By Nicole Reyhle
With the rise of debit cards, ACH, e-payment systems and other new payment technologies, some would tend to believe that the paper check is becoming extinct.
To the contrary, paper checks still account for about 20% or more of the total payments made annually to merchants for goods and services.
"According to the 2013 Federal Reserve Payments Study, the percentage of payments made by check was still “21% of all payments made”. This amounted to 18.3 billion in checks being paid, with a value of $26 trillion dollars. Based on these numbers, it is clear that checks still play a major role in our payment system."One challenge that business owners accepting checks face is that there will always be some percentage of checks that are returned for a variety of different reasons. According to the study, 3 out of every 1,000 checks was returned unpaid in 2012.
This amounts to nearly 66.4 million checks with a value of $83.1 billion that were returned unpaid. Checks are returned unpaid by the payer bank for a host of reasons, but most likely because the payers did not have sufficient funds in their accounts (that is, non-sufficient funds, or NSF).
Although it is the case that check usage is slowly declining, the study concluded that “checks’ diminishing share of the payments pie shouldn’t mask their overall significance in the payments system. The value and volume of checks will likely stabilize, with billions of checks being written well into the future” the study concluded.
As a business owner, the goal is usually to make it as easy on the customer to buy as much of your goods and services as possible. One effective way of accomplishing this is to accept all forms of payment, including checks and allow the customer to choose the payment method that he or she prefers.
There are a number of precautionary measures that business owners can take when accepting checks. Among them, here are our top 10 for you below:
- Establish a check acceptance policy with clearly acceptable forms of ID, and dollar limits. Allow no exceptions to these policies.
- Verify the check information. The check writer’s name, address and phone number should be pre-printed on the check.
- Watch the check writer sign the check. If the name is not readable, have the customer print the name below.
- Compare the signatures, photo and physical description from the ID with that of the check writer. Always get a photo ID with every check written!
- Most returned checks have low check numbers (100 to 500), which indicates a new account and therefore a more likely risk. Accept starter checks only from known customers. Any number under 300 should be a “red flag”.
- Other useful information on the check is the accounts opening date (month and year) usually indicated by four numbers to the side of the account holders name and address.
- Do not accept checks with PO Boxes. Always get a street address for the check writer.
- Do not accept altered checks. The check writer’s name, address and phone number should be imprinted on the checks.
- Do not accept third party checks. The check holder may not have permission from the account holder to have the check (it may be stolen)
- Have a camera at the point of sale. Individuals committing forgery, fraud and writing bad checks do not want their photo taken. A video camera conspicuously placed will deter most dishonest people.
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