A recent report that surveyed over 500 treasury practitioners by AFP (The Association of Financial Professionals) provides some sobering news – fraud attempts in 2023 were up 15% over 2022. Even more disheartening, 30% of the organizations victimized by fraud were unsuccessful in recovering their lost funds, and only 41% recovered at least 75% of their lost funds. Being victimized by fraud is tough for any organization, but it can be devastating for a church. While there is no fool-proof system to stop bad actors from trying to scam businesses, non-profits, and churches through fraud, there is a weapon that can help – Positive Pay.
What Is Positive Pay?
Positive Pay is a fraud prevention strategy that matches fundamental check information (check date, number, amount, and bank account number) for each check provided to the bank against a list provided for payment. It’s a very effective way to identify and block fraudulent transactions.
How Does Positive Pay Work?
For churches, Positive Pay compares the information submitted to the bank from the church to ensure that all checks that the bank processes are legitimate. This simple strategy provides a reliable means to validate transactions. Here’s an example: Let’s say your church pays its bills on Tuesday and issues five checks. The church’s financial personnel (probably the bookkeeper) provides the check details (number, amount, etc.) to the bank. As the recipients present the checks to the bank for payment, the bank verifies the information against the list the church submitted. As long as the information matches, the bank processes the checks. If the information doesn’t match, the bank contacts the church for further instructions.
Different Types of Positive Pay
There are various types of Positive Pay, each designed to address a particular kind of fraud. Setting up Standard Positive and ACH Positive Pay for most churches should cover the typical fraud types.
- Standard Positive Pay: Matches the check details like check number, dollar amount, and bank account provided by the church for each check it writes against the checks the bank is processing. When a discrepancy in the information arises, the bank contacts the church for verification and further instructions. It’s a simple yet effective way to stop fraudulent checks from processing.
- ACH Positive Pay: Similar to the Standard Positive Pay, ACH Positive Pay relies on the church to provide criteria for processing ACH transactions. To stop bad actors from processing fraudulent ACH transactions against the church, ACH Positive Pay allows the church to set up payee lists and transaction amount limits. It can even go as far as requiring approval for each ACH transaction.
Pros vs. Cons of Positive Pay
Every church wants to know if “the juice is worth the squeeze” when adding anything new to its plate. Comparing the Pros vs. Cons is the best way to determine if Positive Pay and ACH Positive Pay are right for your church.
- Pros: The primary reason for a church to consider Positive Pay is simple: it prevents fraud and protects the church from financial harm. Positive Pay immediately stops unauthorized transactions.
- Cons: Some financial institutions charge fees for the protection Positive Pay provides. On top of the bank fees, Positive Pay requires additional administrative work.
Considering the 15% uptick in fraudulent transactions over the past year and that 30% of those victims never recovered their funds, it’s time to implement an effective and simple tool to thwart these bad actors. Positive Pay and ACH Positive Pay provide the protection needed to verify transactions stopped fraud before it happens. Churches need to weigh the cost to see if this is the right tool to prevent this type of financial harm.
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