To prevent check fraud in a small business, lock up blank check stock, limit who can print checks, split approval from payment, review your check register, reconcile every month, shred spoiled checks and confirm payee or bank-detail changes by phone. Add bank alerts, and ask your bank about positive pay.
None of these controls is expensive. Most cost time and habit, and together they close the gaps that fraudsters use most often. This guide shows what to do, in order of payoff.
How does check fraud usually happen?
- Stolen blank stock or a stolen check: a thief fills in a payee and amount.
- Altered or washed checks: a real check is changed after the fact, with a new payee or amount.
- Counterfeit checks: a copy carrying your routing and account numbers.
- Forged signatures: a signature that is not yours or not authorized.
- Mail theft: an outgoing check is taken from a mailbox.
- Impersonation: someone pretends to be a vendor or a manager and asks you to pay a new account or payee.
Notice that only some of these need a thief to touch your paper. Several can happen with nothing more than your account and routing numbers, which are printed on every check you give anyone.
What are the most useful controls?
| Control | What it stops | Effort |
|---|---|---|
| Lock up blank check stock | Theft of unused checks | Low: a locked drawer or cabinet |
| Limit who can print checks | Unauthorized issuing | Low: decide on one or two people |
| Separate duties | One person hiding a bad check | Medium: split writing, approving and reconciling |
| Review the register | Unknown or duplicate checks | Low: a few minutes a week |
| Reconcile monthly | Altered amounts, forged checks | Medium: once a month |
| Call to verify payee changes | Impersonation scams | Low: one phone call |
| Bank alerts | Late discovery of fraud | Low: set up once |
| Positive pay | Counterfeit and altered checks | Varies: bank service with fees |
How should you protect blank check stock?
Blank check stock is a ready-made fraud tool, since it has security features and nothing but a space for a payee and amount. Store it in a locked drawer or cabinet, keep a running count of sheets, and record who took any out.
Shred spoiled or misprinted checks. Do not throw them in the trash, because the routing and account number are on them. Write VOID across any check you cancel and keep it with your records. See how to void a printed check for the steps.
Who should be allowed to print and sign checks?
As few people as the business can run with. If more than one person must print, make sure each one knows the rules for payees, amounts and approvals. Never share your login with someone who does not need it, use a strong, unique password and sign out of shared computers.
If you are the only person in the business, ask a trusted outsider such as a bookkeeper or a spouse to look over the monthly statement. A second pair of eyes catches mistakes you have stopped seeing.
What is separation of duties?
Separation of duties means no single person controls a payment from start to finish. One person approves the invoice, another prints and signs the check, and a third reviews the bank statement. In a team of two or three, you can still divide the roles.
- The person who orders or receives goods and services does not pay for them.
- The person who prints the check does not approve invoices.
- The person who reconciles the account did not write the checks.
- The owner reviews a summary of checks every month, even if someone else does the daily work.
How do you spot altered or washed checks?
A washed check often has a blotchy or discolored area, uneven ink, a payee line that looks lighter or darker than the rest, or an amount with different handwriting or print. Look at the images of paid checks in your online banking, since they show the payee and amount that were actually paid.
Compare each paid check with your register: same number, same amount, same payee. Anything that does not match is worth a call to your bank right away. Security features in the paper make washing harder, as covered in check security features explained.
How should you handle payee and bank-detail changes?
Treat any request to change who gets paid, or to send payment to a new address or account, as a warning sign, especially if it comes by email or text. Fraudsters copy real invoices and letterheads and add a new account.
Call the vendor on a phone number you already had, or one from your own records, not one in the message. Ask a question only they would know. If you cannot reach them, do not change anything. More examples are in how to avoid check printing scams.
What about mailing checks?
Outgoing mail is a common target. Drop checks at a post office or inside the post office's collection box, not in an unlocked mailbox with the flag up. For large payments, hand them over, use a trackable service or ask the payee if there is another way to pay.
How do bank alerts and reconciling help?
Alerts for large debits, low balances and new payees mean you hear about trouble in hours, not weeks. Review your account online several times a week, and reconcile every month, matching each check number, amount and payee to your register.
Deadlines for reporting problems can be short, and they are set by your account agreement and applicable law. Report anything suspicious to your bank immediately. If you find fraud, call the bank, ask about stopping payment on any unpaid checks, close or change the account if needed, and keep copies of everything. Consider filing a report with local police.
Should a small business use positive pay?
It can be a strong layer if you issue many checks or large amounts. It does cost money and attention, so it is not a must for every business. Read what positive pay is and ask your bank about availability and fees.
Check Writer 123 is made by the publisher of this site. Every printed check is saved in a searchable register with its own activity history, and you can download the register as a CSV for your monthly review. A saved check can be reprinted without a new number, and deleting one takes a typed confirmation, with deleted checks held in an archive for a year. Read how we protect your account on the security page.
A simple monthly routine
- Count your blank stock and compare it with your records.
- Download or print the register for the month.
- Match each check number, amount and payee to the bank statement.
- Look at images of paid checks for altered amounts or payees.
- Investigate gaps in check numbers and any unknown item the same day.
- Shred spoiled checks and file the voided ones.