You wouldn’t purchase a car or a house without insurance – so why wouldn’t you want a similar safety net for your business?
“Fraud is so prevalent in the business world,” shared Sarah Shuler, Vice President and Director of Treasury Management Sales with First Merchants Bank. “I always tell our clients that, if they haven’t been victims of fraud yet, they will be eventually – it’s unfortunately just the way our world is.”
Both Automated Clearing House (ACH) and check payments have been among the top targets of fraud for several years running. In fact, according to the most recent survey of businesses from AFP (Association for Financial Professionals), in 2021, 66 percent of checks were impacted by fraud and 37 percent of ACH debits were impacted by fraud.
Which is why it’s vital to have a fraud prevention tool like Positive Pay in place to help minimize the risk of fraud and catastrophic losses to your business.
So what is Positive Pay? Positive Pay is a software service offered by banks, which allows business owners to approve or deny payments made through ACH or checks. As a business, you probably do these many times each month, paying employees, vendors, or other parties. These two payment methods are very different, so banks typically have solutions for each of them, adapted to address their specific needs.
Watch our videos on Check Positive Pay and ACH Positive Pay.
Maintaining Positive Pay and approving transactions is a daily task.
“I know some people see Positive Pay as time-consuming, but it’s really not – and if it’s between that or not making payroll, or that and having to close your doors due to an incident of fraud, why wouldn’t you take that precaution?” Sarah said. “I try to tell our clients to just add it to their morning routine – to check Positive Pay the same way they’d check the local news or the NASDAQ.”
But when you partner with a bank, you’ll have help ensuring everything is set up with your specific business in mind. This will streamline the service so it’s as effective and efficient as possible for you.
And, while Positive Pay does take a little extra time, and cost a little extra each month, it’s less time-consuming and less of a financial drain than being a victim of fraud.
“It’s about being proactive,” Sarah said. “While it may come with a small cost, it’s less than trying to make your vendors and employees whole after an incidence of fraud. While it may add a few minutes to your day, it’s less time than filling out an affidavit of fraud and a police report.”
And, using Positive Pay is healthier for the longevity of a given business.
“A common way some businesses deal with fraud is to close the compromised checking account and open a new one,” Sarah shared. “But that doesn’t work, long-term. If a business doesn’t change its processes, it will only be a matter of time before they encounter fraud again – if that happens too often, banks may see that as a high-risk relationship and close all the business’s accounts, which can be incredibly detrimental to your business.”
In addition to fraud prevention, Positive Pay can also help business owners stay on top of expenses.
“When you go into the system to approve your transactions, Positive Pay will also tell you which checks are still outstanding – it’s a great way to stay on budget and keep track of business expenses,” Sarah explained.
While Positive Pay isn’t foolproof – it can’t automatically detect a forged signature, for example – it can help drastically reduce a business’s risk of fraud – something Sarah said all business owners should have on their to-do-list.
“I like to ask my clients what keeps them up at night,” she shared. “The top two things are often making payroll and retaining employees, but if that third concern isn’t fraud, I feel like I have to sit down and have an honest chat with them. I deal with fraud every day, and every business owner will, at some point, encounter fraud – it’s so, so prevalent and it can completely crush a business if you don’t have the right processes and precautions in place.”
“Positive Pay can save you so much heartache, in the long run – or in the short term, even,” she added. The AFP found that businesses targeted by fraudsters peaked in 2018 at 80 percent and was at 70 percent for 2021. When that happens, remediation can be significant, so prevention is important.”
But there are also other steps business owners and employees can take to prevent fraud. For example, Sarah said, it’s important to be cautious of any request to change a payee’s address, direct deposit information, or account number – even if that request is coming from a trusted vendor.
“Whether that request is made via e-mail, snail mail, or phone call, I always tell clients to go to Google, look up that person’s verified phone number, and call and confirm the change,” she said. “Don’t call the number in the e-mail or voicemail, don’t hit redial – call from a verified, for-certain number.”
It’s an important step to take even if the request comes from a colleague, she added.
“I had one client who approved an e-mailed direct deposit change request from her company’s CEO. The employee approved the request without verifying the change with the CEO, and come Friday, the CEO did not get paid," Sarah shared. “Even if it’s your own company – even if it’s intimidating to call your company CEO or President – I encourage people to pick up the phone and verify that information using an accurate phone number, it’s worth it to do so.”
If business owners have any questions about preventing business fraud or about Positive Pay, Sarah recommended reaching out to their local banker for more information – but above all, she encouraged business owners to be vigilant.
“It really is a situation where an ounce of prevention is worth a pound of cure,” she said. “I really encourage people to ask questions, to look into Positive Pay, to stay informed, and to not be afraid to verify change requests – because in the end, it’s in the best interest of your company.”
