When conducting business, it's a good idea to set up guidelines or a check acceptance policy when taking payments in that way. Accepting checks can be risky, as you're not sure if the funds are as good as the paper the check is written on. A well-written check policy can help in protecting your business from those checks with insufficient funds.

While a policy for paying by check is good, you'll also want to make sure your employees are trained and vigilant in adhering to the policy. Check verification and recovery services can also strengthen your policy.

Consider the following facts for your check acceptance policy:

1. Your check acceptance policy should include the customer's showing of a proper photo ID. That way you can confirm that the check writer's identity matches the data written on the check.

2. Many businesses have adapated a policy for paying by check that excludes the acceptance of those checks written on new accounts.

3. Check acceptance should also depend on the check writer's bank location. Many businesses do not take checks from out-of-state banks because it can be more difficult to recover funds if going that route becomes necessary.

Action Steps
The best contacts and resources to help you get it done

Review check acceptance practicies and policies from other companies

Combating check fraud starts with a well-developed check acceptance policy. Be sure to research current check fraud schemes used and browse other company check acceptance policies. While some policies may be more stringent than others, you can take the nuts and bolts of a sample policy and then bolster it to make it your own.

I recommend: Read through the check polices of ProTech Computers and the Potomac and Rappahannock Transportation Commission.

Use a check verification policy through a professional service

More than 3/4 of all merchants use a check verification service from a third-party vendor to pre-approve checks. Advanced technology can even provide for approval or denial at the point of sale terminal.

I recommend: Check out the check verification services provided by ACH Payments or InfoMerchant.

When accepting checks, keep a check recovery system in place

When it comes to collecting on bad checks, it can be difficult at times. Most of the time, businesses are out the money entirely. If the merchant acts fast, collections can be succesful. A number of collection and recovery agencies exist. Make sure to check on the agency's reputation with the Better Business Bureau before contracting their services.

I recommend: If you bank with Wachovia, you may be entitled to their free bad check recovery service. Check out the automated check collections and check recovery service offered by Electronic Clearing House.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Check acceptance procedure should include a way to note which employee or cashier received the check. That may prove to be important if the fraudulent check writer is ever charged with the crime of issuing a bad check.

Accepting checks as a form of payment can be risky business. People occasionally write a check when they don’t have the funds to cover it. Even more dangerous to small businesses are identity theft and check kiting, in which thieves knowingly attempt to pass bad checks. This can leave your business with devastating losses.

To protect your business, implement a check acceptance policy that:

1. Confirms the identity of the check writer
2. Verifies the checking account is active
3. Makes sure funds are available from the account
4. Provides insurance for bad checks or a recovery plan

Action Steps
The best contacts and resources to help you get it done

Confirm check-writer identities

One of the first lines of defense in check fraud is to make sure you verify the identification of check writers. The rule of thumb should always be no checks accepted without a valid photo ID.

I recommend: Take the guesswork out of determining if a photo ID is valid or a fake with an ID scanner.

Choose the right equipment

Technology allows you to verify that your customer has a valid checking account with available funds within seconds. Set up your point of sale systems with check scanners to transmit account information electronically to check verification systems.

I recommend: DiscountCreditCardMachine.com offers several check readers for under $100. Keep in mind that most check verification companies offer discounted or free equipment when you sign a contract for their services.

Verify funds availability

Check verification companies instantaneously provide authorization when you scan a check through the reader. The systems work much like credit card authorizations by confirming that the checking account is open, in good standing and has available funds.

I recommend: Learn how check verification works and how to choose a verification company at MerchantSeek.com. Some verification services such as TeleCheck and National Check Trust also offer guarantees to repay bad check funds that they approved if you sign up for the extra service.

Accept checks online

Accepting checks online can seem like a risky venture since the customer isn't in your presence with a photo ID. But today's technology has found a way for you to accept payments in the form of checks with minimal risk.

I recommend: By adding html scripts to your website from online check processors, you can accept checks over the Internet in printed form to your bank, or automated clearing house (ACH) transactions. PayByCheck and PayByWeb offer the service.

Train your employees

Make sure your entire staff knows your check acceptance policy and follows it consistently.

I recommend: Incorporate tips for accepting checks from CheckProgram.com into your check acceptance policy and make sure it's available at each cash register or point of sale for easy reference.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Make sure the address on the check and the writer's driver's license match. Many times people move and don't update their driver's license. Also ask every check writer if their current address is printed on the check.
• •  Always confirm that the printed amount and the numerals in the payment match. Oftentimes, an honest mistake is made, but when the bank receives the check, they will always honor the written number rather than numerals as the payment amount.
• •  Ask your employees to circle the amount, address, date and signature on the check to confirm they have checked it. Make sure your bank allows you to write on the check before you do it.
• •  Some businesses require a credit card number for backup on large payments. Before you ask for credit card numbers to insure a check, make sure it is legal to do so by calling your county district attorney's office for local or state laws regarding acceptance of checks.