The No. 1 protection against fraud is frequent reconciliation.
In order to identify a scam or fraudulent activity you need to be aware of the activity in your accounts.
It is not enough to simply assume that fraud could never happen to you or your company. In today’s environment security experts say it’s not if, it’s when. Being on the offensive, and keeping track of your accounts will ensure that you will not fall victim to a scam that wipes out your funds.
Often when people talk about reconciling accounts, it is a monthly event. In other words, every 30 days a business reconciles its account to look for internal errors. There is danger, however, in only reconciling your business accounts on a monthly basis because money is the lifeblood of your company.
Daily reconciliation ensures that errors, audit issues and even potential fraud are identified immediately, and the sooner errors are discovered, the easier it will be to rectify the situation.
Consider that if cyber thieves hack into your bank account, they could wreak havoc in a few days’ time.
National Public Radio not long ago covered a story regarding cybersecurity for businesses in which one business owner said his account was hacked and multiple fraudulent transactions were made over a number of days. The bank allowed the transactions to go through and never notified him even though the amount, location, and time of the transactions was not normal activity for his account. By the time he realized the theft and contacted the bank, he was out hundreds of thousands of dollars, which the bank refused to return to him because it was a business account.
Business accounts are regulated differently than consumer accounts. For example, the federal regulations that protect consumers from fraudulent theft of account funds do not cover business accounts. Instead, commercial accounts are covered under the Uniform Commercial Code (UCC). There are various sections of the UCC that cover banks’ liability in regard to fraud, and basically, the provisions allow banks to require businesses to report errors and fraudulent activity in a shorter time period than that afforded to consumers.
In many cases, errors must be reported to the bank within 24 hours; however, banks can use contractual agreements to shorten the reporting time even further. If a business does not reconcile accounts daily, it may find out too late that fraudulent activity has taken place.
Waiting to reconcile your accounts on a monthly or even weekly basis is not sufficient for today’s business owners. In today’s online world, there are entirely new variables to consider. Cyber threats are becoming more prominent and sophisticated; they can be subtle and go undetected for long period of time. Keeping a daily tab on your accounts can help ensure that thieves cannot run away with your money.
– Richard M. Reass