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.
Republished From Go Articles