What mitigating controls should we have in place if we go to electronic signatures on checks? How are companies doing electronic signatures. jpeg in the
Mitigating controls for using electronic signatures on checks
Answers
Kim
If your plan is to continue to use your current accounting/ERP solution, perhaps start with asking them what auto check signing add-ons they offer. That functionality will influence controls you need.
Firstly, look at your software's payment process: who has user access to approve a payment run; do you have tiered approvals for high value payments, including a second signature. Are you large enough for a
Secondly,instead of e-signing checks, what about innovating and moving to ACH payments? That process essentially assumes "electronic signing" because authorized users initiate the ACH process to pay the vendor and transmit the file to the bank. It also saves envelope stuffing, postage, bank rec time.
Finally, if you are a global company, your EU colleagues probably are asking you "what is a check?" because they switched to electronic payments long time back.
Best regards
Len
1
Len,
I found your last statement very humorous, because I have dealt with EU entities for years. When they really annoyed me, I sent them a check. They would first be confused; then pushy for payment and then finally get the point I was making...
If only our banking system would wake up, eliminate for the most part paper checks, stop charging absurd fees for ACH/Wires and go to IBAN - one could hope...
Len's answer is complete as to your options, but ACH may provide the greatest controls with the least effort as set-up and payment file release are the critical control points,and added steps for E-signatures are not required. Tiered approvals based on payment size should be part of the authorization process prior to payment by ACH or otherwise.
Wayne...I share your sentiments about the US banking system. Some banks get it, but far too many are still operating in the 1800s I think. But, why don't controllers and treasurers demand more of their providers and force fees down? How much effort/cost is wasted in tracking unpresented checks?
Payment methods are changing rapidly, smart phones are becoming payment devices. Why persist with checks? I know there are some rare occasions to use a check, but if you set up your vendors the right way, you can go electronic from the get go. If a vendor closes their account and my ACH is returned, it's their problem.
Perhaps some controllers/treasurers could share their stories about the true cost of paying by check/mailing the envelope/tracking un-presented checks etc. compared to electronic payments,
Glad to see this question and the posts since this is exactly what one of my key clients is going through right now. They use a web-based app called Financialforce (FF) which was built natively on Salesforce's force.com platform. FF's genesis was "Coda2Go" which came out of the U.K. and the EU-based Unit4 companies. When I first started implementing this app for clients in 2009 Len's comment about EU companies asking "what is a check" was so apropos! FF really hadn't considered the check creation process thoroughly in the first roll-outs of the app in the U.S. Cutting a check was a real challenge! Fast forward 3 years later and what do most U.S. companies want to do? Figure out how to do an ACH file . . . Fortunately, bank format files created and pushed out of web-based apps like FF via API's are easy to do but - as Wayne points out - the U.S. banking system is the real "bottleneck" at this point. Nevertheless, we're forcing the bank to deal with it!
Kim, I love that your company is doing alt energy/biofuels. It looks like it is similar in size to the client I've mentioned that is going ACH right now. As Len suggested, if your current ERP or back end application has the bandwidth, you may want to consider ACH as the primary way to make payments. We did the cost-benefit analysis and determined that the ACH process would increase efficiencies and reduce costs by approximately 43%, which was significant enough to justify going that route. The setup is taking some time (there are over 500+ vendor-type accounts and they add to that all the time), but we're streamlining the process by requesting that every vendor complete an easy online web-form that pushes their ACH bank account data securely into the Salesforce/Financialforce apps immediately upon submission.
Recognizing that there will, of course, always be the need to cut a "manual check" however, Len's suggestion to look first to your accounting application and its limitations or offerings is a good one.
All good answers - I would add, if you are still stuck with checks, that yes, you can build the signature into your software app that is running your checks with some sort of controls on that, and second, whether e-signed or hard signed, you can send a positive pay check file to your bank that is "approved" and transmitted to the bank separately by your staff at the right level, to ensure that the electronic check runs approved and printed is what is clearing on the bank - old, normal controls banks offer. Any checks not in the positive pay file sent to bank are bounced out. If you go to simple ACH or electronic bill pay, take a look at authorization levels (so that larger payments require second approver), and see if you can segregate bank reconcilliation person from the payer on the account as small ideas that help control.
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