Check Fraud On The Rise
I received a letter from a high end accounting firm in New York today warning their clients that check fraud has “increased significantly” and has become “a more prevalent issue”.
They recommend that you review bank transactions daily confirming the correct payee and amount. The problem with that strategy is that check images are typically not posted for a couple of days, so yes, you know the check cleared, but you don’t know if it was altered.
They also let their clients know that their bookkeeping service might not spot fraud like this. Don’t blame us, its your problem.
So, what are better suggestions?
#1 – Use ACH. Electronic transfers happen within hours. Yes there is a small loss of float, but trade that against a large loss from check fraud. It is also cheaper than mailing a check. Given everything involved in creating, mailing and reconciling a check, you probably save a couple of dollars per check.
#2 – If you must send checks, implement positive pay. Your accounting software has to support it, but if it does, it communicates several times a day to your bank, and sends each and every check. including the number, the amount, the date and the payee. The bank reconciles this before they approve the payment. It should even catch attempts to double-deposit checks.
#3 – Use a hosted AP service such as Bill.Com (there are lots of competitors, including many banks). These services work like this. You enter the payables (or the vendor sends the bills to the service directly). Your accounting team approves each payment. The AP service transfers money from your designated account to theirs to cover the bills. Then they pay your bills from their escrow account. They use positive pay to protect themselves. Again, there is a fee for this service, but there is also a lot of flexibility as these vendors offer a number of related services. One other benefit of this service is that your checking account and routing numbers, which are on the bottom of each check, are never exposed. In cases where thieves are stealing checks from mailboxes, they no longer have access to your account information. All they have is the account information for the service’s escrow account, and if that gets hacked, it is not your problem. These services are large enough that the bank gives them access to their check data before the check is actually paid, so the chances of fraud go down dramatically.
Bottom line, if you send out checks, you are at risk and you should look at other options. If you need help with this, contact us.
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