Based on a recently-released AFP Payments Fraud And Control Survey Report (link:, chances are, your practice has been a victim of actual and/or attempted fraud.

Sound hard to believe? According to the Report, 78% of companies were targets of payments fraud in 2017. And the trend has continued to increase since 2013. The relentlessness of fraudsters makes it important for OD practices to take stock of their payment processes and ensure good internal controls are in place to prevent and detect fraud – whether it’s committed by someone inside or outside of your office.

To protect your practice, here are some ways to shore up your accounting processes and minimize the risk of payment fraud:

Move Paper Checks to E-Payments: Lots of fraud can occur with a paper check because it contains important information about your practice’s bank account. Due to the nature of how paper checks are processed, there are many opportunities for fraudsters to steal them – from the time you receive and store the check stock in your office, to the time you send them out in the mail and hope that they are received by the intended recipient. Once accessed, fraudsters can easily alter paper checks, changing the payees and amounts, and/or create a whole new set of fake checks with your account information. Moving from paper checks to e-Payments such as EFT’s and ACH transfers provides increased security and is more cost-effective than paper checks. To learn more visit

Perform Bank Reconciliations: Bank reconciliations involve comparing what’s recorded in your accounting records to what’s recorded in the bank statement. Due to timing differences, you normally will have differences between the two balances, such as outstanding checks that haven’t cleared the bank yet, or monthly interest fee charges that you haven’t added to your books yet. However, unexplained differences between your book and bank balances may represent fraudulent activity, or at a minimum, errors that need to be addressed. Timely bank reconciliations are a great internal control for many reasons: They give you a good handle of your actual cash flows, help detect potential fraud or other errors early, help you to avoid bouncing checks and incurring fees for insufficient funds, and help you to follow up on outstanding payments.

Segregate Duties Where Possible: Segregation of duties is another great internal control to include in your practice. Basically, it means setting up your accounting workflows so that financial transactions are not handled by just one person. The objective is to incorporate checks and balances by separating out key duties; ideally, for your payment processes, the person preparing payments should not also be responsible for approving the payments and performing the bank reconciliations. In smaller practices, it can be hard to segregate duties completely, but at a minimum, ODs should be reviewing the bank and credit card statements for unauthorized activity on a timely basis and signing all checks that exceed a set minimum amount. See for more on segregation of duties.

Take Advantage of Positive Pay: Does your bank use Positive Pay? If you don’t know the answer to this question, you should ask! Positive Pay is a way for banks to help prevent fraud. Under this internal control, you as a business provide your bank with your disbursements information, such as a list of check numbers and amounts disbursed. As checks are presented for payment, the bank double checks this information prior to payment, to make sure the information matches. If there’s a mismatch, the bank alerts you before any funds are issued.

Be Aware of Email Fraud Schemes: In this fast-paced environment, it can be easy to fall prey to various email schemes out there. Even if your staff are generally aware of the various phishing scams out there, in the rush of the day and after working long hours, it can be easy to miss when something’s not quite right. When the person who processes your payments gets that email request from a supposed vendor asking to direct their payment to a different account, you want to be sure they recognize fraud red flags. You can help by taking the time to promote fraud awareness. Keep up to date on the latest scams at and share them with your staff.

Review Vendor Lists for Unusual Activity: A common payments fraud scheme occurs when someone inside your company (all too often, a trusted employee) creates a fictitious vendor. If someone other than you processes your accounts payable and disbursements, you should periodically review the list of vendors in your accounting system. If you identify any unfamiliar payees, follow up promptly to rule out any fictitious vendors.

Look Beyond Payment Fraud

Fraud reaches beyond payments, so be sure to review your controls in other areas, such as sales inventory. To protect your inventory from the risk of theft, manage your inventory levels to avoid overstocking items, leaving them open to potential theft or damage. Control access to your valuable products by keeping them in locked display cases when possible. Also, you should take regular inventory counts and follow up on any unreconciled differences between your book balances versus your physical inventory count.

Although the statistics are alarming, you can take proactive steps such as the ones above, and decrease the likelihood that you’ll become a victim of losses from fraud.

If you have questions and/or need more assistance in reviewing and addressing your practice’s exposure to financial fraud, please reach out to me, I’ll be happy to talk with you. Orin Schepps, Founder and CEO @consultanceaccounting