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Positive Pay

Concerned about check fraud? ECS Financial Services recommends positive pay for your business accounts. It is a service offered by banks that is designed to reduce fraudulent check-cashing against your account. If you are writing checks on your bank account as opposed to using ACH transactions, then the positive pay service may be beneficial for you.

Once positive pay is activated, each time you issue payments you must send a file of the payment information to the bank. The bank will not cash any check against your account unless they have received a positive pay notification for it and the check presented matches by check number, dollar amount, and account number. Depending on the bank’s system, your file may also need to include the date of the check and/or the payee so that the bank may match these items, too. You’ll need to ask your bank if it’s applicable to your account.

If there is a mismatch among checks presented for payment, the check will be treated as an exception item and an authorized individual at your company will be notified. An authorized individual will then need to let the bank know whether to pay or exclude the exception check.

Positive pay helps to deter a couple of types of fraud:

  • Checks where someone has changed the amount

  • Stolen blank check stock, even if you don't know about it being stolen

Positive pay is not designed to prevent the type of fraud that occurs when checks are written to a ghost vendor and erroneously approved by management.

If you use positive pay, then you should separate the bank reporting process from the person who actually writes and/or signs the checks. This will give you better internal control.

The main challenge with positive pay is making sure the bank receives the file of checks before they are presented for payment, including any manual checks written. Another issue is the extra cost, although some banks offer this service at no charge.

For companies worried about check fraud, consider looking into positive pay with your local bank. And while talking to your banker, be sure to talk to ask about other fraud protection services they offer.

Accounting Services

About the Author - Hannah Patel joined ECS Financial Services as a Staff Accountant in June 2017. Hannah holds Master of Business Administration, Master of Science in Accounting, and Bachelor of Science in Accounting degrees from the University of Illinois at Chicago. At ECS, Hannah works in a variety of client services areas, including audit, corporate and personal income tax return preparation, and multi-state sales tax return preparation. In the future, Hannah hopes to pursue her Certified Public Accountant designation. Outside of work, she enjoys running, cooking, and spending time with her husband and two children.


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