FORTUNE Small Business:

How to handle bounced checks

Hate dealing with rubbery payments? FSB's experts know how to avoid them.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

check.03.gif
Ask FSB
Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
Your name:
* Your e-mail address:
* Your city:
* Your state:
* Your daytime phone #:
* Your questions:

(FORTUNE Small Business) -- Dear FSB: I read your recent column on collecting bad debts ("How to Make a Client Pay Up"), and have a related problem. Some customers bounce checks, which are returned for insufficient funds on amounts such as $100 or $300. These are too small to call for small-claims court or collection agencies, but add up to big money over time. What can I do?

- Henry Rivkin, Co-Owner, Afiber Mannequins, Inc., Orange, NJ

Dear Henry: Of course, writing bad checks is a crime, and your local district attorney's office may be willing to help you file complaints against any habitual offenders.

But to foil the occasional rubber check writer, there is a simpler way: Ask almost any credit card processing company about its check service programs, which set you up with a scanner tapped into a national database.

You run the check through the scanner and, if the account has a history of bounced checks, you'll be warned. If the scanner approves the check, the service guarantees it. Even if it later bounces, you'll be reimbursed the full amount.

Some check services go further, treating the check as if it were a bank debit card, and putting an instant lock on the account's funds - if you don't get around to depositing it right away, the money is guaranteed to be there when you do. There are also check-service programs that will pay you even if a check writer deliberately stops payment.

With so many features available, you'd be wise to shop around. Fees for different service combinations vary widely. Generally, check-scanning costs about 2% of your sales, which may not seem worth it if less than 2% of your receivables bounce.

But, says Rick Blesofsky, president of Tribul Merchant Services, a New York City-based firm that sells credit card processing and check scanning services: "The fees are negotiable and, if bad checks are a persistent problem, there's no reason not to protect yourself."  To top of page

How do you ensure that the checks you receive translate into cash? Do you use a check service program? What has been your experience with it?

Climbing out of credit-card debt
Nailing new profits
Shedding non-buying "customers"
Raising prices, keeping customers
Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
8 CEOs who took a pay cut in 2013 Median CEO pay inched up 9% in 2013 to $13.9 million. But not everyone got a bump last year. Here are eight CEOs who missed out. More
7 businesses Amazon wants to shake up From industrial supplies to educational software, Amazon is about more than just retail and books. More
Don't miss these Tax Day deals From massages and paper shredding to cookies and queso, celebrate the end of tax season with these Tax Day freebies and discounts. More

Sponsors

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.