In its most basic form, Positive Pay allows the bank to match issued checks that are clearing your account to a clearing file presented by the bank. The system helps detect fraudulent checks right when they’re presented – so they can be stopped before they are paid.
When your company issues checks, the issue file sent from your system contains specific details about each check, like the check number and dollar amount. The issue file is saved in the bank’s processing system indefinitely. When a check is cleared and posted it is compared to the issue file.
If any discrepancies are found, the check is flagged and placed on a Positive Pay “exception” list for your review. You can then decide to pay or not pay by a specific deadline on the clearing day.
One advantage of Positive Pay is that when a discrepancy is discovered, it may help to prevent fraudulent activity on your account. Positive Pay can also help with your account reconcilement by clearing mistakes on your account. For example, if your company issues a check and there is an image capture issue or encoding error, you could end up paying too much or too little on the check. Positive Pay can catch these encoding errors before they end up costing you time and money. You will also have the ability to void checks and monitor ACH activity.
First Federal Lakewood offers Positive Pay with all of our Business Online Banking accounts. It’s a simple yet powerful way to safeguard your business against the most common types of check and ACH fraud, as well as unintentional errors.