Yikes! Are You Still Using Paper Checks?
Placing paper checks in the mail to vendors places your company at risk if you are placing them in the mail without Positive Pay.
Why don’t you just play Russian roulette with a full chamber or ride a motorcycle without a helmet? That may seem a little over the top, but the paper check is a risky way to submit payments to vendors.
What Can Happen?
A client contacted me recently to help unravel the mystery of the missing payment to one of his vendors. By researching his automated AP system and conferring with his third-party print vendor, we confirmed that the check had been produced and picked up by the post office for delivery. The check was eventually presented to a bank in Chicago for payment. The vendor was in North Carolina.
The bank in Chicago eventually released a photo to the FBI (yes, they had to get involved) of the person trying to cash the check. We had the chance to view the photo to confirm the person was not an employee of my client’s company. Thanks to using Positive Pay, they did not lose out on the amount of the check.
The incidents of check fraud are so frequent that law enforcement officials such as the FBI aren’t that interested in pursuing the “little guys;” they want to go after the big fish. Even though the check my client had cut was over $20,000 – big to him – it wasn’t worth pursuing just that instance to the FBI.
If you thought checks were old news, take a look at these statistics from the 2016 AFP Electronic Payments Fraud and Control Survey:
- Seventy-five percent of organizations that were victims of fraud attempts/attacks in 2016 experienced check fraud, a 4% increase over 2015.
- Positive pay continues to be the method most often used by organizations to guard against check fraud, used by 74 percent of organizations. Other methods include:
- Segregation of accounts (cited by 69 percent of respondents)
- Daily reconciliations and other internal processes (64 percent)
- Payee positive pay (41 percent)
- Lack of positive pay (cited by 23 percent of respondents) and clerical errors (18 percent) were two primary reasons for financial loss due to check fraud.
As the statistics show, checks continue to be the payment method most frequently targeted by those committing or attempting to commit fraud. One method companies use to fight check fraud is converting to electronic payments. In addition to the fraud prevention benefits, ePayments provide benefits such as:
- Ability to quickly process last-minute bill and payroll payments.
- Take advantage of early payment discounts, while paying closer to the due date.
- Improved client-vendor relationships due to rapid, more efficient payments.
- Eliminate the cost of printing and mailing paper checks, which can be as much as $9 per check.
Often implemented as an add-on to your existing financial system, the selection of vendors offering B2B ePayment solutions is huge. Barker Associates has seen the “deer-in-the-headlights” look that clients get when trying to sort through the options to choose the best solution for their company.
Gathering this information and learning more about the ePayment process can be overwhelming. Want help? Sign up for a 30-minute consultation with me to discuss.
In addition, we have compiled an invaluable checklist that will guide you in the transformation of your payment process to select the best vendor for your circumstances.