Most middle market businesses have either been or will be the target of attempted payment fraud. The good news is when you are following best practices to prevent payment fraud, it is fairly easy to detect and prevent the attempted fraud from being successful. Best practices include the following:
1) Implement Positive Pay: This is an early warning fraud detection system that helps you prevent fraud before it occurs. It involves sending your bank an electronic file of payments made as you make them, which they can cross reference as checks are cashed. The service is inexpensive and can be provided by your bank or your ERP system provider.
2) Daily bank reconciliations: Some people think daily bank rec’s are overkill, but the truth is they prevent fraud, give you a clearer picture of your short term cash flow and they often actually save time. Minor discrepancies can be difficult to identify when you are working with a whole week or month of data. Reconciling daily makes it a simple task that can be easily performed by lower level accountants.
3) Use fewer paper checks and keep your check stock secured: Most of the attempted payment fraud is the result of fraudsters getting their hands on your paper checks and either duplicating them or using the information to make unauthorized ACH debits. Converting regular payees to electronic ACH payments reduces the risk of fraud.
Following these 3 simple practices will greatly reduce the risk of fraud and give you some additional peace of mind.