Protecting your assets Don't let fraud put you out of business.

American businesses lose nearly $12 billion each year to check fraud. Small businesses are frequent and vulnerable targets. If you operate a small landscaping company, nursery or equipment shop, you could be at risk. Check counterfeiters, forgers and thieves thrive on stealing from small businesses. They often see them as "easy prey."

What should you know? Payroll checks are the most common target of check-fraud artists. Along with stealing, forging and cashing blank payroll checks, criminals can alter lost or stolen legitimate checks. For example, they can modify the payee's name or the amount of the check. Because the banking industry processes more than 60 billion checks annually, it is difficult to detect these types of fraud.

Criminals can alter checks in a variety of ways, including erasing information and retyping it; blacking out existing information and reprinting new information with a laser printer; or chemically washing the document to change the payee's name and check amount.

The widespread use and availability of high-quality desktop-publishing technology creates another avenue of crime--computer-assisted fraud. According to recent statistics from the government's Secret Service Bureau, the rate of this particular crime has doubled each of the past 3 years.

How does it happen? Most employers pride themselves on the ability to hire honest, hardworking individuals. Generally, you do not have to worry about your employees taking advantage of you, but rather someone else taking advantage of your employee's check.

Here's how it can happen: Your employee cashes his or her payroll check at a local check-cashing store. The unscrupulous proprietor of the service scans the check into a computer and proceeds to reproduce a nearly perfect copy of your company's payroll check. After a little more work, he or she is able to fabricate additional checks made payable to several different people. Within less than a week, 10 people who do not work for your company will cash checks at various locations throughout your city. (This is just an example and does not reflect the standard business operations of all check-cashing stores or similar institutions.)

What can you do? You should do whatever you can to protect your company from becoming a victim of fraudulent activity. Implementing the following check-fraud deterrents can help.

* Make a concerted effort to protect your checks. Do not allow your employees or anyone else access to them. Treat your checks as cash.

* Keep accurate records and verify your bank statements in a timely manner. Many banks have a 90-day time limit on making adjustments for mistakes, which can range from simple accounting errors to actual incidents of fraud. Track all the checks your company issues as vendors and as employees cash them; pay particular attention to payroll checks.

* Purchase and use checks that have built-in security features, which prevent them from being altered or copied. Look for check products that protect against both alteration and duplication.

Security features that discourage might-be offenders from altering your checks include colored pantographs, moire patterns and chemical reactants that produce stains and make alteration attempts obvious. In addition, micro-printing and watermarking features also protect against duplication as they are difficult or impossible to reproduce.

The check-fraud trend: It will continue Despite several decades of predictions of a checkless society, check volume has consistently continued to grow. Other payment mechanisms, including credit and debit cards as well as direct deposits, have complemented rather than replaced checks. As check use continues to rise, the incidence of check fraud will inevitably increase.

Your small business, however, does not have to fall prey. Follow the few simple yet effective steps mentioned here and take a proactive approach to protecting both your business and yourself.

Andy Bollman is a business manager for New England Business Service Inc. (NEBS Inc.) in Groton, Mass.

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