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Five accounting basics every AP department needs to have in place.

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Image Five accounting basics every AP department needs to have in place.

Five things every accounting department needs to implement to protect the check payment and signing process.

We put together our list of the top systems we see the most successful businesses and accounting departments using to process check payments. For large businesses with established AP departments they probably already have great systems in place. The problem we see is with the new and fast-growing startups. They haven’t had time to establish systems yet so they are vulnerable to potential theft. These businesses should start early and make sure they build a secure payment process inside their growing accounting departments to avoid any check fraud issues.

  1. Institute clear separation of control so the person processing the checks is not the same person who signs the checks regardless of position with the company.The “separation of control” or “separation of duty” is by far the most important protection every accounting department needs to have in place.
  2. This may sound too obvious but never use a rubber stamp to sign checks. These can be easily lost or misplaced so it’s best to avoid this style of signature application.
  3. Set up value based restrictions dependent on the dollar amounts of the checks. Something which makes sense for your company but keeps the department from automatically signing and processing any abnormally large checks. The amount will be different for each company but never allow large checks to pass through without adding one additional approval. We recommend flagging check above 150% of the company norm. For example: If a standard check is $5000 they should set a limit at $7.500. Any check above this requires additional approval.
  4. Use the “Positive Pay” system offered by your bank. Every bank offers positive pay so check with your branch on the cost and guidelines to use it.
  5. Before using any automated check signing program or machine, make sure you notify your bank that a digital signature will be used. This will avoid any issues with your bank processing checks.

Checks have been a part the payment process for businesses since 1681. That’s 330 years of check processing history and 330 years of criminals looking for loop holes. New innovations in ACH payments, ApplePay and other POS payment systems are changing the way money moves but payment by check for business is not going away anytime soon. It’s still the easiest and safest way to pay and track payments for any business to vendors and customers.

Check fraud and company embezzlement remains a $500 billion problem so take some simple steps to protect your business, customers, and employees from the issue.

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