Process, Not Accounting, Is Key to Preventing Theft and Fraud

My senior leadership recently asked me if Books & Benchmarks ever helps practices uncover theft or fraud. If you’re hoping that working with us guarantees your practice will never face financial misconduct, I’m sorry, but I have to disappoint you. 

While we have occasionally caught a team member putting personal Amazon purchases on the practice account, the type of accounting we handle—accepting transactions, reconciling them, and reporting them—is only going to catch things when expenses diverge sharply from historical norms. 

However, that doesn’t mean we don’t have any advice or experience with these issues. We’ve seen contact lenses diverted, eyewear sold to friends outside the practice, equity partners stealing frames (twice!), check washing by patients, and, more recently, credit card refunds directed to a team member’s personal account. 

Catching Fraud is Hard 

Theft is hard to catch. While materials are an obvious culprit, I wouldn’t suspect theft until a practice’s cost of goods sold (COGS) continuously exceeds 37% over an extended period. 

Fraud and theft usually start small. Over time, as the perpetrators see that they’re getting away with it, it grows and grows. Anecdotally, the equity partner frame theft cases both reached six figures and the credit card processing fraud hit over $80,000 before it was caught purely by chance. 

An Ounce of Prevention 

Since fraud escalates as the guilty party grows bolder, catching it early is in every practice’s best interest. Furthermore, environments with little oversight or excessive autonomy are particularly vulnerable. 

Here are some ideas and best practices you can implement to safeguard your practice against malfeasance: 

1. Conduct regular self-audits and make sure your team knows about them. At regular intervals (at least once a year) review records of sensitive practice areas: frame inventory and bills, lab statements, contact lens statements, etc. Knowing that key areas of the practice will be reviewed regularly is probably the best way to prevent theft. 
2. Buyers buy, payers pay. To maintain accountability, ensure that those who purchase materials are not the same individuals paying the bills. Allowing the same team member to manage both functions creates unnecessary risk for your practice. 
3. Take inventory regularly and know how many frames you have. This goes beyond theft, though it certainly could uncover diversion if you have far fewer frames than you expect. From a cost-control perspective, though, excess frame purchases are the biggest area where costs can run away in your optical. 
4. Keep personal expenses out of your practice. Do your best to run a tight ship financially in your practice. If you run a ton of personal expenses through your business and don’t regularly account for them, there’s a real risk that you’ll miss employees putting their expenses on your practice. 
5. Create redundancy. Avoid situations where only one team member is responsible for critical financial tasks. Not only does this reduce the risk of abuse, but it also prevents operational disruptions if they leave. I understand that smaller practices have to depend on individuals out of necessity. However, as your practice grows, it is important to prioritize cross-training and building redundancies. 

Stay Calm and Create Controls 

The purpose of this blog isn’t to make you worry that your trusted team is secretly plotting against you. Neither is it to promise that if you sign up for our service, nothing bad will happen to your practice.  

Rather, it’s to point out that simple, basic controls can help you stay on top of your practice and forestall most calamities. Strong processes and procedures are your first line of defense—long before accounting even comes into play. 

Here’s your next action step: set up annual and semi-annual reminders to review your lab bills, contact lens statements, frame bills, and credit card processing statements. Identify all the vulnerable areas of your practice and build routines to check in on those. 

Finally, if you want regular, reliable financial reporting that will help you make strategic and tactical decisions, contact us to learn how our accounting and optometry practice financial benchmarks can provide the clarity and support you need.