06 Apr MW Positive Pay Check Protection
MW Real Estate Group Protects Client Checking Accounts with Positive Pay
What is Positive Pay?
Positive Pay is an automated fraud detection tool offered by the Cash Management Department of most banks. In its simplest form, it is a service that matches the account number, check number and dollar amount of each check presented for payment against a list of checks previously authorized and issued by the company. All three components of the check must match exactly or it will not pay.
How does Positive Pay work?
Positive Pay requires the company to send (transmit) a file of issued checks to the bank each day checks are written. When those issued checks are presented for payment at the bank, they are compared electronically against the list of transmitted checks. The check-issue file sent to the bank contains the check number, account number, issue date, and dollar amount. Sometimes the payee name is included, but is not part of the matching service.
When a check is presented that does not have a “match” in the file, it becomes an “exception item”. The bank sends a fax or an image of the exception item to the client. The client reviews the image and instructs the bank to pay or return the check.
Why is Positive Pay Particularly Important for Property Management
Property management companies normally have one client bank account per property. If not one per property, certainly one per client. Checks for each of those properties are formatted in the property management software. The company buys blank checks and prints checks for each account as required for account payables. That includes all vendors, contractors, tenants for returned deposits, government agencies, and so on.
Now anybody who received a check or obtains one from someone who received one can easily mimic all the information on the check. As a bank will tell you, it is also possible to set up a bank account online with no ID or fake ID. More and more we are seeing instances of check fraud where someone obtains a company check, creates their own version of the client check in any inexpensive online bookkeeping software with word processor, then simply prints their own checks and forges the original signature.
With so many tenants receiving full or partial deposits refunded, or handymen receiving checks, the odds are that someone at some point will be defrauding your management company, and very possibly your management checking account. This once happened to one of our clients’ account and the amount stolen was $11,000 in $900 checks all cashed very fast one after the other at different banks. Our bank insured the funds, but it is never a good thing when it happens and your management company has to threaten a lawsuit to recover the funds. As we all know, insurance companies will do anything to avoid paying out.
Therefore, a security system such as Positive Pay is of paramount importance. Yet when you ask anyone in property management if they use it, the answer is usually no. Ask most people and they have for the most part never even heard of it. Moreover, it can be time consuming. Unless the management company is set up with the appropriate management software, it is not feasible to enter the all the necessary data into files to be uploaded into the Positive Pay system. Even with all the systems in place it adds a whole layer of additional data entry, not to mention bank fees.
With MW Real Estate Group, on the other hand, your hard earned rental income is 100% safe from any form of check fraud. Every single check we write is accounted for at all the levels of security: payee, check date, and check amount are verified as issued by us and uploaded to Positive Pay. In the event any check is presented which does not exactly match our input file, we receive an email for approval by 11am on the day the bank is presented with the check and the check is automatically rejected unless we approve. The service has always been free to all of our property management clients.
(The first two paragraphs explaining Positive Pay above are from Positivepay.net. For a nice description and definition also read this Chron description of Positive Pay)