Did you know it takes the average business roughly 18 months to detect fraud? That’s an awfully long time – especially for a small business or a start-up that is just getting off its feet.
According to a 2014 report by the Association of Certified Fraud Examiners (ACFE), the typical organization loses 5 percent of revenues each year to fraud. If applied to the 2013 estimated Gross World Product, this translates to a potential projected global fraud loss of nearly $3.7 trillion. In addition to financial losses, fraud is known to negatively impact a business’s reputation and morale as well as an increase audit costs for an organization.
While the need for anti-fraud measures is apparent for most small business owners, the thought of implementing fraud detection systems that actually work can be overwhelming. Understanding what to look for and how to protect your business is critical to ensuring your operation is safe and secure.
Internal vs. external fraud
Business fraud boils down to two main categories: internal and external. Internal fraud is typically employee or partner fraud that includes skimming, redirecting, or misappropriating funds.
External fraud can range from simple credit card or check fraud to complex schemes that involve third parties and possibly even internal accomplices.
While nothing can eliminate the risk of all fraud, there are steps you can take to limit fraudulent activities. One of those steps is implementing a fraud protection system such as MidWestOne’s new Positive Pay services.
What is Positive Pay?
Positive Pay is a secure and powerful online tool that gives business the fraud protection and information management capabilities they need to monitor their bank account activity. MidWestOne offers three types of Positive Pay services that vary based on the level of involvement you want to have in the system. All three options are automated services.
You submit a check file daily to MidWestOne detailing pertinent information, such as check number, account number, payee, amount, and date. When checks are presented for payment, MidWestOne will then flag any data discrepancies and report them back to you. You, then, have the ability to make “pay/no pay” decisions on the checks that have been flagged and MidWestOne processes checks accordingly.
2. Automated Clearing House (ACH)
You submit criteria for ACH transactions that dictate any debit filtering or blocking that should occur on your account. When ACH transactions are presented for payment, you’re notified of any transactions that don’t meet your criteria. You, then, make “return/no return” decisions on the flagged transactions and MidWestOne processes ACH items according to the decisions made by you.
3. Reverse Positive Pay
You maintain a list of issued checks and MidWestOne sends the list of checks that have been presented for payment. You compare the lists and notify MidWestOne of any checks that need to be returned. You handle the corrections and MidWestOne processes the checks accordingly.
Fraud can have a detrimental effect on your business that can cause operations to come to a grinding halt. If you’re a small-business owner and you’re interested in learning more about how to protect your business from fraud, contact your nearest MidWestOne Bank or call us at 800-247-4418. Each service is available for a monthly fee.