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3. Safeguard checks and account information
- Keep reserve supplies of checks, statements, and other documentation in a secured and locked facility. Limit the number of employees allowed to have access to these documents and train responsible staff never to leave blank checks or bank statements unattended.
- Deface and keep voided checks to ensure they don't fall into the wrong hands. If you want to shred voided checks, check with your accountant first. Some accounting firms prefer you to retain voided checks until after the annual financial statement audit is completed.
4. Segregate duties
Assign responsibilities for accounts payable to more than one person, with each responsible for different areas. For example:
- The person who issues checks should not also sign checks and reconcile the bank account.
- Authorized check signers should not have access to blank checks or the ability to enter transactions into the accounting system.
Segregation of duties makes it more difficult for employees to tamper with checks and payments.
If you use a signature stamp, implement proper controls to ensure the stamp is not readily available for just anyone in the office to use.
5. Reconcile accounts promptly
Quick fraud detection tends to limit loss exposure, so balance accounts monthly to identify discrepancies. The reconciliation should also include a review of the bank statement and check images to ensure vendors are recognized, expenditures are related to company business, signatures come from authorized signers, and endorsements are appropriate.
6. Use a positive pay service
Possibly the best strategy for protecting company funds is to use a positive pay service available through the Treasury Management department of most banks. With positive pay, before releasing checks to payees, you send your bank an issue file of those checks. Your bank then compares checks received each day to that issue file and singles out unmatched items for your review. Positive pay is an incredibly valuable tool to help you proactively prevent check fraud. Ask your bank about it today.