Check fraud is the easiest to commit and often delivers the highest value payment for criminals . The fraudsters use what is known as paper hanging to write checks on closed accounts . Checks are less common than they used to be , but some businesses still have a lot to gain by accepting checks . The main challenge is simply avoiding that bad check . You never know if your client has money in their account and a bad check is expensive for any corporation . Bounced checks cost businesses bad-check fees , plus the time and cost of collection , if any collection . They can be an even bigger problem for smaller companies that do not have the healthy cash reserves or margins hefty enough to survive several bouts of bad checks .
It is critical that good procedures related to your check processing process are in place . These steps need to be in order for all employees handling incoming payments . There are ways to protect your company and the steps below will help you and your business get a new check fraud plan in motion or update your current plan .
Stop Accepting Checks This is the most drastic action , but it will protect your company from ever receiving a bounced check . You know your business best , so you will have to make the call whether this is a practical option .
Accept Local Checks Only Stick to checks that come from customers who live in the same state as your business . Understanding people move and your client base might be on vacation , but the risks are higher with an out-of-state check .
Accept Only Cashier ’ s Checks A cashier ’ s check offers the greatest protection to the recipient as they can ’ t be reversed . Cashier ’ s checks are treated as guaranteed funds because the bank , rather than the purchaser , is responsible for paying the amount . The same goes for a wire transfer to your company ’ s bank account . Money orders and electronic fund transfers are not guaranteed ; you can put a stop payment on either transaction just as you would a check .
Watch Out For Low-Numbered Checks Usually , a low number means a new account . The odds are increased that these low-numbered or starter checks are fraudulent . Of course , a low-numbered check is not inherently bad , however statistically , the incidence of bad checks raises with low check numbers .
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