I want to add also from my experience as office manager in a smaller practice is Separation of duties also is going to help you as a business owner determine Areas that are going to require more training for your team if you have a And Require the need for additional services. Let's say insurance is a huge huge Area that needs more time than the team members that you have those are things that you can outsource and one of the main things that I see happen, especially

With office managers who wear a lot of hats in the practice a great clear separation of duties Also is going to help with staff burnout, right? So where they're not doing 10,000 things at once and everything's on their shoulders. So it's also going to help you have a great tool in your practice to Help your your team grow and and not feel like all the pressure is on them as well That's insightful. Thank you

Yeah, I'll add one more thing. So a question I get asked a lot is this, you know, I I own a very small practice

I've been told that I need to divide up so that the same person doesn't receive cash Record the cash deposit the cash and reconcile the cash and sorry, I when I say cash I'm talking incoming funds because cash checks Credit card payments really are all all stealable by a thief but you know, how do I Break that up so that I don't have one person performing all those functions when I only have one person at the front desk

and that's a That's a very logical reasonable question and When when Amar put up the three categories here really what she's doing is giving you the answer, you know in a small practice if you are the practice owner you probably have more Financial responsibility more financial duties than you might in a bigger practice where you have more employed staff to spread things around and

Of course the other possible out here is there are some things that can be outsourced and we work with several Specialized dental bookkeepers and they're very happy to take your practice management software results each month and Compare what your software says was received versus what actually went in the bank That's the key. Yeah, it is and you know, there are Fundamentally if I'm stealing on the revenue side, there are three ways to do it

If I am if there is no separation of duties if I am the only person touching this stuff Then I can just steal money from the deposit. I don't need to do anything exotic in your practice management software I can just Take money from your deposit and probably nobody's ever gonna know The second way that I can steal is if the reconciliation is done, let's say by you, but it's done

Based on what's going to the bank as opposed to what actually arrives there then same thing I can I can siphon off deposit. You won't know and the solution there is that your comparison needs to be between practice management software and What actually went in your bank in other words what your bank statement or what your online banking says not what a deposit slip that leaves your practice says and

The third way to steal is to get your practice management software to like and this is something we talk about a fair bit

It's not terribly hard to do But I as a thief that will be my last choice my least preferred way of doing things I'd much rather just you know stick stick my hand in the deposit and take away whatever sticks to it so people like the outsourced bookkeepers can Can stop the easy theft and then you have to deal with the more complicated advanced stuff. Maybe a different way

Wendy mentioned this one a minute ago, and I just want to tie back to what she said something that I hear a lot from people is You know one of the ways that I protect myself from being an embezzlement victim is That I pay my employees really well I think in this context really well probably means above the going rate for the local area So, you know if receptionist in your area are normally paid twenty six dollars an hour And you pay thirty dollars an hour. It's tempting to think that that will buy their honesty and

Surprisingly, there's very little research on this Um Probably the most credible study was done in 2011 and it found two things it found that if you paint people more they were less Likely to steal okay great It's the second part that is a little bit less pleasing though What the authors of the study found was that for every dollar in salary cost?

They reduced the amount of stealing that was going to take place by only 42 cents in other words that paying

People better to not steal actually cost you money in net more than it saved so I'm not saying Pay your employees badly because it's better and that's not always a good idea either But the the concept that we can buy their loyalty doesn't really seem to hold up in practice and Let's talk about something a little bit older. There was a guy named Frederick Hertzberg and he was

in 1959 what was called an industrial psychologist and He he did he had some some groundbreaking kind of research and What he did I remember studying this guy back when I was in business school in the 1980s And and his stuff is still taught in business schools. He said that there are two kinds of factors there are dissatisfiers and satisfiers and

certain things Only have the potential to make people unhappy if they're not done properly and A different set of factors have the ability to make people happy So the kind of things that he listed as dissatisfying factors are things like how much people are paid? We think money is a motivator Here's the problem with money, you know, I start work at your practice as

As as a hygienist and you know, I'm paid $52 an hour, which is good money, you know And the first the first paycheck I get when I'm out of dental school. I say wow, this is wonderful You know, and I take my parents out to dinner and you know, I kind of live it up

Do you think I feel the same way on my eighth paycheck or My 20th paycheck or my 50th. No way at that point my lifestyle has moved up to

equate to My income, you know, I've now got a car payment I've had to start paying back my student loans and stuff and I don't really get that feeling of getting ahead like I did when I got that very first paycheck So money becomes a dissatisfaction factor In other words, most most people don't derive a whole lot of satisfaction and pleasure from the amount they're paid They just kind of expect it

The satisfaction factors are things like achievement and responsibility and they're a little bit less tangible If you've ever looked at Maslow's hierarchy, you'll see a lot of similarity between what Herzberg did and what what Maslow did

Maslow suggested there were lower order needs that had to be satisfied first before Higher level needs and the highest need in Maslow's hierarchy is called self actualization until those things can be satisfied

So You can make up your own mind about this But there's a lot of evidence that says really that you can't buy the honesty or for that matter even the satisfaction or happiness of employees with money

That has to come from other places Dave, I love it when you pull out the psychology studies It just makes me warm and fuzzy on the inside Well, you know every every private investigators and amateur psychologist Wendy, you know that well Yeah, plus I spent many years studying doing studies. Yeah, go whatever those so it just makes me feel young

Anyway, okay, let's talk. Let's talk about payroll speaking of paying employees These are three vulnerable areas of your payroll or shall I say payroll processing That can be manipulated Number one which I hear all the time from business owners is the timekeeping accuracy Meaning inflated hours within the computer system or however you're keeping

Keeping track of and or employees are keeping track of their time number two is Hourly rate and I'm I'm gonna talk a little bit more about this in a second, but

there are different ways that an Employee who is processing payroll can increase their hourly rate without you ever knowing and that's kind of where I'm going with that and

Then also one of the main manipulation tools I see is the failure of the two separate payroll Compendence to automatically draw information from each other. So for example, what I mean by that is you have your employees

Keeping track and logging in logging out of their time or keeping time in let's say your computer software Like maybe your dolphin software if you're an orthodontist, okay? but When it comes time to submit that payroll either by written check or to a third-party processing company like ADP or paychecks

They have to be manually entered into the program. So those systems aren't automatically joined together so some recommendations to Kind of close up this vulnerability or these gaps is number one to use a biometric Reader such as a thumbprint reader This stops other employees from logging in for their for their work BFF if You know their work BFF is going to be about 30 minutes late to work and it's like, ah

Would you please log me in anyway? So it stops that from happening And then another thing about About that is I know because I've done enough payroll Reconciliations and I've done enough payroll cases There are times multiple times when employees just don't log in they forget So they'll go ahead log into the computer system and they'll begin working immediately

Then maybe at lunch when they go to log out It hits them. Oh my god. I never logged in in the first place So then you have to go back and manually change that time I think a great suggestion is When that happens for a proof the owner of the business being notified and the approval actually come from the owner To have that specific time entered because remember when that happens

You're really just it's very hard to prove what time an employee was at the office that day And having done payroll examinations again I get there are lots of different things in your computer system that can tell you that But there are also a lot of variables based on that as well so I recommend having that change of time

submitted to the owner preferably on a daily basis and if not on a daily basis at the very

What I want to say maximum The once a week at the end of the week and here's why I say that So the first Monday of the pay period I come in and I forget to log in well Am I gonna am I gonna remember two weeks from now when I came in? I'm not going to so it's just real easy for me to say. Oh, well I I came in at 7 30 that day because I normally come in at 7 30 that day

Well, that may have been a day that I came in at 10 because I had something to do that I an appointment that morning So try to get those daily and if not daily at least every week Another option is or another recommendation is hourly rate lock If you're submitting your payroll through a third-party system like ADP or paychecks

many businesses many business owners are not aware that Those programs actually have rights levels the same way that your computer software does so for example, you can set up the rights for One of your staff members to enter the hours of all of your employees but not view or

Change the the pay rate of that employee you can set that up for owner Specificity so that owner only the owner can be willing or can be doing that and then also I Hear a lot about You know people say well, I can see if embezzlement is happening because I can look at my

Employee cost versus my collection percentage that shows up on my P&L and that is truly a very important Metric that you need to measure on your P&L. I know that's like geeking out on accounting Accounting stuff like I do but it is I mean, it's it's crucial that you know that number to run a successful business

I I believe that a If you know what your average percentage is of Staff cost versus revenue if you know what the average of it is and you see a spike in it for example, I have I or I had one

payroll case Where the doctor's staff cost to revenue was 35% And I think everyone watching this webinar would agree that that is a really high percentage So it can be an indication that there is Some sort of payroll theft going on that you're not aware of But we need to be very cautious

Because there are many many variables that go into that calculation and One of those variables may be impacting that rate Dave do you you're you're kind of passionate about that Do you want to kind of go over that a little bit more for sure? I have a lot of people Particularly consultants who swear to me that if an employee is padding the payroll it will show up in this ratio of staff cost to revenue and

The problem with that is that a couple of things first of all You know every practice and we all found this out Very much the hard way last year practice revenue is variable salary expense Not quite so much. So the average practice last year was was off about 18% according to the ADA from

What those same practices had been in 2019 and the question is for those practices? how much did their payroll change and Sure, a lot of practices closed for six weeks and they they furloughed some employees then But I doubt that for most practices your staff cost in 2020 was 82% of what it was in 2019. I just don't think that happened So when you when you compare this ratio for 2020 to 2019 in most cases the ratio is going to look worse in

2020 now we all understand that for a whole bunch of reasons 2020 is going to be a normalist and it's going to be like those Pre-steroid testing athletic records, you know, they all have a big asterisk by them now in the record books It's going to be like that But my point is this your revenue can increase by 10% without your staff cost changing in most practices It doesn't mean anything except that you're comparing a variable revenue with a relatively fixed expense so I

Won't say don't look at this ratio and and and don't draw some conclusions about how well your practice is using its human resources, but it would it would take a pretty egregious payroll theft to Make this stick out statistically to the point where you say somebody must be stealing from me in payroll let's talk about bonuses and

This is a topic. I see a lot of discussion on in some in some dental forms that I belong to and everybody's looking for that kind of elusive bonus formula that that meets all their needs and I've got to say I think in general the task of setting a bonus is tough first of all because Running a practice is kind of a multifaceted activity

There are a lot of things that have to happen correctly to have a well-run profitable practice for example You need the recall program to be effective. You need to be good at collecting money You need to be good at getting patients who need treatment into the appointment book. I mean, they're there a lot of moving parts and What that means is that when you set up a bonus plan You kind of have this trade-off of either I make the bonus plan relatively simple, which probably means that I Focus on only a few of those many areas in the practice that have to happen successfully

Or I come up with some really complicated bonus that nobody can understand So here's the dilemma. Let's say that right now you perceive your problem is to collect accounts receivable and You go to your staff and you say alright I'm gonna put a bonus in place and if we get our accounts receivable level down from where it is to where I'd like it to be Everybody will get a bonus

Well, there are two ways to get receivables down one way is to collect the money that's outstanding and the other way is to Stop doing dental work. Think about that for a minute So You put that in place for your staff and the next thing they do is they drop everything else and they start trying to collect money In the meantime, they're not making recall phone calls. They're not following up on Patients with with pending treatment who haven't been booked yet

They're not doing all of the other things that need to happen to make your practice have sustained profitability so Coming up with a bonus formula is challenging to begin with and Then you have to overlay on it this other set of complications, which is what if people play games with it? well in my mind the one of the Bonuses that is most subject to being played with is what's called a threshold bonus

And what this means is that there's some level at which the bonus kicks in or accelerates or stops So, you know an example of a threshold bonus would be to say to your staff if you collect more than $200,000 this month I will put $5,000 in a bonus pool and divide it up among you or you know use it for a can for a Continuing education trip to summer nights or something like that. That's that's a threshold bonus

So there's there's some number that we have to hit so We're having this conversation on the 22nd of April and if you have that kind of bonus What's happening in your practice today? More or less is that your staff are getting together in the break room and they're looking at each other and say Well, how close are we? Are we gonna make that bonus or not? And if you've already collected on the 22nd if you've collected a hundred ninety five thousand in the

this looks good, what do you think happens next? Now they start thinking about next month. In other

words, we're going to make it this month. There's going to be $5,000 that come in pretty much no matter what we do, but there's no real point in our collecting $230,000. It would be better for us to just cross the threshold and postpone that $30,000 until next month so that next month's goal, which is going to be $200,000 again, is that much easier for us. So if they decide that the bonus is a slam dunk, they're going to stop trying to collect. Well, let's think about the other side where on the 22nd of the month, the amount that's come in is $120,000 and they look at each other

and they say there's no way we're going to make the bonus. Once their behavior then, well, here's the interesting part. It's exactly the same. There's no point in their busting their chops to get another $60,000 in this month only to still fall $20,000 short and get no bonus.

So if the staff decide on their 22nd of the month meeting that this month's bonus is hopeless, then let's stop trying to collect this month and we'll again push collection off until next month and try to make next month's bonus happen because this month's clearly is not. So a few things you need to do to make sure that your bonus dollars work for you the way that you want them to. The first thing is this. It's easy for staff to manipulate timing of events, whether it's on the revenue side or sometimes on the expense side. We can push timing of stuff

around. If I really don't want to collect that money this month, I can certainly make it happen next month instead. One of the ways to deal with that is to use longer term yard sticks. So if instead of monthly targets we have annual targets, now you're limited to what you can push around at the beginning of the end of the year as opposed to having 12 opportunities to do the same thing. So longer term yard sticks tend to take away the potential for timing manipulation.

A second caution is don't use gross production in any meaningful calculation. So we all know how

this works. Most computer systems, when they bill at what's called UCR, usual customary and reasonable fee, in other words your sort of theoretical fee that you would treat a cash patient for. And then if you're dealing with an insurance patient, typically there's an adjustment to get down to what the insurance company and you have contracted with. Gross production is the bigger number. What's called net production is the number after adjustments or sometimes it's called adjusted production. That should be the yard stick for things like bonuses. Consider the case

where you do free dentistry on a staff member and what happens in your practice management software. The way that shakes out is the practice management software initially uses UCR. So you do a cleaning that would normally cost a cash patient $250 and you do it on a staff member. Eaglesoft or whatever you're using will clock up a $250 production and then there will be a $250 adjustment. Do you really want to bonus your staff based on how much staff dentistry they did? It just makes no sense. So don't use gross production for any metric.

Dave, I have an excellent example of threshold bonus manipulation. Can I tell?

No. Sure. Okay, so I just finished this case and I'm so glad because it was a really big one. Very detailed investigation. Amber helped me with this case as well, my bud, Amber. Anyway, so there was a DSO organization that was bonusing their doctor practice owners,

partial practice owners on what we call contract revenue or we can call it production just to make it simple. Well, what they had decided very fairly in my opinion was that because we had

COVID to deal with and the lockdowns and the closing of businesses that there would be three months out of three consecutive months out of 2020 in which they would take their annual bonus

that they would strip those three months out of the calculation because they knew that they were going to be low and there was no way that the other professionals could possibly bonus on that because they wouldn't be hitting their goals. So they stripped those three months out and then they used a nine month time period from the beginning of the year and then the end of the year, a nine month time period to calculate the production which would calculate their bonuses. There was one particular doctor who continued, according to the treatment notes, continued

to see patients, continued to see new patients, continued to do records and continued to do to start orthodontic patients during that three month time period where they weren't counting

the production. Nobody was looking at those three months, but he held all of the production for that three months and put it in at the beginning of the nine months of the nine month

period that would be calculated. So this ended up being a shifting of contract revenue recognition of like 500,000, a little more than 500,000. So

I mean, even again, I said that I get brokenhearted every single time I find an investment case, but when I find business owners cheating each other or doctors doing that to each other, it really just rips my heart in half. So it was a very sad case, but and to be clear, Wendy, very happy with our research and the outcome of the discovery. Yeah, to be clear, the doctor didn't change the timing of what he did. He did the clinical work on schedule. What he did though was he did clinical work and then he didn't enter

that work into the practice management software. He postponed entering the work until he was back into his bonus period. That's really what he did and it was a massive manipulation. So yeah, let's, Amber, tell us about, or sorry, Wendy, tell us about Amazon fraud. Oh, well, I am so excited about this. You're excited about Amazon fraud. I am really excited that we have discovered Amazon fraud. I'm just sick sometimes. I know

my mind is dwindled. No, actually what I'm really excited about is this is a new type of theft that

we haven't seen before. And we've had, I know I've got a case, Amber had a case, and there are a couple other cases with investigators, crossbearing it right now. So I don't want to call it a new theft method because honestly it's probably not, but prosperity is the first organization to uncover when things like this do happen. And so now we've uncovered it. Okay. So basically, let me share the scheme with you. A little schemie girl here. Okay. So what the scheme is, is that someone who is ordering,

logging into your Amazon account to order items for your office or for your business. And so they log in, all the information, we all know how Amazon works. I'm not going to go into that, but instead of shipping to one particular address, which is your office location, they ship to another address, which would be their personal address. Or in Amber's case,

how many addresses did she have? Additionally? Four. Four. Four different delivery addresses, right? Oh, I'm sorry. Go ahead, Amber. Well, it was interesting because when we started looking through the Amazon history, you could tell going to get the gift or the present, right? It's like, oh, well, this is for personal and her kids or this was, you know, for another friend or this was for her friend on the side.

So yeah, it was really interesting because you started to see a pattern of what was purchased and where it was shipped, which was another interesting thing to look at also. Yeah, that's just so bold, isn't it? Okay. So here are some recommendations to that. Number one, be aware that it can happen and it does happen because we're seeing it happen. Number two, set up a separate Amazon account. One of the issues that makes this scheme possible is because on your credit card statement,

when you get that statement, it simply says Amazon on there. It doesn't say what you ordered. It just says Amazon and an amount of the charge. When you go back and look through that, it's hard to tell if the doctor is commingling personal purchases with business purchases on,

not just on their Amazon account, but even on your regular credit cards account, like your Visa, Mastercard, whatever. If you're commingling those expenses, you need to separate that. So one option would be to create a separate Amazon account that is

only for ordering business supplies or whatever you order for your business off of Amazon. Another thing I think is absolutely crucial is I hate to add more work to our clients or recommend

more work for people to do in their review at the end of the month, but I think this is critically important. And in the end, it's really easy. Go into your Amazon business account at the end of every month and do a quick scan of everything that has been ordered from that account.

So let's say you're scanning through and you're seeing business supplies like paper and paper clips, whatever dental supplies as well now on Amazon. And let's say you come across a Traeger barbecue grill or a Traeger smoker, right? You absolutely know that that was not ordered for your office. So bingo, just that quick. You know that's a fraudulent purchase. As well, you can look at the delivery addresses and see exactly where that went. So anyway, this is the thing. Yeah,

watch the address. Thanks. Go ahead, Amber. Well, I wanted to add one thing too in my experience with Amazon. What I also started noticing is time of day that things were ordered.

It was really interesting because if it were office supplies or things like that, are they going to order this Blackstone grill for the office at midnight on a Saturday evening? So that was another kind of interesting thing was to look at the time of day that they ordered the item, right? So even if they say, oh yeah, I went ahead and ordered that printer for the office. Really? At Saturday morning at 2 a.m. in the morning, you decided I needed a printer at the office? So interesting thing that I saw. In my case, it was probably

off the times of the day as well. So that's why I love what we do. It's so, it's so main.

That's why I was talking about the psychological studies you were talking about. I mean, it's just fascinating what people do. Anyway, with my experience and Wendy,

you and I went through this, she ordered three different barbecue grills over like two months. And if you look at the time of day that she ordered them, I'm like, she must have been watching like an infomercial Saturday on these really fancy grills and decided

they're some sizes of these grills or something. And I'm gonna see if Amazon tells that, you know? You should talk to her to count about that $1,000 grill, okay? Yeah. Give it to my girlfriend's house. All right, Amber, tell us about refunds. Something that you talked about earlier, Dave, that post-pandemic, we are seeing an increase in refunds this year. So the main thing is we always want you to do a refund by check and never

a credit card. Now, in my experience, that can sometimes be difficult, right? Because a patient wants their refund right now. But we want to make sure that the refund always goes directly to the patient and there's documentation. So this is another component where the true separation of responsibilities comes in, where you have that system down with your team members. And that is a clear policy that your patients are aware of, your team members are aware of, and you are aware of that refunds are done by check, never credit card. The other rule of thumb

is as a producer in the dental practice, patient credit should be an exception and not the rule. So as important as it is for us to collect money from people that owe us money for the treatment that we have given them, it is just as important for you to know and understand on a regular basis who your software says you owe money to. The reason this is so important is a lot of credits that a patient's account, if they're not reviewed with oversight on a regular basis, many of those credits arise from lack of staff knowledge, not that they did anything wrong,

just error in training, right? So you actually don't owe these patients or an insurance company that credit. The other key thing here is if you are going to be issuing a refund to a patient or a dual insurance patient, this is where you really need a clear written documented system that you as a practice owner and another team member where that transparency comes to place, you review this together and make sure that that is truly a credit that should be on that account. So always, always review a patient account before issuing a refund. And once that

account has been reviewed as the owner, you need to control how that goes out, meaning

a refund to a patient should either go through you or an outsourced person like a bookkeeper, a CPA, never been an office person that has signing rights. Because like I said, we want to make sure that refund is documented and it goes directly to the patient. And you are the one who has approved that refund for work that you have done for that patient to go out to your patient. Here's the other cool thing that we always recommend. You put that refund in the mailbox it yourself. So if you write that check, you make sure that you are the one that drops it off

at the mailbox. Don't allow any team member to go ahead and mail that. You want to make sure it goes where it is supposed to go. DCC's virtual credit cards. Dave explained these

a little bit in the beginning of the program. So basically what happens in case somebody missed it is, you know, you file a claim and then the insurance company will send you a slip of paper with a credit card number on it. And then you run that through your merchant terminal, which I think is incredibly unfair. And I think a lot of people are sometimes misguided by the actual cost of virtual credit cards because they think it's so great. Okay, we get all these payments from insurance. It's so easy. We just type them into the merchant

or whatever and then they're off. Well, remember anything that goes through your merchant terminal is going to charge a fee, whatever your merchant fee is. So I've had a lot of clients complaining that their expenses have gone up. And I see some Facebook groups, I follow a lot of

business owners, Dennis in particular, are complaining that their credit card fees have skyrocketed. Well, if that's happening to you and you're taking virtual credit cards, that's exactly the reason why. Because the insurance companies used to deposit directly into your bank account, they're not doing that anymore. Now they're sending it to you and making you pay for it to process the payment or through checks. Now they're making you pay for it. One thing I would like to say before I say just say no is if you are using

virtual credit cards, make sure that you have a proper accounting code set up for that in your software. Some people will enter it simply as an insurance payment. Well, an insurance payment is a

very broad payment method. There are very broad payment methodologies. I mean, it can be direct deposit, it can be check, it can be a VCC. So make sure you have a separate payment method, insurance credit cards, so that you can track that. Let me also point out to you that

I'm not going to tell you how because I'll get in trouble. They will be mad at me, but it's actually very, very easy to steal a virtual credit card number. Remember, that's kind of like a

pre-loaded debit card or kind of like a gift card, right, with money on it. So don't allow yourself

to be fooled into a comfort zone and by thinking, well, if I'm getting my payments through virtual credit card, those payments can't be stolen from me because they absolutely can and they absolutely can very easily, right? So that's all I'm going to say about that before I get in trouble. But here's the main thing. Insurance companies will tell you that they've switched to this form of payment and that you have no other choice. And in most cases, depending on your state, that is absolutely not true. So just say no, you'll want direct deposit or you want it mailed

to you in a check. Yeah, these are a monumentally dumb idea. And I get why they're convenient for insurance companies, but that's not a reason for you to get involved. Just a reminder that

if you have questions, we'd love to answer them. We're getting very close to the end of our kind of formal part of our presentation. So if you have questions, please stick them right in that Zoom feature and we'll get to them in just a couple of minutes. A few things to wrap up. First of all, we have seen how people steal change in the past year. Will it go back to the way

it was? Probably to some degree, but there's definitely been a shift that's kind of been pandemic driven and driven by people's circumstances. Secondly, and you've heard these as kind of recurring themes tonight, dividing up duties is important. Outsourcing certain things

can take the burden off you as a practice owner to kind of become a part time accountant in your practice. And let's never forget the concept of just business common sense. When Amber was talking a few minutes ago about refunds and saying do it by check and not by credit card, one of the reasons is it's very hard to look at what's called your merchant statement. So this is the statement that the company that processes credit cards for you each month sends you and figure out where the charge backs that you see the negative items on that

statement, what they actually mean. On the other hand, when a refund is done by check, it's pretty easy to see where the check went. So a lot of the protection comes from some common sense. And finally, I'll mention that we're here to help. And people think of us typically as a company that investigates when an embezzlement is found or suspected. And we absolutely do that. We also do a lot of work with practices in helping them set up systems that protect them properly from things like embezzlement. So if you're interested in either topic,

we'd love to hear from you. There's an email that's going out to you in just a few minutes that will tell you things like how to access your continuing education credit for tonight. You can do all that right online. And there's also a button there if you'd like to talk to us. And we're always happy to have that conversation. So it's time for questions. Amber, why don't you tell them what we're going to be doing next month because it's pretty neat. Yes, most definitely. I'm excited for next month, which is probably why I started

talking about that first meeting. But we're going to be talking about master your practice finances. And so we really want to teach practice owners and teams some great tools on how to master that piece of your practice. I feel like as my experience on the clinical side, we really focus on mastering, you know, clinical things and production. So we wanted to be able to bring our audience some great tools on mastering your practices, finances. That's part of it. But there's the other part, too. We're going to have a fantastic guest next

month. He's actually a greenhouse guest. He's one of our one of our team at Prosperity. And his name is Scott Clifford. And if you're a webinar regular with us, you've seen him probably three or four times. Scott is working on this absolute hum dinger of a case right now. And he and I were kicking back and forth the final report today. This is a multi-million dollar

case. The damage to the practice is probably in the $2 million range. And how it happened

is instructive for every practice owner. I mean, there are some kind of specifics to the case that may not apply to you. But there's a whole lot that could happen in any practice. So Scott's Scott's going to be our very welcome guest. He is if you've if you've seen him speak here before what what comes out of his mouth is almost always priceless. So we're we're super excited to have Scott back with us next week or next sorry next month. Our contact information is there if you want to talk to us. And Amber and Wendy normally monitor the the questions that come

in. Is there anything that you want us to kick around today, ladies? I have one. There's a client

or a participant that said that they have had insurance companies tell them that if they not accept the BCC cards that they will not pay it. What experience whether what is your opinion on that day? The best answer to that is check your state law. I'm not aware of any state in the US or for that matter any province in Canada where somebody you deal with can force you to accept payment by credit card. Because that's that's really what they're trying to do. The the concept the legal concept is what's called

legal tender. And the question is what what constitutes satisfaction of a debt? I don't think anybody can do it. Certainly check with your attorney. But the insurance companies want you to do this. It's a very cost effective way for them to deliver you the benefits. So they're they're trying to force you and they will strongly suggest to you that you need to do this. But I don't think that's actually the case in any state. Okay, great question. That kind of relates to credit cards. If a patient paid by credit cards, the practices pay the

fee. So this practice does refund to the credit card they use so that they can try to reimburse that fee that they have already paid. What is your opinion on that? Yeah, you know, that's interesting that the credit card companies have some funny rules on that. And in a lot of cases, the rule is that if you refund a fee within the same month that it was charged, then then they will reverse them the merchant fee on the initial payment. So somebody pays you $300 on April 5th, and then you process a refund to the same card of $50 on April 12th.

In that case, you only pay the merchant fee on the net amount, which is $250.

And the rules vary a little bit from company to company. But in general, if the same refund were processed two months later, you don't get a reduction in the credit card fee because of it. So, you know, if somebody pays you by credit card, and then they say two minutes later, oh, look, I changed my mind. I realized I'm going on a trip next week and I don't want to try to tie up my balance. You know, can you reverse the payment and give me a let me pay you by check instead? That's the case where doing it makes sense. And you would avoid the merchant fee.

On the other hand, if you're issuing somebody a $50 refund six months later, in the way most credit card companies calculate their fees, you don't get relief for that one. The other put, oh, sorry, I'll add one more thing. The other place people get burned on that sometimes is charge fax. So somebody pays you by credit card. And let's say it was a stolen credit card.

So eventually, you know, it takes a little while, but eventually you get a reversal of the original payment. And the merchant company charges you the percentage when the patient pays you first. So, you know, somebody has a bridge done and it's $4,000. They pay you with a stolen credit card. You pay a merchant fee on the $4,000. Then a couple of months later, this all comes out and you get a charge back for the $4,000. What the merchant company doesn't do typically

is refund the processing fee on the original payment. So that ended up costing you, you know, something like $4,200 instead of $4,000. So it sucks. I'm sorry. I want to ask some questions,

but hold on. I'm trying to manage like answering questions and typing and all that. But instead

of answering the question, I'll just ask you. Okay. So Miranda wants to know, is there a way to embezzle through multiple debit and credit adjustments on accounts? I think that might be one you might want to answer privately, right? Yeah. Okay. First of all, hi, Miranda. Thanks for asking a great question. Why don't you reach out to me tomorrow or next week and we can have a little more in-depth conversation? I mean, yes, there's certainly a way to steal from that, but I don't know that it's something we want to go into a whole lot

of detail on here. But Miranda, my phone number's on the screen. Please feel free to reach out when it's convenient for you and we can talk about that in a little bit more depth. Okay. Thank you for being in our audience. She said that makes sense. Thank you. We're not here to teach people how to steal, right? No, most people are already, most thieves are already pretty good at it. They really don't need our help, Wendy. Okay. Hey, here's like an ortho-friend of mine. What is the best biometric reader for

ortho-track software? And although ortho-track is one of my favorite programs to work with,

I don't think I have an answer to that question. Do you, Dave, or should they just contact Carestream? That's what I was going to say. Carestream will, I mean, first of all, the biometric readers have gotten pretty generic. I mean, there was a time when these were really expensive and really fussy to work with. And now they're just, you know, they plug into a USB port. They're pretty much plug and play. So I think asking Carestream is a good idea, but I also predict that Carestream is going to say, look, just go buy whatever one you want,

and it'll likely work with our software. Okay. And I have one other. Oh, yeah.

Yeah. So Barry is like just as brilliant as we are. So he made a comment and he said,

you'll never be able to stop anyone from embezzling. A higher pay rate won't change the greed or the need. The only way to mitigate embezzlement is to understand your business practice and pay attention to everything that happens on a day-to-day basis. He gets it. Wow. Barry, if you ever want to make a career change, I think you'd fit in really well here. That was incredibly profound and expressed better than I could ever hope to say it. Yeah. If somebody gets to the place where they wake up one morning and decide that

stealing from their doctor is what they should be doing that day, they're going to get away with it for a while. And the real variable is how quickly you catch them. And Barry's advice is 100% on the money. Wow. I'm just marveling at how well that was said. Yeah. I'm glad that question's written down because, you know, I will quote Barry going forward. And since we're on that topic, someone had asked earlier what percent of dental businesses will be embezzled from? You want to take that? And folks, we'll make this the last question

because we're just at time. If you did ask a question and we didn't get to it in the session, we'll certainly reach out to you after or feel free to contact us. What we have seen about embezzlement in the last decade is that it has been increasing in practices. So there are kind of two measures that you can take. You can ask a group of people, have you been embezzled from, and you get an answer. That tells you the past. It doesn't really tell you about the future. In other words, if I ask that question and

48% of dentists say no, they haven't been, or yes, they have been embezzled from, the other 52 have some probability of being embezzled later. So the easiest answer to give you is one based on a historical percentage, but that doesn't really tell you how likely you are to be hidden in the future. The ADA has done a couple of surveys. One was done in 2007. One was done in 2018 with the results published a year later. The 2007 study said that 35% of the respondents had been embezzled. The 2018 study said 48%. So over about a 12-year span,

the percent of people who have already been embezzled went up about 12%. If you ask me what the lifetime probability of you being embezzled is, it's probably around 80%. So the reason we talk about the things we do is to protect this group because you do face a

significant risk. And yet there are a lot of things you can do to help yourself. And what we talked about today is some of them. We have a product called Office Protection System that's designed to help you find the weaknesses in your practice and lock them down. That's a part of our world that Amber Weber is very involved with. So you're not helpless against this, even though it may seem that way sometimes. There's a lot you can do. That's probably a great place to wrap up for tonight. I'd love to thank my delightful co-host. We have so much fun

putting these things together and delivering them. I can't believe how giggly Wendy was tonight. She always has fun, but tonight really seemed to hit it with you, Wendy. And it was just terrific to see that. I'd also like to thank our audience because you guys are the reason we do this. So we're back in just under a month, May the 20th. I mentioned our guest presenter, Scott Clifford. He is just a terrific guy to listen to. Every time I hear him speak, I come away just marveling. So thank you very much. Please be safe wherever you are,

and we'll see you in just about a month. Good night, everybody. All right, night. Thanks for listening to the Dental Practice Owners Podcast,

brought to you by Prosperident. You can contact Prosperident through its website, www.prosperident.com, or by calling 888-398-2327. If you have questions about this podcast,

if you would like to discuss your practice or there is a topic you would like to see in a future podcast, we would love to hear from you. Amber, Wendy, and David will be back soon with another episode.