Why Positive Pay Could Help Protect Your Small Business

Author: Lisa Steiger, Treasury Management 12/15/2022

Fraud is an ever-present concern for businesses of all sizes and industries. Even one instance of fraud can have detrimental financial and reputational consequences. To avoid fraud and its effects, businesses need strong anti-fraud tactics in place. This means investing in tools to help detect and prevent fraud. One of the best ways to combat payments fraud–specifically, check and Automated Clearing House (ACH)-related fraud–is through a tool called Positive Pay. Below, we’ll cover the basics of Positive Pay and its benefits.

What is Positive Pay? 

Positive Pay is a fraud-monitoring tool that helps protect companies from fraud associated with checks and ACH payments. The goal of Positive Pay is to catch fraud before it impacts your business. When Positive Pay detects a suspicious transaction or finds an item you did not preauthorize, you will be notified to review it. From there, you can elect to return the transaction.

Positive Pay Provides an Extra Level of Security  

Advancements in technology have made it easier for fraudsters to alter, forge, and counterfeit checks. In addition, ACH payments are an attractive target for fraud because fraudsters only need two pieces of information to commit ACH fraud–a routing number and a checking account number.

When it comes to protecting your company against fraud, prevention is key. Think of Positive Pay as a security checkpoint for checks and ACH payments. With Positive Pay, every check that’s presented for payment is inspected and verified before it’s cleared.

Here’s how Check Positive Pay works:

  • Every time you issue checks, you log in to the Positive Pay platform and upload a check-issue file that includes information–the check number, issue date, dollar amount, payee name and account number–for every check your company has issued since the last check run.
  • When checks are presented for payment, Positive Pay compares the check number, issue date, dollar amount, payee name and account number of each item with the information in your check-issue file.
  • If there is a discrepancy between a presented check and your check-issue file information, the check is flagged as an “exception,” and you are notified to review it.
  • You can either approve or return the transaction to the sending bank.

Similarly, every ACH transaction must meet specific criteria before it’s processed. Here’s how ACH Positive Pay works:

  • Business users set custom filters or rules to determine “normal” account activity.
  • If an ACH transaction occurs outside of your specified parameters, the system will alert you and you can approve or return the transaction.

Positive Pay Helps Reduce Your Risk of Financial Loss  

Fraud is not only a headache to deal with, but it can also cost your company a lot of money, affecting your company’s ability to grow, invest, and expand.

Payment fraud, unfortunately, is widespread. According to a survey by the Association for Financial Professionals (AFP), 71% of surveyed organizations experienced payment fraud activity in 2021. Additionally, checks and ACH debits were the payment methods most susceptible to fraud. Sixty-six percent of organizations reported incidents of check fraud and 37% reported incidents of ACH debit fraud in 2021.

Besides monetary losses, dealing with fraud can also be time-consuming and tedious. Filing a police report, closing your account, and redirecting funds to a new account are just some of the hassles you’re likely to encounter after a fraud event.

Positive Pay is Easy to Use 

You can access Positive Pay through your bank’s online banking platform. Most banks even offer Positive Pay on their mobile banking app. This means you can use the tool anytime and anywhere you have internet access.

All in all, the daily upkeep of Positive Pay is generally very minimal. Most accounting software programs give you the option to generate a check-issue file that you can export and then submit to Positive Pay. On the other hand, if your company issues a small number of checks, you can simply log in to Positive Pay and manually input your issued checks. After submitting issued checks, most of your work is done. Only transactions that get marked as exceptions need to be reviewed. With ACH Positive Pay, the daily work is even easier, as your parameters for acceptable ACH payments are already set. All you need to do is ensure your ACH filters are up-to-date and review any ACH exception items.

Another useful feature of Positive Pay? You can have as many authorized users as you would like. These users can access the platform, upload check-issue files, and provide decisions on exception items. Having multiple users is especially helpful during non-bank holidays, like Good Friday or Christmas Eve. Moreover, if you’re traveling, on vacation, or just too busy, you can rest easy knowing someone else can provide coverage.

No business is immune from fraud. That’s why it’s vital to have a trusted banking partner who can help you protect your business’ finances and reputation. To learn more about PlainsCapital Bank’s fraud prevention services, including Positive Pay, email us at treasurymanagement@plainscapital.com.

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