Check fraud is the easiest to commit and often delivers the highest value payment for criminals. The fraudsters use what is known as paper hanging to write checks on closed accounts. Checks are less common than they used to be, but some businesses still have a lot to gain by accepting checks. The main challenge is simply avoiding that bad check. You never know if your client has money in their account and a bad check is expensive for any corporation. Bounced checks cost businesses bad-check fees, plus the time and cost of collection, if any collection. They can be an even bigger problem for smaller companies that do not have the healthy cash reserves or margins hefty enough to survive several bouts of bad checks.
It is critical that good procedures related to your check processing process are in place. These steps need to be in order for all employees handling incoming payments. There are ways to protect your company and the steps below will help you and your business get a new check fraud plan in motion or update your current plan.
Stop Accepting Checks This is the most drastic action, but it will protect your company from ever receiving a bounced check. You know your business best, so you will have to make the call whether this is a practical option.
Accept Local Checks Only Stick to checks that come from customers who live in the same state as your business. Understanding people move and your client base might be on vacation, but the risks are higher with an out-of-state check.
Accept Only Cashier’ s Checks A cashier’ s check offers the greatest protection to the recipient as they can’ t be reversed. Cashier’ s checks are treated as guaranteed funds because the bank, rather than the purchaser, is responsible for paying the amount. The same goes for a wire transfer to your company’ s bank account. Money orders and electronic fund transfers are not guaranteed; you can put a stop payment on either transaction just as you would a check.
Watch Out For Low-Numbered Checks Usually, a low number means a new account. The odds are increased that these low-numbered or starter checks are fraudulent. Of course, a low-numbered check is not inherently bad, however statistically, the incidence of bad checks raises with low check numbers.
66 NATDA Magazine www. natda. org