The moment you buy a new big screen television, it’s obsolete due to new products constantly coming on the market. The moment you buy a new laptop computer it’s also instantly obsolete. Why? Technology resources are advancing at an incredibly fast pace, getting better seemingly every week. What else is getting better? Fraudsters. They’re constantly trying to trick their victims.
I’ve seen multiple instances of fraudulent checks presented to banks for payment. Somehow, these criminals will prepare a very authentic-looking check from the company, with full and complete bank account information that is written to themselves and will even have an authentic looking signature from and authorized signer on the bank account!
If you take only one thing from this brief article, it’s this: talk to your banker about whether you’re taking advantage of the right tools for your business to protect yourself.
One available resource has been available to business customers for many years, but I’ve been surprised to find the number of clients that do not take advantage of the resource. That tip is to sign up for positive pay with your bank.
Some of my readers may ask, “Who writes checks with the number of electronic resources available?” It’s a reality that many companies are still using paper checks to pay their bills. Until our society transitions to a fully paperless society, it’s still a valid mode of paying vendors.
Without positive pay, a company (payor) sends out checks and each payee presents their check to their bank, which eventually passes through the payor’s bank. Assuming there are no obvious errors, the bank honors the check and passes the cash to the payee.
Positive pay is a service available from banks in which the company (payor) after issuing a check batch, will submit a list of the checks issued to their bank. The bank will store the information in their systems, and as checks are presented to the bank for payment, the check is compared to their list. If discrepancies are noticed, they present those discrepancies to the payor for research or to confirm payment denial. If a fraudulent check comes through, the check will be denied and the payor’s cash is preserved.
Somebody may say, “Well, if that happens to me, since it’s not my error, my bank will just cover it for me, since they allowed the check to be processed.” Not so fast. Very possibly the bank has given you an opportunity to sign up for positive pay with the disclaimer that should you choose to decline the available service, any fraudulent checks that don’t get caught will not be covered by the bank. I’ve seen instances where they will stand by that disclaimer when the inevitable check is paid.
Additionally, it’s very likely your insurance carrier will deny a claim.
This type of fraud is happening regularly and you may lose thousands and thousands and thousands of dollars. I’ve talked to enough people to know that not everybody is using this resource. There may be other ideas your banker has for you that is specific to your unique circumstances, but my tip is to start that conversation. It will save you some headaches.
Karl spends his time thinking about ways to help organizations with sound financial decisions.
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