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6–8 Negotiate Faster Deposited-Check Availability
not normally a major problem, some companies can lose a considerable amount
of money to fraudulent activities by this means.
A few banks now allow a company to use a program called ‘‘positive pay,”
which virtually eliminates check fraud. This best practice works by having a
company send to the bank a daily list of all checks issued, which is usually stored
in a specific data storage format that the bank can use to update its files of autho-
rized checks it is allowed to cash. All presented checks are compared to this mas-
ter list, with both the check number and amount being reviewed. If there is a dis-
crepancy, the check is rejected. By using this method, check fraud can be
completely eliminated.
A less expensive version of the positive pay system is one where the flow of
information is reversed, going from the bank to the company. Under the reverse
positive pay system, the bank faxes to the company a list of all checks presented
that day for payment. The company then reviews this list for any checks it does
not wish to honor and informs the bank of its decision before the close of busi-
ness that day. If the bank receives no notice by that time, then all checks on that
day’s list are honored for payment.
This best practice is being used only by a small number of companies, for
several reasons. One is that few banks currently offer the system (and usually
only large ones). Another problem is its cost. Even if a participating bank is will-
ing to provide the service for free, there is still a cost for the company because it
must pay to store check data on a tape and have it sent to the bank, usually using
an expensive overnight or same-day delivery service. Finally, a major problem is
that a company must make sure that all checks are included in the information it
sends to the bank, or else some checks may be rejected for payment—this can be
a major problem if manual checks are not immediately loaded into the account-
ing database. Consequently, positive pay is only useful in a minority of situations.

Cost: Installation time:

6–8 NEGOTIATE FASTER DEPOSITED-CHECK AVAILABILITY

One of the standard tricks used by banks to create a larger store of funds that they
can invest is to delay the availability of money from deposited checks. One can
see delays of as long as five days for some checks, and much longer periods for
checks drawn on international banks, even though the checks may have cleared
much sooner. As a general rule, if checks are not clearing the bank within two
days, then it is time to either negotiate with the bank to reduce the amount of float
it is taking or to switch to another bank that is willing to make money available
within a shorter time frame.
This option is not a realistic one for smaller businesses, since they have min-
imal leverage with their banks. Also, some companies that deal with many out-
of-state customers will experience a much slower actual check-clearing time than