Dear Dawn, I run a dental practice and I’m worried that one of my trusted employees might be embezzling from our company. I noticed our profits seemed to be slipping over the past few years even though we seemed to be producing a lot of revenue. I started looking harder at our financial statements and noticed several irregularities, such as missing funds, unexplained expenses, and altered financial records. I tried to bring up my concerns with my partners, but they have have been dismissive. All of our employees have been with us for a long time, and they're like family to us. My partners can't believe any of them would steal from us so they think there must be another explanation and I'm overreacting. I am not sure what to do next or how to protect our business from further harm. I feel stuck. What should I do? Sincerely, Suspicious Dental Practice Owner Dear Suspicious, I can understand how challenging and stressful it can be to suspect that someone may be embezzling from your company. This situation is far more common than you think. I've had friends who experienced it. It happened in my own practice. I’m currently supporting a client in a similar situation. It's the dirty little secret that no-one wants to talk about. We don't talk about it because it brings up feelings of embarrassment or shame. We feel like we should have known.
Embezzlement is a violation of trust.
More than anything, this loss of trust is what hurts the most. Because of this loss, you're probably experiencing one or more of the phases of grief:
- Denial. There's no way they could do that! They're like family!
- Fear. What else could they have been doing? What do I NOT know about?
- Bargaining. Maybe they had a good reason...
- Anger. How could they? We were so good to them!
It sucks. Take a deep breath and remember that you are not alone in this situation. Many business owners have faced similar challenges and have lived to tell about it. As a business consultant (and human), I can offer you some advice. Start with clarity. Before making any further decisions, it's important to gather as much evidence as possible to support your suspicions. Review your financial records and bank statements to identify any discrepancies or suspicious activity. If you are not familiar with financial analysis or forensic accounting, consider hiring an experienced financial professional to assist you. Once you have gathered enough evidence to support your suspicions, you need to decide what to do next.
Should you take legal action?
Many people immediately think they need to take legal action. Here are some points to consider about that:
- Evidence: How much evidence do you have to support your suspicions? How concrete is it?
- Severity: How much money is involved?
- Relationship: Do you have a good working relationship and a history of open communication? Or has the relationship already broken down and you suspect they may be acting in bad faith?
- Legal implications: What are the potential legal implications of taking action? Consult with a lawyer who specializes in business law to discuss your options and the potential consequences.
- Emotional impact: Legal action can be stressful and time-consuming. What would the emotional impact be on yourself, your partner, and your business?
While legal action is sometimes both called for and realistic, often, it's not a great option. Embezzlement can be hard prove. In a lot of cases, people don't have enough evidence or the expense of bringing the action doesn't make sense financially (legal fees would make it cost more than it's worth.) Often, however, in the course of uncovering what happened, you realize that you're partially responsible. Perhaps your business lacked security, had poor systems and controls, or fostered an environment that created employee resentment. That can be a tough pill to swallow. It's also the most empowering.
Use this opportunity to make your business stronger.
Here are some things you can do to strengthen your business and prevent this from happening in the future. 💪 Protect your business from further harm. Change your passwords and limit access to financial records to reduce the risk of unauthorized activity. 💪 Institute checks and balances. Put stricter financial controls in place, such as separating financial duties and conducting regular audits. 💪 Develop processes for receiving payments and managing inventory or equipment. 💪 Conduct external & internal reviews of bookkeeping. 💪 Keep channels of communication open. Understand what is going on with your employees and partners both professionally and personally. Personal challenges can lead people to make bad decisions out of desperation. 💪 Set your people up for success. When it's clear that bad behavior will be noticed, it makes it easier for people to not engage in it. Support people to do the right thing by taking the option of doing the wrong thing off the table. Finally, while it's crucial that you protect your business and make it stronger so this doesn't happen again, it's also important to look after your own personal well-being. Seek support from trusted friends, family members, or a therapist who can help you process your emotions and develop coping strategies.