November 2, 2020

Successfully Completing A Check Run in Accounts Payable

What is a Check run?

A “check run” or “cheque run” refers to the most important step of the accounts payable process where payments are approved and executed in order to pay invoices in a timely manner. Check runs can be processed either as a batch of payments, or as individual payments. Historically, they are defined as payments by paper check, however today, the term also applies to electronic payment processes.

Check runs are labor and time intensive, therefore they are typically done once a week, or even once every two weeks. The drawback to infrequent check runs is that payments are approved and dispatched sometimes weeks before they are due. This can result in payments being out-of-sync with deposits. Ideally, payments should be approved and distributed only when due and after the company is confident that deposits are made.

Here are five strategies to help manage your accounts payable process:

1. Simplify your accounts payable process

  • Modify your check run approval workflows to remove labor and time intensive steps. Wherever possible, remove paper issuances and replace them with electronic documents.
  • Ensure invoices are approved before they are signed.
  • Make sure to track your payment workflows so you can select the most important invoices to pay, while rescheduling others that are not as time sensitive.
  • Once done, increase the number of check runs to maximize cash flow.

2. Add safety procedures: Reduce risk of accounts payable fraud

Payment fraud attacks are the ‘new normal,’ and advancements in technology have opened the doors for fraudsters. 81% of companies were targets of payments fraud in 2019 alone, while 74% of organizations experienced payment (ACH, wire and check) fraud in 2019–up from 70% in 2018.

Implementing procedures and policies can safeguard your business and mitigate risk. Make sure to have a system in place for each payment workflow step within your accounts payable process. Authorized approvers, customized workflows and added security such as positive pay will help reduce the risk of payment fraud.

Also validate that each outgoing payment is to an authorized vendor or legitimate recipient. Fraudsters often submit illegitimate invoices in the hope of getting paid by mistake. Be alert to false invoices.

3. Use technology to be more efficient

Using accounting software to manage, approve, and to review paid and unpaid invoices can help you manage your accounts payable more efficiently, while reducing errors such as incorrect data entry, amounts, and check numbers used to pay vendors.

Payments software should gather payment data directly from the accounting application to reduce errors and fraud. Mobile approval applications can increase the productivity your business by substituting paper related workflows with anytime, anywhere remote approvals. A mobile app is also a great way to gather authorized signatures, if paying by check.

4. Streamline the approval workflow process

A Chief Financial Officer (CFO) or Controller typically signs approved checks, but that person shouldn’t be the one assembling the check run. The Accounts Payable department should run the aging report, choose which invoices are ready for payment, assemble the payments, release the electronic payments or print the checks, and verify that all invoices are approved before payments are released for payments.

In instances where a check amount exceeds a certain threshold, require a second person to sign the check. This control allows multiple members of your team the ability to stop payments that could result in costly errors.

5. Always keep check printing security top of mind

Businesses have been writing, printing and mailing paper checks for decades (even centuries) but, without adequate protection and safety measures, the risk of check fraud is increased. It’s important to consider check printing security solutions that are compatible with your business in order to mitigate risk and liability. Here are a few things to consider:

  • Switch to blank check stock. When using blank check stock, all client specific data is printed along with the check. That means the same check stock can be used for all of your clients and you no longer have to carry the theft and fraud risk of storing pre-printed checks.
  • Store pre-printed checks in a secure location. Any unused pre-printed checks need to be stored in a locked location. Otherwise, they can be stolen, filled out fraudulently, and then cashed.
  • Automate the print and mail processes. Use a company to print and mail the checks using self-sealing envelopes.
  • Consider Positive Pay services. Use positive pay as part of your accounts payable process and send Positive Pay records to your bank for all checks issued.

Summary

Modern tools can simplify and improve check run processes, saving you time and money. Pure mobile payment and approval applications (not browser pages), can add convenience and security to check runs. Improved workflows and notifications that alert authorized to perform same-day payment decisions can facilitate more frequent check runs, thereby improving cash flow management. Payments made by check, directly from your checking account will remove the cash flow and time delay restrictions that exist as a result of the pre-funding requirements of using some bill pay services. With the new technology available, it makes sense to put the check back into your check runs.

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