Posted by: Transform Limiting Beliefs | July 23, 2013

Protecting Your Green Dental Office from Fraud and Embezzlement

You work hard for your money. Strong internal controls can keep it from disappearing unnecessarily.

iStock_000020048082LargeYou trust your employees or you wouldn’t have hired them. That’s what everyone says as they watch a valued staff member being hauled off in handcuffs, “But I trusted them.”

Whether your accounting tasks are done on one PC or you have multiple users working on different screens, it’s critical that you make use of all that QuickBooks offers in terms of internal controls. You’ll also need to establish some common-sense rules. You’ve moved your green practice to the digital world, which makes it easier to have more than one set of eyes on your books.

First Stop: Audit
An audit trail is a very large report that displays every addition, deletion and modification of every transaction. Because of its size, you’ll probably have to use QuickBooks’ filtering tools to zero in on the user and/or date(s) you’re looking for. Go to Reports | Accountant & Taxes | Audit Trail. Click Customize Report | Filters to set up your search.

Your audit trail won’t alert you when someone tries to enter a prohibited area, and it won’t detect changes to lists. Setting up permissions will help (Company | Set Up Users and Passwords | Set Up Users), but you need more than that.

image 1

Figure 1: Be especially careful when granting user access to areas that contain patient, vendor and employee information.

Run the Right Reports
Other QuickBooks features can help prevent fraud. Review these reports regularly:

  • Closing Date Exception. Why were those changes necessary?
  • Voided/Deleted Transactions. Is there supporting documentation? Should you be reviewing these daily?
  • Expenses by Vendor Detail. Look for irregularities, especially multiple payments made to a vendor in a short period of time.
  • Check registers. Use the Balance Sheet for this. Go to Reports | Company & Financial | Balance Sheet Standard and customize the report for the correct period and – if necessary – for specific patients, vendors and/or jobs.

Adhere to Best Practices 
You undoubtedly implement financial best practices in your personal life. If your dental office is large enough that you have multiple accounting employees, you probably can’t be as hands-on as you are at home. But you can still set up internal control procedures.


Figure 2: Debit? Credit? Reverse the transaction? No one should be making General Journal entries but your head accounting manager.

For example, if your practice has grown to the point where you’re removed from the daily workflow – good for you – but you may still want to have approval rights for some procedures, like bank balance adjustments, refunds and credits, printed checks (you should still be signing them), timesheets and expense reports.

It goes without saying that you should password-protect your dental office QuickBooks file and change the password regularly, even – and especially – if you’re the entire accounting department.

Reinforce the rules


Figure 3: Anyone in your practice who has access to accounting data should have a background check.

Know who your employees are (consider running background checks) and never have only one person managing all of your bookkeeping work. Have one person cut the checks, and someone else, such as an outside bookkeeper, reconcile the bank account and make sure the checks match what it says in the QuickBooks file.

Make sure that your entire dental team understand the definition and consequences of fraud. Let them know about the steps being taken to prevent it, but do some unannounced auditing on your own. Include a session on fraud in new staff orientation and get current staff up to speed at a regular team meeting. Make it easy to report fraud anonymously, with no fear of repercussions.

This all may seem like a lot of work, but small businesses have the highest rate of fraud in the country.  One of our clients had an employee that stole over $150,000 from them over a year before she was caught and they were still obligated to pay the IRS the payroll taxes!

If you have questions on this subject, or anything else Accounting or QuickBooks related, give Sum of All Numbers a call or email. We’re here to be your partner to grow your green practice profitably and safely!


  1. Good information, but most of the embezzlement that takes place in dental offices involves practice management software, not QuickBooks.

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