Understanding Positive Pay

Before diving into the technical aspects of creating a positive pay file, it's crucial to understand what positive pay is and why it's important.

What is Positive Pay?

Positive pay is an automated fraud detection tool offered by most banks. It matches the check number, dollar amount, and sometimes the payee of each check presented for payment against a list of checks previously authorized and issued by the company. If these details don't match, the bank flags the check and notifies the company for further verification before processing the payment[1].

Why Use Positive Pay?

Positive pay significantly reduces the risk of check fraud by:

1. Preventing unauthorized checks from being cashed
2. Alerting you to potentially fraudulent activity
3. Providing an additional layer of security for your business finances
4. Saving time and resources that would otherwise be spent dealing with fraudulent transactions

Options for Creating Positive Pay Files in QuickBooks Desktop

While QuickBooks Desktop doesn't have a built-in feature for creating positive pay files, there are several methods you can use:

1. Export data and manually create the file
2. Use third-party apps or add-ons
3. Utilize custom programming or scripting

Let's explore each of these options in detail.

Method 1: Exporting Data and Manually Creating the File

This method involves exporting check data from QuickBooks and then manipulating it to create a positive pay file that meets your bank's requirements.

Step 1: Generate a Check Register Report

1. In QuickBooks, go to Reports > Banking > Check Detail
2. Set the date range for the checks you want to include in your positive pay file
3. Customize the report to include necessary fields (check number, date, amount, payee)
4. Click "Run Report"

Step 2: Export the Report to Excel

1. With the report open, click "Excel" in the top left corner
2. Choose "Create New Worksheet"
3. Click "Export"

Step 3: Format the Excel File

1. Open the exported Excel file
2. Delete any unnecessary rows or columns
3. Ensure the data is in the format required by your bank (this may include specific column orders, date formats, etc.)
4. Save the file in the format specified by your bank (usually CSV or TXT)

Pros and Cons of Manual Creation

Pros:

• No additional software required
• Full control over the data and formatting

Cons:

• Time-consuming, especially for businesses that issue many checks
• Prone to human error
• Requires knowledge of Excel and your bank's file requirements

Method 2: Using Third-Party Apps or Add-ons

Several third-party applications integrate with QuickBooks Desktop to automate the creation of positive pay files. These apps can save time and reduce errors in the process.

Popular Third-Party Apps

1. BRC PositivePay file Creator - QB Desktop
2. Positive Pay File Creator by Proper Soft
3. Treasury Software's Bank Positive Pay

Using BRC PositivePay file Creator as an Example

1. Download and install the BRC PositivePay file Creator app
2. Open the app and connect it to your QuickBooks company file
3. Select the bank account for which you want to create a positive pay file
4. Choose the date range for the checks to include
5. Select your bank's format from the list of supported banks
6. Click "Create File" to generate the positive pay file

Pros and Cons of Third-Party Apps

Pros:

• Automates the process, saving time and reducing errors
• Supports multiple bank formats
• Often includes additional features like void check handling

Cons:

• Additional cost for the software
• May require some setup and learning curve
• Dependence on third-party software for critical financial processes

Method 3: Custom Programming or Scripting

For businesses with in-house IT resources or those working with developers, creating a custom script or program to generate positive pay files can be an effective long-term solution.

Steps for Custom Programming

1. Analyze your bank's positive pay file requirements
2. Develop a script (e.g., in Python or VBA) that:some text
   • Connects to your QuickBooks company file
   • Extracts relevant check data
   • Formats the data according to bank specifications
   • Generates the positive pay file
3. Test the script thoroughly with sample data
4. Implement error handling and logging
5. Create documentation for using and maintaining the script

Pros and Cons of Custom Programming

Pros:

• Tailored to your specific needs and bank requirements
• Can be integrated into existing workflows
• One-time development cost with long-term benefits

Cons:

• Requires programming expertise
• Initial development time and cost
• Ongoing maintenance and updates may be necessary

Best Practices for Creating and Managing Positive Pay Files

Regardless of the method you choose, following these best practices will help ensure the effectiveness of your positive pay system:

1. Consistency: Create positive pay files on a regular schedule, ideally daily or at least weekly.
2. Verification: Always verify the contents of your positive pay file before submitting it to the bank.
3. Secure Transmission: Use secure methods (e.g., encrypted file transfer) when sending positive pay files to your bank.
4. Exception Handling: Establish a clear process for handling exceptions flagged by the bank.
5. Reconciliation: Regularly reconcile your QuickBooks records with bank statements and positive pay reports.
6. Backup: Keep backups of your positive pay files for auditing and troubleshooting purposes.
7. Training: Ensure that all relevant staff members are trained on the positive pay process and its importance.
8. Stay Updated: Keep your QuickBooks software and any third-party apps up to date to ensure compatibility and security.

Troubleshooting Common Issues

When creating positive pay files, you may encounter some common issues. Here's how to address them:

1. Mismatched Data: Ensure that the check data in QuickBooks matches exactly what's printed on the checks, including payee names and amounts.
2. Formatting Errors: Double-check that your file format matches your bank's requirements, including field order, date format, and file extension.
3. Voided or Deleted Checks: Develop a process for handling voided or deleted checks in your positive pay file.
4. Special Characters: Some banks may not accept special characters in payee names. Consider replacing or removing these in your positive pay file.
5. File Size Limitations: If your bank has file size limitations, you may need to create multiple files for large numbers of checks.

Future-Proofing Your Positive Pay Process

As technology evolves, so do the methods for creating and managing positive pay files. Here are some considerations for future-proofing your process:

1. Stay Informed: Keep up with updates from QuickBooks and your bank regarding positive pay features and requirements.
2. Consider Cloud Solutions: As more businesses move to cloud-based accounting, explore options for integrating positive pay with cloud systems.
3. Automation: Look for opportunities to further automate your positive pay process, potentially integrating it with other financial workflows.
4. Security Enhancements: Stay abreast of new security features and incorporate them into your positive pay process as they become available.

Conclusion

Creating a positive pay file in QuickBooks Desktop may require some additional steps or tools, but the benefits in terms of fraud prevention and financial security are well worth the effort. Whether you choose to manually export and format your data, use a third-party app, or develop a custom solution, implementing a positive pay system is a crucial step in protecting your business from check fraud.

Remember that the effectiveness of your positive pay system depends not just on the technical aspects of file creation, but also on your overall financial processes and the diligence of your team in following established procedures. Regular training, consistent implementation, and ongoing review of your positive pay process will help ensure its success in safeguarding your business finances.

By taking the time to set up and maintain a robust positive pay system, you're not just protecting your business from potential fraud; you're also demonstrating a commitment to financial best practices that can benefit your organization in numerous ways. As you implement and refine your positive pay process, you'll likely find that it contributes to more accurate record-keeping, improved cash flow management, and greater peace of mind in your financial operations.

Citations: [1] https://www.investopedia.com/terms/p/positive-pay.asp [2] https://tipalti.com/payments-hub/what-is-positive-pay/ [3] https://firstutahbank.com/how-positive-pay-is-used-to-prevent-check-fraud/ [4] https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/we-have-quickbooks-desktop-pro-how-do-we-generate-a-list-of/00/516118 [5] https://stcu.org/media/BOLB/Business-online-banking-user-guide-check-positive-pay.pdf [6] https://www.youtube.com/watch?v=K62a7i6HbZQ [7] https://warrenaverett.com/insights/what-is-positive-pay/ [8] https://quickbooks.intuit.com/learn-support/en-us/banking/i-need-to-create-a-positive-pay-file-for-the-bank/00/203263