Are You Using Cheques to Pay Your Bills? Question is – Why?

Is it Safe?

The first question people ask me when I suggest only an online bill payment service is this – is it safe?

The question I ask – do you think it is safe to pay by cheque? And, if yes, why?

Let’s look at the facts. The Association for Financial Professionals (AFP), not an association with an agenda one way or another, and rather conservative, given its nature, reports these two stunning facts:

  1. Fact One – payments fraud reached a record high in 2017 – 78% of organizations were impacted by fraud in 2017.
  2. Fact Two – and here is the corker – and I am quoting now word-for-word from their report – “checks [or cheques for us Canadians] were subject to more payments fraud than any other payment method, a staggering 74% of finance professionals report that their organizations’ check payments were exposed to fraud”.

So, again, why is it that people think cheques are safer to a very high degree? Perhaps it’s the same reason people like to read paper books not a Kindle-Reader. They can feel the cheque in their hands, see it, actually take a pen and sign it.

Here’s the problem – you can have 3 valid signatures all over that cheque, and once it leaves your desk, it is out of your hands.

Someone internally – God forbid – could intercept it. Ok, you feel that would never happen in your company. Great!

You Have Zero Control Over a Cheque

But what happens when it leaves the premises and hits the mail system. It can intercepted by anyone at that point.

And what do they do with your beautifully printed, logo embossed cheque? They alter it with advanced chemicals that wash it clean and they re-do. Cheques can be forged from scratch too.

Many businesses have single-signing cheque authorization – in other words, only one person, usually the owner-manager needs to sign. No counter signature is required.

Online Payments Gives You Back Control & Safety

Compare this to an online bill payment service. Because it is online, you could easily have 3 signers because no one needs to leave their home or office to sign! It can be done fast – no running around chasing people for counter signatures.

So, couldn’t someone just logon to the payment platform and sign in as you and start the fraud that way?

Well, imagine that they could for a minute…

They first need to know your user name (often your email and that part is easy enough) to login, but they need your password too!

OK, so we will assume the worst and imagine that they got hold of your password too.

Now, they also need your cell phone, because with two-factor authentication, before finalising your login the system sends a 6 digit code to your cell phone for you to entre online before you can get in the online system to start the payment process.

Well, if they have your login, password, and cell phone and setup a fraudulent payment online, the next person in the approval matrix would have to approve that payment too!

After everyone has “e-signed” the “cheque” it will be sent through the Internet in a highly secure manner. For me to describe the security involved here would take a dozen blogs…

Here is a sampling – there is end-to-end encryption – the data is garbled and cannot be read enroute from bank to bank. The banks also use complex algorithms to determine legit logins to verify payments.

Perhaps it is possible to create an online fraud with virtual cheques, but it would require a highly complex combination of stolen passwords, cell phones, collusion, and insider crooks inside the bank that maybe, maybe find a way to bypass controls.

Do You Still Want to Write a Cheque?

So, knowing how much fraud happens with cheques and virtually none paying online, do you still want to write a cheque?

The bottom line is this – if you do your own survey of financial professionals (controllers, accountants, advisors) and ask them if they have encountered actual or attempted cheque fraud, I bet you will find the overwhelming majority have. I know I have – more than once.

Now, ask the same group if they have ever witnessed online bill payments fraud.

(By the way, I am referring in this blog only to the online bill payment process. It is possible you can pay a bill you shouldn’t pay to a fraudulent vendor. That can and does happen. There are different ways to prevent that problem. I will write about that in a future blog).

I would guess that no one in that group has ever seen an online payment fraud where a cheque meant to pay a supplier was interceded and went to another party. In other words, the cheque was altered, and your vendor never got paid.

And, when your vendor doesn’t get paid, they will come to you and not care if that cheque didn’t arrive. You will find that you still owe them for the goods you purchased.

They Don’t Do Cheques Any More Down Under

I recently talked to a banker from Australia and he said they don’t do cheques anymore in the entire country.

I was stunned. You mean “the entire country!” “How does that work”, I asked?

Well, he said, you could technically still print and mail a cheque, it is just that bank will charge you $50 per cheque!

That’s a nice incentive to get completely away from paying cheques.

In fact, right now for most of our clients the entire cycle of Purchase Order to Vendor Bill to the Data Entry to the Online Payment is 100% online with not a single piece of paper being printed.

It is safe, secure, fast, accurate, and complete. It means you know where you are at in your business at all times in real time. No more waiting for month-end cut-offs, or bugging vendors for bills, or chasing paper for approvals, or chasing cheque signers, stuffing envelopes and hoping the cheque gets to where you intend it to.

If you need one more incentive to go completely online for payments – Canada Post. 😊

Thanks for reading….