Check fraud entails paying for goods and services using a counterfeit or altered check. It also involves writing business checks, yet you know that the bank account’s funds cannot cover the entire amount indicated in the check.
Fortunately, there are different accounting software applications that ensure you can bill your clients using electronic modes of payment, and they can help eliminate the use of checks. If such options are not viable, you can take time to learn more about check fraud and how you can prevent it.
Businesses lose billions of dollars annually because of check fraud. Fortunately, there are measures that businesses can take to prevent check fraud, and they include:
1. Accept Checks Only from Known Clients
There are specific clients that are used to paying using checks. When dealing with such clients, the chances of being defrauded are low. Such an approach ensures that the chances of check fraud are minimal.
2. Check the ID as you Accept a Check.
As you accept a check, ensure you have checked the ID of the client first. The identification documents should match with the name present on the check. If the details don’t match, you can request the client to use an alternative payment method. Make sure there are no exceptions and ensure that the employees adhere to these rules.
3. Ensure the Check Has Been Examined Closely
As you accept a check, make sure that you have checked it closely. Is the coloring on the check off? Are the numbers on the check legitimate? Does the check look suspicious? You can check the routing number and determine whether it is legitimate. The legitimacy of the check matters.
If the information present on the check cannot be verified, you should not accept the check. If the client cannot use an alternative payment method, they can procure the products and services they need elsewhere.
4. Utilize Other Payment Methods
Ensure you have looked into other payment methods that clients can use as they pay for the goods and services you are offering. Most businesses usually accept direct deposits, which means there is no need for a client to write a check. Alternative payment methods eliminate the issue of misused or stolen checks.
5. The Checks Should be Locked Up
The majority of check scams often occur because checks have been used fraudulently or stolen. Since technology has evolved significantly, the checks can be reproduced easily, and individuals with ulterior motives can use them.
If a client needs to use a check to pay for your business’s goods and services, ensure that only authorized employees can access them. Be keen on the check numbers and also conduct an investigation once you come across a check that does not seem legitimate.
6. Be Careful When Dealing with Checks
Most businesses assume that the cashier’s check cannot be used for fraudulent activity. On the contrary, such checks can be duplicated to look authentic.
A cashier’s check is supposed to showcase the bank name and a phone number. The payee’s name should also be present on the check.
If you have any doubts, you should contact the bank branch, and they will verify whether the check is authentic or not.
7. The Bank Statements Should Be Reconciled Promptly
By completing the bank reconciliation process within a short period, you can easily spot instances of check fraud. If you find an issue revolving around check fraud four months later, it will be hard to solve the issue. Also, the perpetrator cannot be tracked down easily, and you will have lost a significant amount of funds in the process.
To eliminate the issue of check fraud, businesses should conduct due diligence. Also, they should adhere to the tips mentioned above.