As a small business owner who accepts cash payments, you must protect your business from counterfeit money. There are millions of dollars in counterfeit bills in circulation. Learn how to tell if money is fake before you accept counterfeit bills.
Once you receive counterfeit bills, they are valueless, which results in unnecessary profit losses. When you know how to tell if money is real, you can ensure your business doesn’t lose hundreds of dollars from counterfeit cash.
How to tell if money is fake
Counterfeit money is illegal currency created by scammers, not the government. Many counterfeiters are able to make fake money look realistic, making it difficult for businesses to spot the phonies.
There are a few different ways you can tell fake bills apart from real ones. First, these are the seven denominations in circulation:
- $1
- $2
- $5
- $10
- $20
- $50
- $100
All bills have a few of the same security features. But, the $1 and $2 bills have not changed since they were issued in 1963 and 1976. The five higher bills have additional security features.
So, what does counterfeit money look like? Counterfeiters might add similar-looking security features on fake money to make identifying counterfeit bills difficult, but there are definitely differences. Most of the fake security features are superficial.
Check out these security features on legal U.S. currency. Once you know what they are, you can look for some of these features when you collect payments.
Federal Reserve seal
The Federal Reserve seal varies between the $1/$2 bills and the rest of the currency.
For the $1 and $2 bills, there is a Federal Reserve Bank seal. This is black and is on the left of the portrait. It has the letter and Federal Reserve Bank name that issued the currency.
For $5 bills and up, there is a Federal Reserve System seal, which is the image of an eagle. The letter and Federal Reserve Bank number are to the upper left of the seal.
Treasury seal
The treasury seal is green and found to the right of the portrait. All bills from 1969 on after have the same treasury seal.
Raised printing
If you run your finger along a legal bill, you’ll notice that the printing is raised. United States currency is textured instead of smooth.
The bill could be fake if it is smooth. Run your finger and nail along the bill to make sure it is textured.
Material
United States currency is not just regular paper. The bill is one-fourth linen and three-fourths cotton. And, there are red and blue security fibers woven into the bill.
Check to see that the red and blue security fibers are woven into the bill instead of being added on top. The material should not feel like standard paper.
Portrait and vignette
The portrait is found on the front of the United States bill. The vignette is on the back. Each denomination has a different image. Make sure the portrait and vignette are correct before you accept the bill.
Take a look at this table to learn about each bill’s portrait and vignette:
| Denomination | Portrait | Vignette |
|---|---|---|
| $1 | President George Washington | The Great Seal of the United States |
| $2 | President Thomas Jefferson | Signing of the Declaration of Independence |
| $5 | President Abraham Lincoln | Lincoln Memorial |
| $10 | Secretary of the Treasury Alexander Hamilton | United States Treasury Building |
| $20 | President Andrew Jackson | White House |
| $50 | President Ulysses S. Grant | United States Capitol |
| $100 | Founding Father Benjamin Franklin | Independence Hall |
Serial numbers
All United States bills have a combination of 11 numbers and letters. The serial numbers appear twice on the bill’s front—one set of serial numbers is on the left of the portrait, and the other is on the right.
Make sure both sets of serial numbers match. If the bill is torn so much that it is missing part of one set of security numbers, do not accept it as payment.
Microprinting
On bills $5 and higher, you can see small text scattered around the bill. You might need a magnifying glass. The text is clear. If you see small, blurry text, it is counterfeit.
Microprinting changes from bill to bill. Take a look at the text each bill has.
| Denomination | Text |
|---|---|
| $5 | FIVE DOLLARS (left and right borders), E PLURIBUS UNUM (inside the Great Seal), USA (inside Great Seal), USA FIVE (on edge of purple five), State names (on Lincoln Memorial) |
| $10 | THE UNITED STATES OF AMERICA (below portrait and inside borders), TEN DOLLARS USA (below portrait and inside borders), USA 10 (beneath torch) |
| $20 | USA20 (right of portrait), THE UNITED STATES OF AMERICA 20 USA 20 (border below Treasurer’s signature) |
| $50 | FIFTY (left of portrait inside stars, borders), USA (left of portrait inside stars), 50 (left of portrait inside stars), THE UNITED STATES OF AMERICA (President Grant’s collar) |
| $100 | THE UNITED STATES OF AMERICA (Franklin’s collar), USA 100 (near watermark), ONE HUNDRED USA (quill), 100s (borders) |
Though you probably won’t have time to get a magnifying glass and inspect the bill for microprinting, you can keep an eye out for some text if you know what to look for.
Glance over the bill to see if you can find some clear microprinting. Some counterfeiters also have microprinting, but it is blurry and might be in different locations.
Color
The bill’s color changes based on its denomination. The $1 and $2 bills have a standard green color. The higher bills have a mix of colors incorporated. However, the $100 does not have special colors mixed into the background.
| Denomination | Colors Incorporated |
|---|---|
| $5 | Light purple and gray |
| $10 | Orange, yellow, and red |
| $20 | Green and peach; blue TWENTY USA in the background to the right of the portrait |
| $50 | Blue and red on the sides of the portrait |
Symbols
Legal money has additional symbols that represent American freedom. These symbols include the Great Seal ($5), the torch of the Statue of Liberty ($10), an eagle ($20), stars ($50) and a quill ($100).
Colored numbers
Each denomination has a large, colored number on the back of the bill. These numbers are in the corners for all bills $5 or higher except the $100. The $100 bill has a colored number stretching vertically from corner to corner on the back.
The $5 bill has a purple 5 in the bottom right corner on the back. The $10, $20, and $50 bills have matching green numbers in the bottom right corner on the back. The $100 has a gold 100 on the back.
Series year
There are a few different series years, depending on the denomination. And, the first letter of the serial numbers corresponds to the series year. Before you accept payment, make sure that the letter corresponds to the series year.
Here are the letters each series year should correspond with:
- 1996: A
- 1999: B
- 2001: C
- 2003: D
- 2003A: F
- 2004: E
- 2004A: G
- 2006: H/I (depending on the denomination)
- 2006A: K
- 2009: J
- 2009A: L
- 2013: M
- 2017: N
- 2017A: P
Security thread
If you’ve ever seen an employee hold $100 bills up to the light, it’s because they’re looking for a security thread. This security thread runs vertically on all bills $5 and up. And, you can see a different color for each denomination with a UV light.
The printing on the thread and the location differs between bills.
| Denomination | Security Thread Text | Security Thread Location | Security Thread Glow in UV Light |
|---|---|---|---|
| $5 | ”USA” and “5” | Right of the portrait | Blue |
| $10 | ”USA TEN” and a flag | Right of the portrait | Orange |
| $20 | ”USA TWENTY” and a flag | Left of the portrait | Green |
| $50 | ”USA 50” and a flag | Right of the portrait | Yellow |
| $100 | ”USA” and “100” | Left of the portrait | Pink |
Watermark
All bills $5 and higher have a watermark you can see when you hold them to the light. All watermarks are of the portraits except for the $5. The $5 bill has a watermark of a 5. The watermarks are found to the right of the portrait toward the border.
Color-shifting ink
One security feature of bills higher than $5 is they have color-shifting ink. When you tilt the bill, the denomination in the right bottom corner should change colors between copper and green. If the numbers do not change colors when you tilt the bill, it is counterfeit currency.
The $5 bill does not have color-shifting ink. However, it does have a large purple 5 on the bottom right corner on the back.
Additional security for $100 bill
You can learn how to tell if a $100 bill is real by additional security features. In addition to the standard security features, the $100 bill has a 3D security ribbon woven into the paper. There are bells in the ribbon that move as you move the bill. The $100 bill also has a color-shifting bell in the orange inkwell.
Tools that help with detecting counterfeit money
As you can see, the government has included many security features in each of the bills. But as a small business owner, you may not have time to memorize the features and look for all of them when a customer pays you. You want to protect your business bottom line from unnecessary losses, as well as your valuable time.
You can use tools to help tell the difference between counterfeit money vs. real money. There are all kinds of tools, including pens, UV lights, and scanners ranging from five dollars to hundreds.
Don’t solely depend on tools, however. Some tools might not be able to pick up on counterfeit money.
What do you do with a counterfeit bill?
So, what do you do with counterfeit money at your business? According to the Office of the Comptroller of the Currency, you must report counterfeit money to the authorities.
Take notes on the customer who gave you the bill. In some cases, they are not the counterfeiters. They might have received the bill without realizing it and passed it onto you.
Try not to touch the bill too much. Cover it so authorities can test it for fingerprints. Call your local police or a local U.S. Secret Service Office.
How to handle counterfeit bill payments in your books
Unfortunately, once you receive a counterfeit bill, it is worthless. You will not be able to receive revenue from the sale. If you receive fake money and give real money as change to a customer, you lose even more money.
Let’s say you sell a printer to a customer. You receive a counterfeit $100 bill and give the customer $50 back in real currency. Your business has lost the money you should have received for the printer as well as an additional $50 in real money.
You will need to reverse the entry in your accounting books. When you initially make a cash sale, you need to debit the cash account and credit the inventory. But when you discover you’ve accepted a counterfeit bill, you need to reverse the entries.
Your business initially has $500 in cash. After the loss of money, your cash account decreases to $100. Take a look at your initial journal entry.
| Date | Account | Notes | Debit | Credit |
|---|---|---|---|---|
| 8/3 | Cash Account Inventory | Sale to Customer | 50 | 50 |
You need to debit your bad debts expense account to adjust your books for counterfeit money. This will reverse the entry. Since the sale was $50 and you gave $50 in change to the customer, you need to debit and credit $100 to both accounts.
| Date | Account | Notes | Debit | Credit |
|---|---|---|---|---|
| 8/5 | Bad Debts Expense Cash Account | Counterfeit Money | 100 | 100 |
If you have small business insurance that protects you from fraud, your policy will cover a certain amount of your losses. Consider purchasing commercial crime insurance that protects you from losses of hundreds or thousands of dollars.
Patriot’s online accounting software is made for small business owners and their accountants. With our software, you can effortlessly update your accounting books when you receive payments.
This article has been updated from its original publication date of October 3, 2017.
This is not intended as legal advice; for more information, please click here.
