Bounced Checks

Recoup your losses from bounced checks with smart planning and policies

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 checks

A 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.
Try: PoliciesAndProcedures.com offers sample problem check policies to guide in the development of one for your business. Articlesbase has an explanation of basic check clearing policies, which will help you develop your bad check guidelines for your business and the employee that will be following up with the customer.

Trust collecting on bounced check to a professional collection agency

If 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.
Try: The Association of Credit and Collection Professionals offers information about collections and legal proceedings for bounced checks as well as contact information for several collection agencies. USA Credit Recovery is one of the leading national collection agencies, specializing in business-to-business claims. Review its collection process.

Take the customer that is bouncing checks to court

The 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.
Try: You can find bad check forms for court submission at 1StopLegal.com. Note that each state has its own forms and policies. JustAnswer.legal will answer simple questions about collecting on bad checks in small claims court.

 

• 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.

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