You’ve been tasked with finding a new external auditor for your organization. You have identified…
Cheque usage poses a serious risk to businesses. While many have eliminated paper cheques, others still use this out-dated payment method and are likely unaware of the risks:
An employee of Teva Canada, a Toronto-based pharmaceutical company, fraudulently requisitioned 63 cheques totaling $5.4 million, payable to two fictitious entities and four Teva customers.
The employee had no authority to requisition cheques or approve payments. The cheques were processed and the funds deposited into bank accounts of the employee and his accomplices.
Teva sued the banks and argued that they should not have cashed the phony cheques, however the Courts ruled that the banks were not responsible for the loss.
This incident underscores why you should not pay suppliers with paper cheques: they can be lost, stolen, counterfeited, forged, altered and improperly endorsed.
Fortunately, all payments can now be made electronically – it is not necessary to use paper cheques and be exposed to substantial risk.
Cheques are also very costly. Scotiabank’s Cheque Cost Issuance Model shows that costs can be anywhere from $15-$25 per cheque. In some cases, it’s as high as $50 per cheque. And what if the cheque is lost or stolen? The company then may need to deal with a potential fraud issue and must pay to reissue the cheque.
Along with risk reduction, electronic payment methods offer many other benefits over cheques:
- Cheque printing, mailing and handling costs are eliminated
- Security and internal control is significantly strengthened, reducing chance of fraud and theft because EFT payment approvals utilize strong on-line banking security, instead of much weaker paper-based signature approvals. The EFT system should allow for a dual electronic signature requirement
- No need to store and secure blank cheques
- Clerical work and errors are reduced
- Ability to manage and forecast cash flow is improved. Payments can be set up with various due dates, and postdated for up to 35 days
- Stale-dated cheques are no longer a possibility
- Bank reconciliations are simplified, because there are no outstanding cheques to account for
- Payment approval process is streamlined. Payments are ready for approval immediately upon entry into the EFT system and can be approved from anywhere, anytime, by authorized signing authorities. Added benefit: when your signing authorities are out of the office, they can still approve payments easily from their smart phone!
- EFT is environmentally friendly. Paper & ink used in producing cheques and envelopes is eliminated, as is the carbon footprint resulting from the physical distribution of cheques
If you would like to find out more about how you can eliminate paper cheques and reduce business risk, or you need help improving operating efficiency, reducing costs and strengthening your organization, please contact me at 613-727-1230 ext. 212 or email@example.com