|Methods and techniques|
Positive pay is a cash-management service used to prevent checks-related fraud. Generally, bank uses positive pay to match the checks that a company issues with those it presents fr payment. Positive pay can be one of the alternatives used in companies to prevent fraud such as cashing such exchanged checks.
How to Positive Pay works?
- One of the parts of the company's business is issuing checks as payments for services rendered. Checks can be paid to employees, suppliers, sellers and other companies from whom the company purchases goods and services. However, if security checks are not carried out, identity thieves and fraudsters can create false controls that can be reported to the bank, where, if nothing is wrong, false payment claims can be honored. In order to protect against theft, the company may adopt a process called positive pay.
- The company issuing the check creates a file containing the number of the check together with the date of its creation and the amount of all checks which it issues each day and sends the file to its bank. In the next stage, the bank compares information about checks in a file created by the company with checks submitted for payment and refuses to accept checks containing different information. This approach is considered one of the most effective ways to prevent fraud. Some banks offer a more advanced system of positive remuneration, thanks to which a company can view digital images of unique items on the internet and enter a pay our return decision on the spot. An improvement on the basic positive pay concept is for banks to also offer positive pay that includes the name of the payee, which keeps anyone from cashing a company check on which the payee name has been altered.
- For those companies that do not want to spend time issuing a check file to the bank whenever they issue checks, reverse positive pay in the solution. Under this approach the bank creates a file containing information about all checks presented during the day, and sends it to the issuing company. Ideally, the company reviews the file and approves only those checks for which it has matching information. in reality the bank can wait only a short time for the company to review the file, and then accepts, all checks if it is not otherwise notified by the company- which makes this a weaker control than positive pay.
Problems with Positive Pay
- If the person responsible for payment forgets to send a file with new checks to the bank after each check run, each check will be rejected by the bank for that period.
- If the person responsible for the obligations, forget to include the retention of payments in the file, invalidated checks and manual checks, then the checks can be settled on the basis of the company will not be clear and vice versa.
- If the bank updated its files with new incoming positive pay information only during an overnight batch process, then anyone taking a check directly from the company to the bank to be despite at once may find that the check will be rejected.
Benefits of Positive Pay
By using the positive payment function, you can automatically create a positive payment file from the system, for example from the payment register and send it to the bank. The bank will not complete the payment if it is presented and does not match the information about the positive payment. There are many default formats that are available and can even be customized for specific banks. Another advantage of a positive payment is that it stores a history that contains detailed data. You can also use history to play a positive payment file for your bank.
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Author: Justyna Galon