How to Safe Guard Your Business Against The Risks Of Accepting Checks As Payment
Accepting checks for payment can be tedious process. Checks that are not good and bounce can be a blow to the profit for the business.
However, the business does need to accept checks especially when dealing with other businesses and suppliers. While it can be more difficult to handle than cash and credit cards, here are some ways of making the check acceptance policy that safeguards your business against some of the risks.
Get familiar with the laws and regulations
The laws and regulations regarding cashing checks can differ greatly among different states and even different areas in the same state.
You can begin by contacting your local police department and familiarizing yourself with the rules and regulations that govern checks in your state. Some of the police departments have seminars instructing businesses on how to set up proper check cashing policies.
While the laws may differ in different areas, some of the basic rules that you should always follow before accepting the checks can go a long way in minimizing the risk.
Ask for Identity Verification
Always asks to see some form of identification from the consumer such as a drivers license. Any other valid and legitimate photo identity card will do as well. Compare the physical characteristics of the person presenting the check against the photograph in the identity card. If you have any doubt you can ask the consumer to write his signature on a separate piece of paper and match it with the signature present on the check.
Many people using false identities may make a mistake at this point time.
Ask for the customers home and work telephone numbers in case the check happens to bounce. Do not cash the road checks, checks for more than the amount of purchase or third-party checks.
Watch out for telltale signs of forgery
Equipment like publishing software, laser printers and scanners which are readily available to any consumer have made it easier to alter, forge and duplicate checks.
Examine the document very carefully and look out for smudge marks that could indicate that it was illegally made.
Watch out for smooth edges on the check which is another sign that the check could help immediately. Almost all checks are drawn from a checkbook and have at least one perforated edge that was attached to the checkbook. Smudged handwriting or signs that the handwriting has been erased are other warning signs that will point to an illegal check.
Be cautious of new bank accounts
The majority of bad checks are written on new bank accounts. Many businesses refuse to accept a check that does not have the customers name preprinted on it. If the check is written on a brand-new account say with a check number below 200, protect your business by asking to see 2 forms of identification.
Establish a waiting period for the funds
Merchants can easily face a loss if the consumer purchases products by check and returns the merchandise the next day for cashback refund. When the bad checks bounce at the bank the businesses left hanging high and dry. In order to prevent this from happening, many businesses require a 5 to 7 business days to allow the checks to clear before cash refunds are paid.
Safeguard your business by using electronic check verification machines and services
If you process a large number of checks, you can benefit from using the services of a check verification company. Check verification companies have a database of people who have a history of writing bad checks. What you are required to do is use check reader and scanner at the checkout counter. If the check matches the name in the company’s database the check is refused. You will need to pay a monthly fee to use the services. The amount will depend upon the number of transactions you hope to process.
Using a check reader can make the process of check verification fast and efficient. Check verification companies can verify and deliver verification results within seconds which is just as fast or even faster than the credit card payment verification.
Apart from verifying checks, check verification companies also offer check guarantee service. This guarantee covers the business in case the merchant happens to accept a bad check based on the approval of a check verification company. The business gets reimbursed for the value of the check. Getting a control on the check verifying process can be important if you hope to accept a lot of checks in your business. One bad chick can signify the profit for the entire business day or a couple of business days for a small business.
Another option for verifying checks before accepting his using an electronic check conversion/acceptance system. This system allows the merchant to accept checks as easily and safely as credit cards. When a customer makes a payment to the check, the paper check is run through a check reader converting it into an electronic item much like the credit card terminal does when the card is swiped. And deposited into the merchants accounts usually within once the transaction is approved funds electronically debited from the customer’s account 24 to 48 hours. This technology also allows the business to process checks over the phone or the Internet.
A good practice is to educate your employees and make sure they understand the procedure to follow when it comes to accepting checks. Be sure to post your check acceptance policy prominently where the customers can see it. Specify the charges for bounced checks, forms of added dictation required and what type of checks you will and will not accept. Posting signs will prevent disgruntled customers who have waited in line only to find at the checkout counter that you do not accept a check.
Require your employees to sign his initials of the checks that he accepts. No one wants to be the one who took a bad check because of carelessness. This will make your employees more careful about following proper procedure when accepting checks.
What To Do When You Get A Bad Cheque
In most cases after the check bounces the bank will allow you another attempt to deposit. After that the responsibility for collecting the money is yours.
As already mentioned before, you should take down the contact number of the consumer, home and office phone number and accept his check. If the check happens to bounce, contact the customer either by phone or e-mail.
Once again consult your local police department on the proper procedure to follow. Some states may require that a registered letter be sent and a specific amount of time elapsed before further action can be taken.
Try to handle the situation with a balanced mind. Most incidents of checks bouncing our accidental mistakes. In these circumstances not much will be gained by becoming hostile and angry. If you manage to get in touch with the consumer explain the situation and ask for payment immediately costs reimbursement of any bank charges that you have incurred.
If the person refuses to pay or you cannot contact him, there are other kinds of actions open to you.
The easiest thing to do is to hold the check for a short time after 6 months from the date that it was written and deposit it as soon as there are funds in the account.
Stay in touch with the bank and asked them to notify you when there are sufficient funds available in the account for you to be able to cash your check. The banks will not allow the check deposited the 1st time. So you have to make the 2nd time good. Keep calling the debtors back periodically and as soon as there are funds, cash a check immediately.
Another option is taking legal recourse. Hopefully through your checked exceptions policy you will have collected identification information about the consumer when accepting a check written by him. This will allow you to complete proper paperwork. However, the hassle and expense of finding a lawyer filing this complaint and suing the consumer in a court may be not worth your time and expense. It may even cost you more than the amount of the check.
In these circumstances you might consider using a collection agency to recover the debt.