Bad checks are a problem for most businesses. Because small businesses rely on maintaining certain levels of cash flow, collecting on bad checks is especially crucial for them. Although check writing has decreased due to the use of debit cards, bad checks from customers are still an issue.
The best business plan is to take steps to avoid, or limit, bounced checks. But, because your business will most likely have to deal with a bad check at one time or another, it is important to have a written bounced checks policy and an established method for handling bounced checks. When faced with the problems caused by bad checks, consider the following:
1. Communication with the customer that is bouncing checks can often resolve the problem.
2. You can find businesses who specialize in collecting on bounced checks.
3. There are legal remedies available for collecting on bad checks, especially if the customer persists.
Designate an employee to contact the writers of bad checksA bounced check is often a mistake, and quite embarrassing to the customer. Have a designated employee contact the customer to explain your business's policy. Offer a "No Harm, No Foul" chance for the issuer to make the check good. Be prepared to offer payment terms if the check was for a substantial sum.
Trust collecting on bounced check to a professional collection agencyIf you've tried to recoup your losses with no luck, engage a collection agency. They specialize in difficult bounced-check scenarios. Work out the terms you'll accept from the offender before turning the collection agent loose.
Take the customer that is bouncing checks to courtThe employee or team handling bad checks should be familiar with the applicable laws. For small balances, go to small claims court. The process is fairly easy and you don't need an attorney, or attorney fees. Larger sums may require a lawyer and more complex legal proceedings.
- Be sure your bounced checks policy is clearly written and available to all customers.
- Check with your bank about its bounced checks policy, especially on resubmitting bad checks. Most banks permit one resubmission. It might be best to not consider a check bad until the entire resubmission process is complete.