A few years ago, the bookkeeper at our church was reconciling the operating checking account. During the process, she identified a check on the bank reconciliation that was not in our accounting system with a duplicate number and an unrecognized amount. It was clear we were the victim of fraud. Fraud is when a bad actor knowingly and purposefully uses deceit to provide unlawful gain or deny a victim a right. According to the Federal Trade Commission (FTC), Consumer Sentinel Network received over 5.1 million claims in 2022 alone, and 46 percent of the claims were for fraud. Fraud, or maybe better stated, fraud protection, is a big deal, even for churches. Although our church was not responsible for the fraudulent check, cleaning up the mess was time-consuming and a bit stressful for our bookkeeper.
Our church is fortunate. We have an excellent relationship with our bank, which was on our side and walked us through the process of resolving this unpleasant issue. During our interactions with the bank, they inquired why we weren’t using their “Positive Pay” feature to prevent future occurrences. The bookkeeper and I were a bit embarrassed to admit we were unfamiliar with Positive Pay and how it could help prevent a fraudulent check from being passed again.
What Is Positive Pay?
A 2023 report from Alloy, a leading identity decisioning platform, found that 27% of the 250 financial services surveyed lost over $1M to fraud in 2022. One way banks can partner with their customers is to offer an automated cash-management service to match the checks issued by the client, or in our case, the church, with the checks the bank is processing. That definition sounds more complicated than it is. Basically, a Positive Pay system matches essential check information like the check date, number, amount, and bank account number of each check presented to the bank for payment against a list provided by the church.
The Impact On Bookkeeping
Since the majority of churches are not large mega-churches with a full-team team of bookkeepers in a finance office, what’s the real impact on day-to-day tasks? The good news is that Positive Pay is quite simple to implement and operate and only takes a few extra minutes when cutting checks. Knowing that there are variances within each bank, here’s a high-level overview of the process:
- The church bookkeeper (or financial person) pays bills via a check, using their standard practices.
- The church bookkeeper (or financial person) uses the web portal provided by their bank to enter the checks written. The information typically includes the payees, dates, amounts, and check numbers.
Then, as each payee presents their check for payment, the bank cross-references them to the list entered into the Positive Pay portal. The bank cashes checks that match and provides an exception report to the church for those that do not match. The church can then decide what to do with the checks on the exception report and inform the bank of their decision.
ACH Positive Pay
The clever way bad actors, intent on taking money from unsuspecting victims, will never cease to amaze me. Protection from fraudulent checks is no longer enough in today’s online world; ACH (Automated Clearing House) or online electronic transactions are now a prime target. Fortunately, the same protection that Positive Pay provides banks and their clients for checks is also available for ACH transactions. The process is very similar to the Positive Pay for checks, requiring the bookkeeper (or financial person) to verify the ACH transaction before it’s processed. It’s a great way to stop these thieves before they gain access to the church’s money.
For most churches, the pros outweigh the cons of implementing Positive Pay solutions for checks and ACH transactions. Positive Pay provides fraud control and prevention for checks and ACH transactions; it avoids the hassle of closing/opening bank accounts; it provides increased control and decreased loss; and it eliminates the time and emotional energy spent cleaning up a fraud mess.
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