Let’s face it: with so many businesses relying on digital means of transferring funds to pay vendors or other businesses, fraud and security breaches are becoming increasingly common. Relying on secure methods of payment is the first step in ensuring your business is avoiding scams. But what options are available?
Using a positive pay system can give your business peace of mind in the event you encounter a forged or altered check. Positive pay systems are accounting tools that can detect fraudulent checks to prevent them from being processed. For example, when a bank receives a check, it will verify the check and its amount based on information the company has previously sent. If they detect any errors or inconsistencies, the bank does not process the check and contacts the company immediately.
How Does Positive Pay Work?
Positive pay is considered an automated fraud detection tool offered by banks. Most banks offer this service for a small fee, though many are starting to provide positive pay services to all clients for free. To use this automated fraud detection tool, your company must send information to the bank about your business account, check numbers, and payment amount for each check. After that, your bank will verify each check your company issues against this information.
What is Reverse Positive Pay?
As the term would suggest, reverse positive pay is a fraudulent check verification service offered by banks that verifies each check as it is received. When your bank receives a check, it contacts the company to verify the check amount before it issues payment. These daily notifications allow companies to stay on top of the checks it issues and track when their vendors are depositing payment.
Benefits of Using Positive Pay
The advantage to using a positive pay system is that it protects your business against fraudulent checks. When you use traditional checking methods, forged checks can mean your company is paying out of pocket to cover the unauthorized payment. Not only is this a security liability, but it can also have devastating effects on your business operations.
By working closely with your bank, your company can take preventative measures to avoid fraudulent charges and security breaches. Since banks will notify you immediately when they have flagged a check, you can immediately take action to stop future scamming or forgery.
Bottom Line: Positive Pay Adds Security for Your Business Payments
Positive pay systems offer your business an additional level of security when issuing paper checks. There are, of course, many other types of payment methods your company can use to pay other businesses, like ACH transfers, wire transfers, and virtual cards. If your company issues digital or paper checks to vendors, positive pay can save your company money by flagging forged or altered checks.