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In this day of online banking, online payment options, apps that allow you to manage your accounts payable, vendor payments, etc., there is really no reason to write checks anymore.  The ease with which we can process payments for business expenses is awesome in and of itself, but there is an added benefit to choosing apps and automation for making payments:  Check Fraud!  Bad people are always willing to spend a ton of time and effort to figure out ways to steal.  Checks can be replicated, the ability to duplicate the micro coding on the bottom of checks can be bought.  The only way to protect yourself is to reduce or get rid of altogether using check stock.

While your bank will reimburse you for fraudulent checks, assuming you can prove the fraud….

The issue is what it takes to fix:

  1. The time, effort and frustration of working with your bank to correct
  2. The cost to all of us for letting thieves, scammers, crappy people get away with it.  We all pay for the fraud one way or another.
  3. Are you certain you have accounting procedures in place that will even find the fraudulent check?  An alarming number of businesses do not reconcile their banks regularly and timely enough to find the theft.  Your bank is only willing to work with you within a specified number of days after the fraudulent check was cashed.

Solution: Automate your Payment Process

Good internal control requires that you keep check stock secured so that only those people trusted with using your check stock have access to it.  But what if you got rid of your check stock all together?  It would solve several problems and avoid risk at the same time. 

  • You would not need to worry as much about employees stealing from you because they had access to check stock.
  • You would not need to worry about checks getting stolen from your vendor’s mail and duplicated for fraudulent purposes. 
  • You might be able to control/trust your own employees, but you have no control over the employees your vendors have, and they get access to your check stock every time you pay them using a check.

Additionally, developing a process for paying bills, standardizing and automating that process will save you time and effort on the accounting end of your business.  So, it is a win/win:  get a better process, save time and effort and pay your vendors with better security and ease.

If you have a need to continue to use check stock, consider adding these procedures to help your bank and your employees notice something odd about a check.

If you still need to use Check Stock

  1. Watch for checks that are outside the numbering series you are using.
  2. Require 2 signatures for checks over a certain amount and talk to your bank about how to enforce that on their end.  Include a note about this on your check stock right above the signature field so anyone looking at the check will see that 2 signatures are required for checks over your limit.  “Two signatures required for checks over $1,000” or something like that.
  3. Always use the Memo field. Blank Memo fields in addition to out of sequence checks can alert your bank and you that the check might not be good
  4. Make if hard for someone to add zeros to your checks, making a $200 check look like $2,000.
  5. Reconcile your bank statement every month!  In some cases, you only have 45 days to catch a bad check that the bank will reimburse you for.
  6. Consider having one person with access to check stock, but someone else is in charge of reconciling the bank statement.  That limits the ability for one employee to be able to write checks and also reconcile the bank statement thus hiding their theft.

Good internal control is necessary for businesses of all sizes and no matter how small you are, procedures can be put in place to limit theft internally.  Automation and using third party apps to approve and process accounts payment payments will limit your exposure to risk.

Post Author: Tricia O'Connor CPA MBA