By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD
April 20, 2022
The checks sent for patient refunds can easily be duplicated in an attempt to use the checks to make purchases. If those checks come from your practice checking account, then that account will have to be closed and a new one opened. That can cause undue stress and inconvenience for the practice owner. Here’s what you should do instead.
About half of all small businesses will experience fraud at some point in their business life.i There is an average cost of $114,000 per occurrence. In most cases, the culprit is a “trusted” employee, however, there are other opportunities for fraud that occur. We want to focus this article on your practice checking account.
Most practices have one practice checking account. Into this one checking account goes all money into and out of the practice. That account that can be targeted for fraud.
Beyond just fraud, think about all the time spent linking this checking account to each and every vendor that the practice deals with. That amount of time is enormous when you consider everything from your utility bills to your frame companies to the income received from your third-party companies – and the list goes on and on.
Can this checking account be compromised? Every time you write a check you are handing the receiver the information needed to commit fraud against you. The check itself contains the following information:
• Phone number
• Bank’s name and address
• Bank account number for your practice
• Bank’s routing number for your practice
When you cash a check at a store, the employee may ask for other information such as birthday or driver’s license number. Needless to say, you’ve given out enough information to allow someone to commit fraud against you.
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The are many different types of check fraud. Here’s a list of what you should know:ii
• Forgery – signing a check without authorization or endorsing a check not payable to the endorser
• Theft – stealing checks to use for fraudulent purposes
• Paper hanging – writing checks on closed accounts or ordering and, then, writing checks on closed accounts
• Check kiting – intentionally gaining access to funds deposited in one account before the bank collects them from another
• Washing – using chemicals to remove information from a check
• Counterfeiting – illegally printing checks using information from the victim’s account
Regardless of which method is used to commit the fraud, one of your actions will be to close down the account that has been compromised and open a new account. Beyond just trying to recover any money lost comes the hassle of linking the new account to each and every vendor you use. This is time that could be used for more productive work – but it has to be done.
Could this situation be avoided? Yes. Most of the time when your practice checking account is compromised, the source came from a refund check that was issued by your practice. Knowing that piece of information, it is really simple to create a separate practice checking account that is limited to refunds. This account is not linked to any vendor/third-party that is paying you and not linked to any vendor/third-party that is billing you.
Two good things come from having a separate refund checking account: (1) there will always be a limited amount of money in this account, and (2) if you need to close this refund checking account, you do not need to do any additional work linking this account to any vendor/third-party.
You cannot eliminate all risk, but you can minimize the risks that exists. Take this week to review your fraud and theft systems in your practice. Don’t forget to consult with your insurance agent, banker and attorney to make sure they all have input into helping you be the most secure you can be.