Here’s the statistic no new owner wants to believe: an AAHA survey found 86% of practices had experienced employee theft or embezzlement, with expert estimates of average losses around $200,000 and fraud running an average of 16 months before detection. It happens to kind owners with loyal-seeming teams, precisely because practices are small, trusting businesses with minimal internal controls and little separation of duties. Controls installed at startup cost nothing and offend no one; controls installed after suspicion cost trust either way. Build them now.
Know the shapes it takes
The common schemes are mundane: cash payments pocketed and the invoice deleted or discounted; fake refunds to a personal card; payroll padding (hours, unapproved bonuses); vendor fraud (personal purchases on practice accounts, phantom vendors); inventory walking out the back (parasiticides and food resell easily — controlled substances are their own regime, see that guide); and skimmed deposits. The perpetrator profile defies instinct: 34% are receptionists, and 64% had been employed under three years — it is not usually the person you’d suspect, which is exactly why the answer is systems, not suspicion.
The control set for a small practice
The organizing principle: no one person controls a cash process end to end. Concretely:
- Daily reconciliation, two hands. The person who takes payments doesn’t run the end-of-day; PIMS totals reconcile to the drawer, terminal, and next-day bank deposit. Any gap gets explained that day.
- Refunds and discounts gated. Two-person approval above a low threshold, monthly refund/discount report reviewed by the owner. Deleted/voided invoices on the same report — deletion rights limited to one login.
- The owner opens the bank statements. Whoever does your books shouldn’t be the only eyes on the bank account (accounting guide). Ten minutes monthly scanning actual statements — not summaries — is the single control that catches the most schemes.
- Payroll verified by someone who knows the schedule. Hours approved by the manager, payroll register reviewed by the owner; no self-service edits to one’s own pay.
- Purchasing discipline. Orders from the inventory system’s reorder report (inventory guide), receiving counted against invoices by someone other than the orderer, vendor list reviewed for strangers annually.
- PIMS permissions matched to roles. Audit trails on, generic logins banned, terminated staff deactivated same-day. None of this requires distrust theater — good controls protect honest staff and remove temptation and ambiguity for everyone. Frame it that way at hiring and it reads as professionalism, because it is. (It also reads that way to lenders, insurers, and eventual buyers.)
Detection: the numbers talk if you listen
Internal-control reviews uncover fraud in 38% of cases — your monthly KPI habit doubles as a tripwire. Watch for: revenue flat while visits grow (skimming), COGS creeping without price changes (inventory loss), refund/discount rates drifting, cash-payment share falling, and the classic behavioral tell — the employee who never takes vacation and won’t let anyone touch “their” process. (Mandatory cross-training and vacation coverage is itself a control.) Add an employee dishonesty/crime rider to your insurance stack (insurance guide) — it’s cheap and it’s the backstop.
If you find something
Don’t confront first. Preserve records quietly, call your attorney and your insurer, involve your CPA (or a forensic accountant for anything sizable), and let the process — documentation, termination done correctly, police report as advised, insurance claim — run in that order. Mishandled confrontations have turned provable cases into settlements. Then fix the control that failed, because the statistics above say the question was never whether someone would test your systems — only when, and whether the systems were ready. This article is general information, not legal advice. Sources: OMNI Practice Group — Theft & Embezzlement in Veterinary Medicine · EquiManagement — Fraud and Embezzlement in Veterinary Practice · Today’s Veterinary Business — Vaccinate Against Fraud · VetPartners — Fraud, Theft, and Embezzlement · IDEXX — Preventing Veterinary Fraud