Banking Technology: Good or Bad for Consumers?
In the last year, numerous banks have developed apps for the IPhone and/or Droid to assist depositors with depositing checks to their accounts. The depositor simply opens the app and then takes a picture of the check. The check amount is then deposited to their account.
I was recently reconciling a client’s business checking account and discovered that a payroll check had cleared the bank on the current reconciliation. What was odd was that it had also cleared the previous month. Same check number, amount, etc. When I began researching with the bank why it had cleared twice, I was informed that it was processed through the banking app. Of course the employee denied any wrongdoing and that it was simply an oversight on their part. While this may or may not be true, it brings home several issues related to business banking and protecting your accounts.
Recently, I have had discussions with various banks concerning this issue and have been assured that it would not be possible at their institutions since they have limits in the amount that can be deposited and safeguards to ensure that a deposit could not be made twice. Even the bank that processed this check twice assured me that it would be impossible for it to occur. After showing them the transaction that occurred, they began to backpedal on the ability to prevent this from occurring all the time. However, as a business owner, you can take steps to prevent it by incorporating the following procedures:
- Checking accounts should be reconciled on a monthly basis at the minimum. Since online banking makes it so easy, I have some clients reconciling on a daily or weekly basis. This allows the company to identify issues that occur with the cash account and take immediate action to correct them.
- Set up a separate payroll account and maintain a maximum balance of $100. Fund the account for the current payroll only. This will prevent multiple deposits from the same check from clearing provided you have instructed your banker not to overdraw the account.
- Use automatic paycheck deposit for your payroll. Another client I have encountered an instance where the boyfriend of one of their employees copied the checking information from the paycheck, had checks printed and then cashed them as payroll checks. Payroll was being paid through the operating account at the time and he managed to steal over $30,000.
- Allow for only 1 or 2 signers on the account. The primary signer should always be the owner, and a secondary signer should be designated for emergency situations only. This gives complete control of the cash account to the owner.
- Bank statements should be opened by the owner only. This gives the owner a chance to review the cash that has come into and gone out of the company. Also request the photo image of each check with the statement and review the signatures.
Remember, cash is the lifeblood of any business and cash is king! Guard it carefully!
