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How to prevent check fraud at your business

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Did you know? Some discount check retailers don't include many of the security features that make checks harder to alter or reproduce.

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.

Learn more about Positive Pay

Important Disclosure Information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Board of Governors of the Federal Reserve System, “The Federal Reserve Payments Study: 2018 Annual Supplement," 2018, https://www.federalreserve.gov/paymentsystems/2018-December-The-Federal-Reserve-Payments-Study.htm, accessed July 28, 2019. Back
  2. Better Business Bureau, “Scams and Your Small Business Research Report," 2018, https://www.bbb.org/globalassets/local-bbbs/council-113/media/small-business-research/bbb_smallbizscamsreport-final-06-18.pdf, accessed July 28, 2019. Back