Protect your assets

Are you doing all you can to protect your assets? Investing in treasury management services from your bank is one way to protect your business from a financial loss.

“There is a range of services and pricing designed to help even smaller businesses protect their assets and manage their cash flow,” says Maureen Murman, vice president of treasury management services for FirstMerit Bank in Cleveland.

“Sometimes clients avoid these extra services because of cost, but in fact, as technology has improved, many services are not so expensive, and they provide a great deal of value in terms of efficiency and control. Having real-time information on activity in your accounts is very important so you can make informed business decisions.”

Smart Business asked Murman to offer insight on the type of fraud companies should watch out for and services that can help them better protect and manage their cash.

What is treasury management? Do all banks provide this service?
Specialists in cash management who help businesses manage and improve the efficiency of their cash flow process. We are involved in positive pay and other account security products and help business owners decide which services fit their needs, and whether their accounts are structured so they can take advantage of these services. Not all banks offer these services, but major commercial banks do.

Describe some common fraud cases. How easy is it to obtain a company’s account information?
There are creative ways of using technology to make fraudulent checks, and it is a huge problem in the industry. At one time, people would steal check stock or alter a check. But with newer technology, someone can obtain a company’s account and routing number and actually create checks. The bank can’t always tell that the fraudulent checks aren’t legitimate, and they clear. Routing numbers are easy to obtain; they are on the bottom of every check you write. If I pay you by check, you have all the information needed to create fraud on my account.

What about fraud on electronic transfers?
That is called ACH, or Automatic Clearing House, fraud. Someone can shop online and enter your company’s account and routing number. Though vendors are supposed to take precautions to prevent these transactions, some slip through.

How do business owners unknowingly set themselves up for fraud?
Many times, business owners either don’t know about their bank’s treasury management services, or they don’t want to pay for them. You pay a little for the service, but it can save a lot of money, time and lost productivity in the long run if you take steps to prevent fraud.

Also, many owners don’t divide duties among employees. In smaller businesses especially, we often see an ‘office manager’ handling accounts payable, receivables, payroll and bank reconciliation. The owner may even delegate his or her personal banking duties to the office manager. This much authority sometimes proves to be too tempting.

Finally, some owners don’t watch their accounts carefully.

What services do banks offer that can protect a company’s assets?
To prevent ACH fraud, a company can set up two accounts — one for paper checks and another for electronic transactions. The bank can block ACH activity on the paper account, and the company can be discreet about giving out its account information for the electronic account.

Banks also offer a service called positive pay, which is a process in which the company informs the bank (electronically) of all checks written and their amounts. As checks are processed, the bank matches the information provided by the company against the information on the checks being cleared. If the bank has no information on a check, it can reject it. This protects the company from check fraud.

Positive pay used to be expensive and difficult to use. It required technical knowledge to create the electronic files to send check information to the bank. Now it is easier and less expensive. It is the best service to prevent check fraud.

Any advice for ways to divide duties so one person isn’t responsible for all company financial matters?
If you can, delegate check-writing responsibilities to one trusted employee, and ask another key manager to monitor accounts online. Also, reconcile your accounts promptly.

If you don’t have enough staff to divide duties, outsource a piece of your treasury management to the bank to create another level of protection. Lockbox services are one solution. All checks are sent to a post office box and deposited by the bank. That way, you separate the checks received from the accounts receivable process.

MAUREEN MURMAN is vice president of treasury management services for FirstMerit Bank. Reach her at (216) 694-5637 or [email protected].