What is so Positive about Positive Pay?

By, Kathy Mitchley,
Treasury Management Director,
Hillcrest Bank, a division of NBH

Old school crime is back and check fraud is surging. Fortunately, many businesses are turning to digital payments and electronic alternatives such as card and ACH. However, some business owners remain committed to paper and use checks as part of their daily operations.

Simply input the term “check washing” into any search engine and you will discover how devastating this crime has been to business owners.

Check fraud requires no tech sophistication at all, making checks appealing to fraudsters. Basic technology such as scanners to duplicate checks or even stealing checks from the mail makes theft all too simple.

Every time you write a check, consider that your account number is displayed at the bottom for anyone who comes in contact with it to see. Then pause to remember the balance in your account. Is it worth the risk?  Bear in mind the expense of the check itself as well as the cost of the envelope and stamp. It should be an easy choice to mitigate the risk of fraud if you are in a position to change your method of payment.

While ACH requires additional homework, obtaining the beneficiary’s account information and routing number, it is still one of the cheapest forms of payment. You determine the effective date of payment and you eliminate the opportunity for check fraud.

For many business owners moving away from paper is not always so easy, and ruling out paper all together can be difficult. If you continue to write checks and you suspect fraud, here are some key steps to take:

1. Contact your Bank immediately.
2. Take a hard look at your own internal procedures
3. Work with your Bank to implement either a more efficient electronic means of payment and apply a paper debit block to avoid any paper presented on your account
4. Protect your account by implementing Positive Pay.
5. Yes, you can close the account and reopen a new account, but you may simply delaying the inevitable and if fraud happened once, it will more than likely happen again
6. Report it to the Police and complete a fraud affidavit

Leaning into technology like Payee Positive Pay will prevent fraud before it occurs. If you implement Payee Positive Pay and a fraudster changes the amount or payee name, you can reject the payment before it is presented for payment.

A great feature of a robust Positive Pay service is the account reconciliation tool. The efficiency of your reconciliation process is extremely important to your own internal process. Any errors identified by your CPA after the event and not initially by your internal team point to an inherent weakness in your internal control environment. By having the account reconciliation feature at your fingertips, as a business owner or Controller, you will know in an instant outstanding checks, void, issued or paid checks. Account reconciliation should be an integral part of your process.

Is Positive Pay right for you? Take the time to consider your risk assessment for check fraud:

Quantitative risk factors.

• Volume of transactions.
• Dollar value of transactions.
• Normal account dollar balance.

Qualitative risk factors.

• Complexity of transactions.
• Fraud susceptibility of transactions.
• Level of manual processing vs automation
• Regulatory oversight.
• Quality of internal control over transactions.

Please know if you write one check or a thousand, it only takes one fraudulent check to disrupt your cash flow significantly.

Hillcrest Bank offers a suite of solutions aimed at providing personalized service and the resources you need to run and manage your business. From lending solutions to deposit and treasury management solutions, you can count on us for practical advice and streamlined decision-making to help you achieve your goals. We call it Common Sense Banking. Visit HillcrestBank.com for more information.

For further help or guidance, talk to Colette V. Chester, Vice President, Community Banking Leader for Hillcrest Bank. Colette is a seasoned banking professional with extensive experience in business banking with the Boise community.