Any time you pay your employees or vendors with a printed check, you’re opening up your bank account to potential criminals. The information on your check – including your signature – can be used to create counterfeit checks, or the name or dollar amounts can be altered. Today’s technology allows easy access to paper, printers and scanners that can be used to create fraudulent checks.
Here are five ways you can reduce your risk of check fraud:
1. Reconcile your bank accounts daily. With online bank access, it’s relatively easy to spend a few minutes each day reviewing transactions to ensure they’re valid. Do it at the end of the day.
2. Segregate duties within your office. The person who writes checks should not be the same person who signs checks or who reconciles the bank account. We can’t tell you how many times we hear about the trusted employee who siphoned off money from the owner’s bank account over a number of years. Don’t give them the opportunity – look at all the checks you sign and have a completely different person reconcile the bank account or do it yourself.
3. Institute electronic payment systems. Direct deposit and pay cards are relatively easy ways to pay your employees, and they get paper checks completely out of the hands of criminals. If you’re using Mize Houser’s payroll system, employees can access their pay information each payday, run wage histories for themselves, and access copies of their annual W-2 forms through the secure online payroll portal.
4. Use Positive Pay. Your bank can assist you in implementing positive pay, which is a system where you provide the bank with a list of all checks that have been written on your account (with each payroll or A/P run). As checks are presented for payment, the system verifies against the list before paying.
5. Safeguard Check Stock. Be sure blank checks are under lock and key, and keep track of usage. Audit blank check stock periodically (unannounced) to be sure there’s nothing missing. And if you have an electronic signature or facsimile signature plate, keep it locked down as well.
If you see anything suspicious, look into it and notify your bank immediately. Visit with your banker to see if they have security measures they recommend, and consider adding insurance coverage for fraud losses.