Positive Pay

A business issues cheques and worries that one might be altered or forged, so positive pay gives its bank a record of valid issued cheques. When a cheque is presented, the bank compares it with that record, and a mismatch goes to an exception queue according to the service rules.

The Washington State Auditor explains the check-fraud use of positive pay, and Regions Bank describes bank-specific features, including check and other options; these sources show the concept and one provider's implementation, so a customer must read its own bank's agreement to know fields checked, deadlines and what happens when no one responds. A typical issue file contains cheque number, date and amount, and a payee-match service may also compare the payee name when supported and supplied accurately.

Without payee matching, a changed payee might not trigger the same check, so ask the bank which details it actually verifies. The business should send issue data promptly after printing cheques, because a valid cheque that reaches the bank before its details are uploaded may appear as an exception, and a late or inaccurate file can generate many false alerts, so the workflow should reconcile cheque issuance with the bank's submission record.

Exceptions need a named reviewer and cutoff, since the bank may require the account holder to mark each item pay or return by a time each business day. The default for no decision varies by service, so a missed deadline can mean a legitimate cheque is returned or a questionable one is paid, depending on terms.

The reviewer should inspect the presented image and supporting records rather than automatically approving familiar cheque numbers, because a number can match while amount or payee differs; verify who issued the cheque, whether it was voided and whether the underlying obligation is valid, and keep the decision and reason recorded. Voided or cancelled cheques should be reflected in the issue file or a separate stop-payment process, as the bank requires, because positive pay does not automatically replace a stop payment.

A printed but never mailed cheque might still be presented if stolen, so check the bank's instructions for reversals and duplicate serial numbers. Electronic payments such as ACH or direct debit are not automatically covered by check positive pay, since a bank may offer ACH filters or blocks as separate services; confirm the exact payment rails, originator rules and exceptions, and do not tell staff that turning on cheque positive pay protects every bank transfer.

The control also depends on internal approvals, because a fraudulent employee who can issue a cheque and submit a matching issue file may bypass a simple match. Separate cheque creation, issue-file upload and exception decisions where possible, reconcile bank activity independently, and remember that positive pay is one layer in a broader payment-control system.

For illustration, a company issued 500 cheques in a month and the bank flagged five mismatches, an observed exception rate of 1%, which does not mean all five were fraud or that no unflagged cheque was problematic, so investigate each exception and test whether issue data was accurate. Keep authorised signers informed: if an approver is on leave, someone else must handle the queue before the deadline, and credentials should never be shared to solve the gap, so use bank-supported substitute users and dual review for high-risk decisions and document who can release an exception.

Positive pay compares what the bank sees with what the business says it issued, and it can catch altered or unissued cheques if data and reviews are timely. Confirm payee and electronic-payment coverage separately, because the strongest setup combines matching, independent decisions and daily reconciliation.