Accepting checks in your business virtually risk free

Marc Eskew Most businesses accept checks as form of payment for goods and services. However, accepting checks can be a risky endeavor if your company doesn’t follow good policies and procedures for preventing loss from bad checks. In fact, the reason some businesses do not accept checks is because of a history excessive “bad checks” that costs their business to much money and aggravation, preferring to accept only cash and credit cards. Whether a business currently accepts checks or not, they can minimize the cost of accepting checks to less than 1%, which is less than half the 2% to 3% cost of credit card processing. The only payment method cheaper is accepting cash.

Outlined below are tips for formulating your virtually risk free policies and procedures for accepting checks. For the purposes of this article, “virtually risk free” is defined as achieving a cost to accept checks of 1% or less. Not all items will apply to all businesses but if you determine that accepting checks in your business is “high-risk”, a more stringent program using more of these tips is needed. In any case, your policy needs to be in writing, distributed to all employees, and followed without exception.

1. Clearly defines acceptable forms of ID, required information and dollar limits. Post these requirements where customers can see them at the point of sale.

2. The check-writer's name and address should be pre-printed on the check. Ask for and write the phone number if it is not pre-printed on the check.

3. Make sure the written and numeral amounts correspond.

4. Watch the check-writer sign the check. If the name is illegible, have the customer print the name below.

5. Compare the signatures, photo and physical description from the ID with that of the check writer.

6. Verify that the ID is still valid! Check the driver's license for signs of alteration or modification.

7. Most returned checks have low check numbers (100 to 500), which indicates a new account and therefore a more risky check, particularly for business or "dba" (doing business as) checks. Do not accept starter checks. Any number under 300 should be a “red flag” and require a manager’s approval for acceptance

8. Never take business checks from individuals unless you know the business and the individual.
Business checks are not presently eligible for electronic re-presentment. With available software, virtually anyone can produce a business check.

9. Do not accept checks with PO boxes…always get a street address for the check-writer.

10. Do not accept third party checks.

11. The four-digits following the magnetic ink character recognition (MICR) number at the bottom of the check should match the four-digit number at the top right hand of the check.

12. All checks, except government checks, should have a perforation along one side of the check.

13. Use a check verifications system. This form of protection should significantly reduce the volume of “less collectable” checks (those passed by check-writer’s with a history of passing bad checks).

14. Have a camera at the point of sale. Forgery, fraud and bad check-writers do not want their picture taken. A video camera conspicuously placed will deter most dishonest people.

15. Utilize a free check collection service for the fastest collection of those checks that do bounce to maximize.

Using a check collection service is critical to minimizing your costs. On average, 2 out of every 100 checks are going to bounce, when that happens, time is of the essence to recovering your money. Check collection services have the tools and expertise to collect on bad checks quickly, over 80% of the time for top providers, and their services are usually free to businesses as they make their income from collections fees allowed by each state.

When choosing a service, choose a free service and avoid the companies who offer “guaranteed” collections for a fee. The fee charged for the guarantee ends up being substantially more expensive than implementing a good check acceptance policy in conjunction with a reputable, free collection service. Also, choose a company with a good reputation for customer service. It is beneficial to know that your service provider will work with you when a special circumstances need to be considered for a particular collection. Finally, expect to maintain full control of your checks. Only hire a service that guarantees to return your checks to you at any time in the collections process.

CybrCollect is a free check collections service that meets these requirements and more. I recommend CybrCollect because:

1. Free service to businesses
2. Excellent Customer Service
3. Clients maintain full control of their checks
4. Best collections rate in the industry, over 80% of NSF checks collected within 30 days
5. Industry leading client website for 24/7 access to collections information
6. Exclusive “Executive Analysis Report” for determining true cost of accepting checks.

About the Author

Marc Eskew is widely recognized in the area of accounts receivable management. For more information on optimizing your cash flow, the CybrCollect program, or to contact Mr. Eskew, please visit www.fmxservices.com/cashflow.