Since the invention of the check, people have been constantly inventing new ways to pass fraudulent checks. The National Check Fraud Center estimates that 1.4 million fraudulent checks are written each day, costing businesses over ten billion in losses annually. Fraudulent check writers have found a friend in new technology such as color copiers, high resolution scanners and magnetic or MICR toner. MICR stands for Magnetic Ink Character Recognition, and it refers to the magnetically encoded line at the bottom of each check. Traditionally, this line could only be printed with a highly specialized magnetic ink on an offset press. However, with the advent of MICR toner and desktop laser printers, anybody with the right software, an HP LaserJet printer and blank check stock can print a check.

As a business owner, you and your company are susceptible to check fraud; however, there are ways to guard against it. Here are 6 steps that you and your business can follow to successfully defend against check fraud.

1. Print Your Own Checks ? Real Time - The main benefit to printing yourself is security. Traditionally a business orders check stock from a company like Harland or Deluxe and they put the checks in a supply room or closet. These unused checks are a goldmine for any disreputable person that runs across them - all they have to do is grab a check from the bottom of the pile, remove it. In all likelihood, you'll never know that last check is missing until at least a month later, and that's if you are lucky and you regularly reconcile your check book and examine each transaction. We know because that's exactly what happened to us.

In 1993, we had an employee that unwisely stole the last page in our check book. We never knew they were missing. Our Ex-Employee filled them out to herself and passed them as payroll checks at a used car dealer. She did get that car and several weeks later my partner's wife noticed the unusual checks. Had she not noticed the problem who knows how much more money would have been stolen before we got wise to it. Long story short the bank had to eat the bad checks and they wasted no time making sure the case was prosecuted to the full extent of the law. We were lucky and it only cost us time. Had the employee been authorized to sign checks we would have lost the money.

By printing your own checks you only stock blank check stock and a MICR toner cartridge. There is nothing to steal with your account information, they have nothing but a piece of blank check paper. Of course you are still open to a new kind of fraud if someone is able to access your check printing software. Be sure it's password protected and your network rights are setup so that ordinary users can't access the directory that it resides in.

Another great benefit of printing your own checks real time is that if you move our change bank accounts, you lose nothing. Just edit your address or account numbering in your check printing software and you've made the switch ? No wasted checks, no wasted money, no waiting for new checks.

2. Buy Secure Check Stock ? When selecting a blank check stock, make sure the check stock is loaded with security features ? this will make it difficult for a scammer to copy or scan the check. Recently the US treasury department spent millions adding security features the newly redesigned notes. Many of these same security features are now available for check stock. Here are some security features to look for in check paper:

Copier Void Pantograph ? This causes the word VOID to appear in the background of a check when copied. A Void Pantograph is created by engraining a precision pattern of lines and dots in the background of the check. The printing of the pantograph is so precise that the VOID is not visible to the human eye, but when copied or scanned they appear making the copied check useless.

Micro Printed Border ? This same technology is used on new US currency - magnify the border line around the portrait on the face of one of the newly designed US bills and you will see the border that appears to be a line is actually comprised of words. Even modern high resolution printers cannot reproduce type this small.

Chemically Reactive Check Paper ? A common way to deface a check is to use chemicals to remove the existing writing to change the amount or to whom a check is written to. Chemically reactive check paper will change colors when it comes in contact with chemicals or solvents making the check unusable.

Watermark ? Check paper with a true watermark will show up when held up to the light. A watermark will not be visible on a copied or scanned check.

Listing of security features ? A good check stock will list the security features on the back of the check. What good is a security feature if no one knows what security features to look for?

3. Positive Pay File Transmittal ? A great way to stop check fraud is to generate a positive pay file and transmit it to your bank. Every time you print a batch of checks, you transmit a positive pay file listing the checks and their amounts to your bank. If a check amount is altered or a check is duplicated the bank will reject it because it does not match the positive pay file. Positive pay is fairly common in large companies, but a small company may not have the resources or the software to produce the file and transmit it. Contact your bank about this service.

4. Check Storage / Access ? One key to avoiding check fraud is eliminating, or at least, decreasing access to documents with your bank account number on them.

Mail Theft ? Mail theft is a very common way checks are stolen - make sure your outgoing mail is not left in a place where anybody coming and going can steal them. A secure mail box is probably the best way to protect your mail.

Check Storage ? If you are using preprinted check, store checks in a secure area under lock and key. Never leave checks unsecured.

Document Storage ? In addition to securing checks, be sure to secure all documents containing your bank information. They contain all the data necessary for a fraudulent check.

Document Disposal ? When disposing of banking and credit card documents, shred them. A shredder is a cheap and easy way to make sure some dumpster diver doesn't steal crucial information that might be used to create fraudulent checks. We use a shredding service. The service provides locking cabinets to store the documents to be shredded. Then once every two weeks the shredding service comes by and actually shreds the paper onsite. The shredding truck has a massive shredder on the back and our documents are shredded before the truck leaves our site.

5. Electronic Payment ? The only way to entirely eliminate check fraud is to eliminate checks. Check processing is very costly for banks and they would love nothing more to eliminate checks all together. With the advent of EDI (Electronic Data Interchange) many large companies such as Home Depot only deal with vendors that can send invoices and receive payments through EDI. Electronic payment is definitely the future and individuals are flocking to electronic payment, but businesses are still slow to make the transition. Most businesses write their checks through accounts payable software, thusly don't have an easy or standardized way to effectively transmit payments electronically. However, in time software will catch up with technology and electronic payment will become the standard. Electronic payment is already available through QuickBooks and it's only a matter of time until businesses adopt this practice to make payments.

6. Pay Attention ? You may follow all of the above steps and still somehow get scammed. Paying attention to your bank and credit card statements will help you detect any discrepancies earlier. The earlier the problem is detected, the more likely that you will be able to catch the culprit and regain your hard earned cash.